Entitlements Now 72% of Federal Spending

In the early 2000s America had become a bona-fide welfare state. More than 60 percent of U.S. federal government spending consisted of transfer payments. That’s right: nearly two-thirds of government went toward redistribution.

Call it what you will – wealth transfer, entitlements, government benefits, welfare, unearned income, handouts. The government became one big redistribution machine. Spending on entitlements was crowding out spending on essential government activities – national defense, law enforcement, foreign affairs, transportation infrastructure, environmental clean-up, NASA, and the like.

So did we finally get our act together and start to tame the redistribution Leviathan?

After eight years of Obama, you guessed it. We just piled it on.

Now, nearly three-quarters – 72 percent – of U.S. federal government spending consists of transfer payments.

These are the Obama White House’s own statistics. The Office of Management and Budget historical table “Composition of Outlays: 1940–2021” tells the story. Transfer payments, expressed as “payments for individuals”, comprised about 20 percent of government outlays in the 1950s. By 1992 they had surpassed 50 percent.

Barack “spread-the-wealth-around” Obama, true to his word, ballooned redistribution from 60 of government spending at the start of his presidency to 72 percent now.

The biggest entitlements are Social Security, Medicare, and Medicaid plus an alphabet soup of programs including Obamacare subsidies, Section 8 housing, civil service retirement, and refugee assistance.

The infamous budget sequestration that began in 2013 has exacerbated the crowding out. It slowed spending on essential government services across the board, but deliberately barely touched entitlements.

National defense as a percentage of total government outlays fell from 45 percent in the 1960s to less than 16 percent now. OMB projects that to fall to 12 percent in 2020.

With 72 percent of federal spending allocated to transfer payments and 6 percent to interest payments on the national debt, only roughly 6 percent of the U.S. federal budget is available for non-entitlement, non-defense government functions. Interest rates’ inevitable rise combined with continually expanding entitlements will squeeze these government functions even more.

Is it any wonder why our transportation infrastructure is crumbling, our national parks are suffering, our space program is faltering, and our military readiness is in jeopardy? We’re a wealthy country that easily could finance those activities, were we fiscally responsible. But too many Americans and the politicians who cater to them have drunk the Kool-Aid of free government stuff be it in the form of money, goods or services.

We could have remedied our predicament by converting major spending programs into savings programs, but the last time anyone tried that was George W. Bush vis-à-vis Social Security. Amid the blowback he dropped that effort like a hot potato.

We’ve reached the “tipping point” where more voters receive free money from the government than there are voters earning that money. Just try proposing cutting back someone’s free stuff and see the outcry that ensues.

Only clever and courageous leadership can get us out of this predicament. While President-elect Trump said he plans to reform Obamacare, it remains to be seen whether he’ll attempt the same with the big entitlement programs.

What will happen as redistribution’s share of government spending continues to swell? Deteriorating military readiness and the degrading of traditional government functions will continue to take their toll. Another consequence is anemic economic growth, as government handouts and higher taxes sap people’s motivation to work and invest. Growth has averaged just 2.1 percent over the past five years, versus 3.2 percent average growth of preceding decades. This is manifested in lower overall wages and greater poverty than would otherwise be the case.

The dire situation is contributing to America’s waning influence in world affairs. More welfare spending means less taxpayer money available for our military, embassies, foreign aid, and cultural outreach. A less-vibrant economy further diminishes our influence abroad.

Absent reform, America’s economic dynamism will continue to ebb as the entitlement culture permeates society.

But we’ll muddle through – until we get a rude awakening. One day, some foreign enemy will be at our doorstep. And we won’t be able to adequately defend ourselves because for far too long we used our tax money to expand welfare rather than stave off warfare. That’s when the bill will come due in a big way.

 

(Originally published in Newsmax.com)

The Ironies of Elizabeth Warren

Apart from initially wiping out any mention of “God” from the party platform, one of the biggest manifestations of the Democratic Party’s lurch leftward is the elevation of the “wealth-is-theft” school of thought.

The notion that the wealthy got their money through institutionalized theft used to be championed just by people on the far-left fringe, like Bill Ayers and Bernardine Dohrn. But at their national convention earlier this month, Democrats not only featured a speaker championing this school of thought, but gave her a coveted, prime-time slot – right before Bill Clinton.

Folks, it’s not your mom and dad’s Democratic Party anymore.

The speaker was Elizabeth Warren, who’s running for Senate in Massachusetts (and infamous for her claims of being part Cherokee Indian).

For more on the demagoguery, click here.

The ultimate irony? That Ms. Warren and her cohorts on the left are protectors of actual wealth transfer from the poor to the rich. As explained in the post below, the 15.3 percent payroll tax on the working poor, perversely, helps fund Social Security and Medicare payouts to middle- and high-income retirees. Whenever Congressional Republicans propose “means-testing” so that transfer payments don’t go to the rich, Democrats balk.

Yet another irony: Awhile back, lefties swooned over Ms. Warren’s comment along the lines that job creators should pay more taxes because of the government services provided to them like roads, police, education, etc.

