The following graph demonstrates the dramatic growth of dependency on federal government benefits. Given the rapid increase in the established trend, any day now at least one person in more than half of all households in America will be receiving some type of government assistance. The current federal debt of $15.3 trillion is greater than the entire Gross Domestic Product (GDP), and is increasing by more than $1 trillion annually.
By our selfish nature, people are usually willing to see someone else's sacred cow put on a diet, but rarely their own.
Entitlements and other government social programs now have such large dependent constituencies that even a hint of changing benefits for future recipients creates an avalanche of criticism; remember the outrage for Paul Ryan’s plan to reform Social Security, not for current recipients but those a generation from now?
Following is a summary of the state of dependency in America as outlined by John Merline in Investor’s Business Daily this past week. Nearly everyone recognizes that this path is unsustainable, but not everyone agrees how to fix it or has the courage to do what is obviously necessary to avoid bankrupting the nation. Actually, most politicians – and particularly the current President – continually call for even more spending and additional programs compounding the problem instead of fixing it.
- Direct Payments: As the graph shows, direct payments have increased steadily for four decades. However, under just Obama’s first term they have shot up 32% - almost $600 billion. The White House estimates direct payments will increase another $500 billion by 2016 and consume two-thirds of all federal spending.
- People getting benefits: According to the census bureau 49% of households have at least one recipient of a federal benefit check: social security, workers comp, unemployment, subsidized housing, food stamps, etc. That’s up from 44% when Obama took office, and way up from 1983 when less than one-third of households received a government benefit.
- Food stamps: More than 46 million Americans – 15% of the total population – get food stamps. That’s 45% higher than when Obama took office, and nearly twice the average of the past 40 years (7.9%). Some of the increase is due to the recession, but Obama’s “stimulus” also expanded the eligibility for the benefit.
- Disability: The number of people receiving Social Security Disability payments has steadily increased largely due to relaxed eligibility rules. But, in just the first two years of Obama the numbers increased by 10%. With millions out of work during the recession, when unemployment benefits expire “many people who could otherwise work sign up for disability benefits instead,” according to Merline.
- Health care: 45% of all health care spending now comes from the government. That’s up from 32% as recently as 1990. If ObamaCare is implemented, the government’s role will increase dramatically; 16 million people will be added to Medicaid and 24 million more will get government insurance premium subsidies.
- Corporate welfare: Often with the best of intentions Congress has provided “incentives” for a variety of industries and perceived desirable business activities. Over time the number of loopholes has become more the rule than the exception. Merline cites a CATO report that found subsidized loans, special tax breaks, bailouts and the like totaled $92 billion before Obama took charge. Through his stimulus and spending on favored industries like green energy ($18 billion in 2009 alone), Obama has greatly expanded corporate welfare.
The dramatic increase in spending on various entitlement programs over the last many decades has hardly been a secret. Nor, has the danger to the nation’s fiscal well-being of a failure to address the problem. Presidents and politicians from both parties have said some of the right things for a long time. Even Barack Obama spoke of the need to “pay down our debt” three separate times in his recent State of the Union address– while using most of the rest of his speech to call for more new programs and spending that would do just the opposite.
It is our nature to like to be spoiled, and politicians seeking favor with the electorate are usually willing to oblige. Everybody prefers to receive rather than to give, particularly if the government is on the other end of the transaction. So, even knowing that America is on a glide path to disaster, when push-comes-to-shove few Americans are really willing to cut back on federal benefits. According to a recent IBD/TIPP poll just 24% would support cutting Social Security and only 16% would back Medicare cuts – by far the most costly of all federal entitlement programs.
Nancy Pelosi promised “no new deficit spending” on the day she was elected Speaker of the House in 2007. She broke her promise.
During the Presidential campaign of 2008, Barack Obama said the $9 trillion of federal debt at the time was "irresponsible. It's unpatriotic." Unfortunately, that rhetoric came 6 trillion dollars of additional debt ago.
Out of control, unsustainable spending is once again a big issue in the 2012 Presidential and Congressional campaigns. But, regardless of who ultimately gets elected, it will take not only a change in the courage of the politicians, but also in the will of the people before any substantial reform is enacted.