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Source link: http://archive.mises.org/6597/study-more-americans-receive-government-benefits-than-do-not/

Study: More Americans Receive Government Benefits than Do Not

May 6, 2007 by

The Christan Science Monitor reports that we have passed the tipping point: 1 in 2 Americans now receives income from government programs:

    Mr. Shilling’s analysis found that about 1 in 5 Americans hold a government job or a job reliant on federal spending. A similar number receive Social Security or a government pension. About 19 million others get food stamps, 2 million get subsidized housing, and 5 million get education grants. For all these categories, Mr. Shilling counted dependents as well as the direct recipients of government income.
Looking into the future, “If the trend continues, the percentage could rise within ten years to pass 55 percent.” Another forecast further down the article cites a figure of 60%. But will the trend continue? Yes, apparently so because “The aging baby-boomer generation is poised to receive big payments from Social Security and government healthcare programs”, and “Healthcare and Social Security are the big programs poised for growth, thanks to the arc of the baby-boom generation, longer lifespans, and rising medical costs. Insurance-style programs also include farm subsidies and efforts to relieve poverty.”


Quoting an economist named Galbraith,

    “New Deal programs persist,” despite the Reagan revolution and its aftermath, says James Galbraith, an economist at the University of Texas in Austin. “They persist because they are largely successful and highly popular.”
Rothbard made the distinction between net tax payers and net tax consumers. The article does not make this distinction, but it implies that an increasing percentage of the population can become net tax consumers over time. The economist quoted as saying that these programs are “succesful” means that from the point of view of a net tax consumer, the programs are a good idea.

The sustainability of these programs, not the direction of the trend, is the big question. Of course the trend is upwards. Any decent economist can draw a line through a set of points and project it out in the same direction. A highly trained economist can run a regression, which is not so much different. But is this a sustainable trend? Can 70%, 80%, or 90% of the population receive government benefits? The article briefly addresses this issue near the end but tells us not to worry:

    “I fear that we may be on the path to becoming a decrepit, high-unemployment welfare state,” says Daniel Mitchell, an economist at the libertarian Cato Institute in Washington. Economists differ regarding whether, or at what level, a high tax burden acts to dampen economic growth. European nations have shown, for example, that advanced economies can maintain generous social-welfare programs.
By some estimates, the US government has around $40 trillion in unfunded promises. The expansion of these benefits is at the expense of increasing these liabilities. The articles does not ask whether there any other consequences such as consumption of the accumulated capital structure, a lower savings rate, or the negative changes in the composition of the labor force of a country that maintains these programs. Could there be any connection between generous European social welfare programs and the loss of 4% of the population of France to emigration, mostly to nations with a lower tax burdens and/or more flexible labor markets?

{ 17 comments }

Carl Marks May 6, 2007 at 1:48 pm

The article is not as uninformed as the post makes it appear. It does mention that Sweden has paid a price of a generous welfare state by falling out of the top ten in GDP/capita. Of course the better example would be France, where the the economy has tumbled from 8th to 19th in GDP/capita over the last 25 years.

The worst part of the article seems to come from the author, where he states that “Government has always created jobs, of course, as it provides everything from national defense to roads and schools.” This is the type of analysis we get from an author who repeatedly spits out government press releases rather than engaging in true economic thought.

speedmaster May 6, 2007 at 4:32 pm
RogerM May 6, 2007 at 9:02 pm

This is so depressing. We’re not making much progress.

nick gray May 7, 2007 at 1:18 am

I hope you noticed the recive/receive mistake, or does recive have a meaning in America?
As for good news, I mentioned once before that you could try emigrating to the microstate called The Principality of Hutt River, a farm in Western Australia which seceded successfully, it seems. Now I find that the Principality of Wy has been independent in Mosman, a Herbourside suburb of Sydney, for over a decade! I am no good with HTML links, but Google-ing should give you some links. Perhaps Mises Economic Blog could write an article on micro-states, and their viability, and whether they have UN recognition?

TLWP Sam May 7, 2007 at 9:18 am

Some 50% of Americans receive welfare? Tax payers versus tax consumers? Doesn’t that mean that there’s some 150 million effective thieves? Only they get the Government to do the dirty work so they can save face? So could that be the Great Conspiracy against Libertarians? Everyone else likes the Government cause they were thieves too all along? Honour amongst thieves? Looks like Libertarians are going to have to buy lots of ammo if they’re to clean the crap off society and start honest living all over again.

billwald May 7, 2007 at 10:18 am

After WW2 most every small city was a company town. A working class person could get a job that would give him job security for the rest of his life, pay the basic bills, and give him enough pension that combined with SS would permit him to keep livingwhen he was to old to work. These days there are no company towns, no company loyalty and no worker loyalty. The only dependable jobs are govt jobs. Of my five kids, two have good govt. jobs.

