Wednesday, September 22, 2010

A Nation on Entitlements

"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money." -Alexis de Tocqueville

This Wall Street Journal article describes how Americans have become dependent on the government, and how this is hampering any meaningful reduction in the deficit.

"Nearly half of all Americans live in a household in which someone receives government benefits, more than at any time in history.

At the same time, the fraction of American households not paying federal income taxes has also grown—to an estimated 45% in 2010, from 39% five years ago, according to the Tax Policy Center, a nonpartisan research organization.

A little more than half don't earn enough to be taxed; the rest take so many credits and deductions they don't owe anything. Most still get hit with Medicare and Social Security payroll taxes, but 13% of all U.S. households pay neither federal income nor payroll taxes."

So the bottom line here is that we have more people getting government checks - in one form or another - and an increasingly smaller portion of the population that's paying for that.

The Treasury Department recently reported that the government ran a $1.26 trillion deficit for the first 11 months of the fiscal year, which puts it on pace to be the second-biggest on record.

According to the WSJ report - the statistics for entitlements was staggering:


In the early 1980s - 30% of Americans lived in households in which an individual was receiving Social Security, subsidized housing, jobless benefits or other government-provided benefits.That went up to 44% by the third quarter of 2008!

41.3 million people were on food stamps as of June 2010 and that was a 45% increase from June 2008!

Federal unemployment benefits are now available for up to 99 weeks! and in late August 2010, 9.7 million unemployed workers were receiving checks (twice as many as the 4.2 million in August 2008)

And with Obamacare in the wings, 19 million more Americans are slated to get federal aid to buy health insurance by 2019.


"Government data don't show how many of the households receiving government benefits also escape federal taxes. But there is certainly some overlap between the two groups, since many benefits are aimed at those earning too little to pay income taxes and at people who don't have jobs, and who thus don't pay payroll taxes".

Today, an estimated 47.4 million people are enrolled in Medicare, up 38% from 1990. By 2030, the number is projected to be 80.4 million now that the baby boomers are starting to become eligible for that benefit.

The U.S. government first offered large-scale assistance during Franklin Delano Roosevelt's New Deal. The Social Security Act, passed in 1935, created the popular retirement program as well as unemployment compensation, the early stages of what became known as "welfare" and assistance to the blind and elderly. In the 1940s, the G.I. Bill offered unemployment benefits, education assistance and loans to veterans. That same decade, Washington began offering free or reduced-price lunches to children from low-income families and, a decade later, monthly benefits to the disabled.

Lyndon Johnson's Great Society programs brought food stamps plus Medicare and Medicaid. In the 1970s, Supplemental Security Income was created on top of routine Social Security benefits for the poorest of the elderly and disabled, and so-called Section 8 vouchers began subsidizing rental housing. The earned-income tax credit was launched in 1975 to offer extra cash to low-wage workers, and grew in the 1990s to become one of the government's principle antipoverty programs.

Benefits for children were expanded in 1997 with the State Children's Health Insurance Program during the Clinton administration—and were expanded again in 2009. Shortly after President Barack Obama took office, Congress passed the American Recovery and Reinvestment Act, the stimulus bill, which among other things extended unemployment compensation and offered incentives for states to cover more workers.

All this is expensive. Payments to individuals—a budget category that includes all federal benefit programs plus retirement benefits for federal workers—will cost $2.4 trillion this year, up 79%, adjusted for inflation, from a decade earlier when the economy was stronger. That represents 64.3% of all federal outlays, the highest percentage in the 70 years the government has been measuring it. The figure was 46.7% in 1990 and 26.2% in 1960.


“And I will go on criticising Socialism, and opposing Socialism because it is bad for Britain—and Britain and Socialism are not the same thing. (...) It’s the Labour Government that have brought us record peace-time taxation. They’ve got the usual Socialist disease—they’ve run out of other people’s money.” ....... ----"The trouble/problem with socialism is that you eventually run out of other people’s money.” - Margaret Thatcher (paraphrased)

"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for,that my dear friend, is about the end of any nation. You cannot multiply or create wealth by dividing it." - Dr. Adrian Rogers, 1931

Read more interesting facts about entitlement programs at the Heritage Foundation - Here and here..