But as explained in an earlier blog post, we’re getting less of those essential government services because of people like Elizabeth Warren!

The left is fueling the biggest crisis in government: the crowding out of things like law enforcement, fire protection, transportation infrastructure, education, environmental protection, etc. by wealth redistribution. Fully two-thirds of federal government spending goes toward entitlements and other redistribution programs – up from about 25 percent several decades ago. And with Obamacare, it’s on track for 70 percent in a few years. For a short video on the subject, click here.

Basic government services are getting squeezed out. Yet Ms. Warren and her allies relentlessly call for more wealth redistribution, tightening the squeeze.

Norman Ornstein: Dems Willing to Cut Entitlements. Huh?

Folks born in my home town of Grand Rapids, Minnesota (not Michigan) can say the darndest things sometimes.

Norman Ornstein, of the American Enterprise Institute, writes (together with Thomas Mann) in the Washington Post that the Democrats “are centrist protectors of the government, reluctantly willing to revamp programs and trim retirement and health benefits to maintain its central commitments in the face of fiscal pressures.”

Democrats willing to trim retirement and health benefits? Huh? Where? When?

Is he sure he and his co-writer didn’t accidentally drop in the word “Democrats” whereas they meant to write “Republicans”? Because that statement characterizes Repubs much more than Dems. Gotta be a typo. Where are the Washington Post’s proofreaders when you need them?

Last I checked, the Democrats are fighting tooth and nail to maintain and increase government-provided retirement and health benefits, even in the face of national bankruptcy. In fact, just two years ago they pushed through the most massive increase in government-provided health benefits in U.S. history (Obamacare)!

Maybe, just maybe, Dems would consider slightly slowing the rate of entitlement growth (which is not “trimming” or cutting) only in exchange for a massive tax increase. Supposedly Obama put together a budget plan containing some of that. But his fellow Democrats rejected it outright. Which just goes to show that while perhaps an individual Democrat or two would consider trimming entitlements – especially in exchange for a tax increase – it’s practically a non-starter for Democrats as a whole.

Those who implement new multi-trillion-dollar government redistribution programs even though we’re already many trillions of dollars in debt are protectors of redistributionist government all right. But they’re not “centrist.” They’re downright leftist. And massively fiscally irresponsible.

Another One Becomes Part of the Solution

Things can get so bad as a result of the liberal/left agenda that sometimes even liberals/leftists recognize the folly of their ways.

That’s what happened to Gina Raimondo, the Rhode Island state treasurer who was mortified to see the union-driven state pension system turn into a black hole, sucking in money and resources at the expense of everyday public services. The leftist-dominated state has resulted in there being more public pensioners than workers paying into that system.

Ms. Raimondo read “an article in the paper about libraries closing and public bus service being cut nights, weekends and holidays, and I just thought it doesn’t have to be this way.”

Of course for most liberals, the solution would be simple: raise taxes. But the now-bankrupt town of Central Falls provides a good example of what happens when you do that. When it raised property taxes to finance worker pensions, “many residents fled, sending the city into a tailspin.”

So Raimondo helped push through pension reforms in order to help stem the state’s deteriorating situation.

Hey all you Wisconsinites who want to throw out Governor Walker: can’t you see that Walker has been doing almost exactly what Raimondo has been doing? He’s trying to prevent your state pension system from turning into a black hole that gobbles up everything in sight like libraries and roads and schools and parks. Quit being part of the problem and be part of the solution for a change.

Of course the only difference is the label – Raimondo calls herself a Democrat while Walker calls himself a Republican. Walker is having a tougher go of it because the term Republican has been so demagogued by the left, even though he, like Raimondo, is only trying to save the state from the ravages of union-created black holes.

Where’s Your Job? You Killed It, Dude

Apart from “Dude, where’s my welfare money,” a slogan or mantra for the age of Obama is, “Dude, where’s my job?”

It sums up both the sorry state of the economy, and the gimme-gimme-gimme entitlement mentality that’s fueling the sorry state of things.

A counter-slogan for the age of Obama should be, “Dude, you killed your job.”

Read on here.

 

 

 

 

Redistribution Nation: 48.5% of U.S. in Households Getting Handouts

“Nearly Half of U.S. Lives in Household Receiving Government Benefit,” roars he headline, based on the latest U.S. Census data.

That ties in with the fact that, with two-thirds of federal government spending dedicated to redistribution, the government’s main function is now taking away money from some people and giving that money away for free to other people . It used to be that its main role was to provide essential services. Those essential services are being crowded out.

It’s worth repeating Patrick Lencioni’s observation, writing in Personal Excellence. He’s talking about socialism, but it equally applies to mixed economies – i.e. a mixture of capitalistic and socialistic policies, especially the ones where the latter gain in prominence, such as ours right now:

…First, socialism just doesn’t work—at least not for long. Most people won’t keep working hard for the greater good if they don’t receive the fruits of that work. The free-loader effect is the tendency of people to do less work when they realize they won’t see more in return. Over time, socialist societies experience decreasing productivity, risk-taking, and innovation, along with increasing tax rates, government programs, and expectations. When the economy falters, those expectations can’t be met.