Me, I spent 30 years of my life in the Seattle Police Department with now it is the taxpayer’s obligation to keep their side of the contract until The Wife and I die. It doesn’t offend my conscience my to spend my pension.

Kevin B. May 7, 2007 at 12:23 pm

Me, I spent 30 years of my life in the Seattle Police Department with now it is the taxpayer’s obligation to keep their side of the contract until The Wife and I die. It doesn’t offend my conscience my to spend my pension.

I spent seven years in the US Navy. I didn’t have a contract with the taxpayers, since they didn’t have a choice. Billwald, you and I aren’t owed anything from the taxpayers. It is pitiful that you haven’t noticed that those who are paying the bill are not signing the checks.

Jim Tetzlaff May 7, 2007 at 12:34 pm

Wonderful analysis- not really true but makes for good reading. Let’s see now- I am on the government dole too. Spent 20 years earning below the poverty level in the U.S. Marines, now I have a pension. Paid my Social Security all my adult life, now retired and drawing yet another government pension. By the way- worked in private industry and have yet another pension (private) to make ends meet. Never have I been on welfare, drawn food stamps, un-employment payments and have always earned my keep honestly. Paid every tax known to man faithfully and now I’m the scum of the earth.

My military career was by choice, all the taxes were by force and the rest of my achievements were in self-defense. I’m getting by just fine and have no shame.

Semper Fidelis,
JimT

Jason May 7, 2007 at 1:54 pm

I guess, when everyone is a theif, no one is a theif.

Robert Brazil May 7, 2007 at 2:50 pm

This raises a good point.

If you are forced to pay into these welfare schemes (Social Security, Unemployment Insurance, Medicaid, etc.), is there anything shameful about getting some of that money back from the government?

As a matter of principle, I would avoid taking any welfare money unless I was absolutely desperate. Even though I’ve already paid in more than I am likely to ever get back, I prefer not to provide a justification for the existence of these programs.

(Such a justification would be fraudulent in any case, since I could have saved and invested the money that was taken, and thus avoided the need for welfare handouts. But the advocates of these programs always ignore this fact.)

I would also never work for the state, either directly or on a contract basis. Payment for such work would, of course, involve the denial of other people’s right to spend their own money as they would have liked, and would as such be a misallocation of resources. And that is a best-case scenario. Even worse is when the job itself involves, for example, the mass killing and destruction of war, or jailing people for non-crimes.

Kevin B. May 7, 2007 at 6:48 pm

Robert,

To answer your question:

If you are forced to pay into these welfare schemes (Social Security, Unemployment Insurance, Medicaid, etc.), is there anything shameful about getting some of that money back from the government?

The point is that the taxes you pay don’t go to the same people that you receive wealth transfers from later. Yes, you are paying into welfare schemes at one point, but when you collect, your victims are new. Thus, your only comfort to them is that they may too become thieves someday.

happylee May 7, 2007 at 6:48 pm

The 80/20 rule may apply here. As long as there are still 20 productive individuals per 80 worthless government and social welfare bums, we may pull through. My personal observation suggests that Germany and France are barely scraping by with roughly this proportion.

The problem is that the private sector has to compete with the gov’t for intelligent workers. As the average pleasant and potentially productive person would have to be a complete nimrod to stay in the private sector (with all its uncertainty and relatively low pay).

I am sad to say some of my smartest friends are gov’t “workers.”

Boss May 7, 2007 at 7:30 pm

I agree. Just because you were robbed, does not
mean that you have a right to receive a cut of
future robbery proceeds.

lester May 9, 2007 at 2:31 pm

I ‘m guessing this galbraith has to be related to the other one. it’s funny, the first economics books I read were Galbraiths. the first froegin policy books I read were by neo cons. Why is it that the worst stuff is the most accesible?

Justin May 9, 2007 at 10:28 pm

How can we hope as Libertarians to change society when over half of U.S. population is on the goverment dole? There’s no way Ron Paul can win when he have such an ignorant and helpless populace. :(

nick gray May 10, 2007 at 1:29 am

If Ron promises to raise entitlements, then they’ll vote for him; and he can then, as president, ensure that everyone is entitled to keep more of their own money! Entitled to not pay taxes! Entitled to run their business as they choose!
It’s all in the wording.
We might not have relative morality if Einstein, realising that the speed of light is the single absolute value in the Universe, had called his idea the Theory of Absoluteness

Andy September 24, 2007 at 11:41 pm

The statistics do not reflect on anyone who chose to put in their time and retire after working a career, that’s an honorable way to earn a living and provide for one’s family.

The fact that it’s more than 50% of the population speaks to the bloat in our government. Even if every penny paid out was worked hard for by the recipient, should more that half the population be working for the government?

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