Outside the Beltway

The Impact of Microsoft on Personal/Disposable Income

The Bureau of Economic Analysis released its estimates for personal income and disposable income today, and wow, what a difference Microsoft makes. Here are the numbers,

• \$360.9 billion, or 3.7% increase for Personal Income
• \$354.4 billion, or 4.0% increase for Disposable Income

Just to give the reader some context, usually personal income and disposable income increase by about 1/10th that number of usually in 0.3-0.4% range. Or if we back out the Microsoft special dividend the numbers are,

• \$62.7 billion, or 0.6 percent increase for Personal Income
• \$36.9 billion, or 0.4 percent increase in Disposable Income for November

The BEA does not include a disposable income number without the Microsoft special dividend so I used November to give an idea of the general magnitude of these increases. In other words, Microsoft, with a special dividend, increased Personal Income and Disposable Income for one month by a factor of 10.

Interestingly, personal consumption expenditures increased at a much more modest (and typical rate) of 0.8%. Apparently most people did not take the money and go out and spend it.

Update: Whoops. In comments Ken points out the large nature of the Microsoft special dividend is due mainly to how the BEA annualizes the Microsoft dividend. The actual dividend was \$32 billion, and of that it was estimated that \$24.85 billion went to individuals. To annualize the number the BEA multiplies the \$24.85 billion by 12 to get \$298.2 billion which was lumped in with the December numbers. So while the numbers above are “technically correct” they are misleading in that they inflate the size of the Microsoft dividend by a factor of 12. It is a strange thing and I’m still not sure why they did it this way. The BEA also offers a quarterly number of \$99.4 billion as well. So it isn’t clear why they are using these larger numbers. The annual number derived by multiplying by 12 is like assuming Microsoft has such a dividend every month, and the quarterly one is like assuming Microsoft has one every quarter.

FILED UNDER: Economics and Business,
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

1. M. Murcek says:

Which, of course, explains all too clearly why the government works so hard to kill this particular golden egg laying goose…

2. ken says:

Steve, this is highly misleading as the BEA takes the special dividend paid by Microsoft and lumps it in with all other quarterly dividend payments and then multiplies by four to get an annualized number, which is what they then report.

The Microsoft special divident totaled about 32 billion dollars, not the almost 300 billions your math would lead one to believe.

If you are suprised at the more moderate increase for personal consumptions it is probably because you were confusing this phantom increase in money with real money.

3. Steve says:

The Microsoft special divident totaled about 32 billion dollars, not the almost 300 billions your math would lead one to believe.

Actually it is not my math, but the BEA’s math.