Unfortunately, by the time people realize this, it is often too late for them to try a different approach, since there are more people who expect benefits from the government than there are people who pay for them. And thus begins a descent to economic and motivational malaise. Ironically, the people who socialism is supposed to help—the poor—only grows because they are joined by more people who drop out of the shrinking middle class…

That last observation – that the ranks of the poor only grow under such a system – is happening to us right now, as discussed two posts below.

 

 

 

Elizabeth Warren and the Crisis in Government Services

Lefties are going ga-ga (the uppercase of whom, by the way, is also a leftie) over a quote by one Elizabeth Warren who’s running for Senate in Mass., in which she says something along the lines that job creators should pay more taxes because of the of the government services provided to them like roads, police, education, etc.

The irony is that we’re getting less of those essential government services because of people like Elizabeth Warren!

She and her brethren on the left are fueling the biggest crisis in government: the the crowding out of things like law enforcement, fire protection, transportation infrastructure, education, etc. by wealth redistribution. For the lowdown, click here.

Another irony: her comments apply to anarchists (those who don’t want any government services). And where can you find marauding bands of people who call themselves anarchists? Try any typical anti-globalization, anti-capitalism, or other leftie rally.

Wealth Redistribution’s Relentless Claws Dig Deeper

News today that’s yet another example of the redistribution/welfare state crowding out good government. Yes, there is such a thing as good government, like postal delivery, law enforcement, education, environmental protection, national defense, space exploration, etc.

The U.S. postal service is threatening to suspend delivery because it can’t make a $5.5 billion payment to its retirees.

Wealth redistribution from working people to retirees is having a severe impact on the fabric of our society, in this case that age-old institution of postal delivery. True, we probably could get by without postal delivery these days thanks to electronic communications and private delivery companies like UPS and FedEx. But even so, the postal service is yet another conduit for the redistribution that’s crowding out everything else.

Just as it was a big mistake to set up Social Security as a spending program rather than a savings program, it was a big mistake to never have transitioned the postal service’s pension system into a savings program, in the same way that private companies are and have been converting their pension plans to 401(k)-type savings plans. But the postal system is part of the government, where unions have a stranglehold on things, so it’s hard to reform anything there.

Richest country in the world. And broke.

Van Jones, the 9-11 conspiracy theorist, one-time (possibly even present-time?) Marxist, and former Obama administration official said “We are not broke. We’re the richest country in the history of the world.”

He doesn’t understand the paradox of how you can be a rich country and broke at the same time.

Money isn’t available to pay for government services like road and bridge repair, national parks, law enforcement, environmental protection, and NASA. It’s a state level phenomenon, too. The richest state in the union (in terms of GDP), California, can’t even fund its state parks, forcing it to shut them down.

Normally it would be easy for a rich country like ours to fund such things. But we can’t, because all the tax money is committed to redistribution. Instead of spending the tax revenue on traditional government services, we’re transferring it from some people to other people, mainly through entitlement programs. Two-thirds of federal tax revenue is spent on redistribution. Lots of traditional government services already have been crowded out.

That’s what happens when you let the purpose of government change from being a provider of services to being a huge conduit for income redistribution.

 

 

 

 

 

California’s Vicious Circle Continues

California recently was ordered to free 55,000 prisoners because it can’t afford to hold them. It’s yet another manifestation of essential government services getting crowded out by wealth redistribution.

As pointed out below (under the Jan. 24, 2010 entry), in the past decade California state pension costs skyrocketed 2,000 percent. Many union workers can retire at age 50, with 90 percent of their pay, for life. 15,000 of them get more than $100,000 per year. That includes life guards.

In 2009, at least $3 billion was diverted from other government services to pension costs.

As Walter Russell Mead writes, “California’s public unions are sucking the state dry — like a parasite killing its host.” He quotes the “great Louisiana prophet of the blue social model Huey Long: ‘If you aren’t getting something for nothing, you’re not getting your fair share.'”

That so sums up what those on the left stand for these days. They’re always talking about getting their “fair share”. Most of the time, they mean getting it for nothing. (Typical is when some interest group gets free government benefits, and some other interest group screams that they should be getting the same or similar benefits in order to get their “fair share”.)

As explained here, California is caught in a vicious circle. “Constituencies sympathetic to businesses are leaving California in increasing numbers. Meanwhile the state’s generous social welfare programs pull in lower-income people – both from the within and outside the United States – who typically vote against the interests of businesses. With fewer pro-business and more anti-business voters (i.e. fewer Republicans and more Democrats), the result is even more regulations and higher taxes, driving even more businesses out, and so on.”

“Californians have slipped from having the 3rd highest per capita income in the country in 1959, to the 13th highest now. What’s their solution to reverse the trend? Measures to make the state business-friendly again? No. Most of the state’s elected representatives are trying to remedy the situation with more tax increases; part of the vicious circle.”

“So businesses will flee the state even faster. Fewer businesses will want to move there. Entrepreneurs won’t want to set up shop there.”

And its status as a failed state will be driven home even further.