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)

OK to Both Accept Government Money and Criticize It

Social Security card

iStock/Getty Images

When critics of Obamacare begin to enroll in Obamacare, they’re likely going to be accused, directly or indirectly, of hypocrisy from some quarters. But it won’t be hypocritical. If the government all but destroys the health insurance market through Obamacare and other forms of government intervention in that market, then the critics of Obamacare have no choice but to enroll therein. They’re, in effect, trapped into participating in that system.

It’s a similar situation with Social Security. Sometimes critics of Social Security are construed as hypocrites for accepting Social Security money. But that’s erroneous. If the government hampers or destroys your ability to save for retirement by coercing money out of you to put toward Social Security, then you have little choice but to accept Social Security payouts.

Moreover, with Social Security, the government took our contributions but didn’t invest them in actual savings funds. Instead it spent the money. We can’t help that – that’s what we’d like to see changed. It’s like being forced to invest in a Ponzi scheme. You would rather put your money elsewhere but you’re essentially told at gunpoint to invest in it. Later you’re accused of hypocrisy for taking the payouts. But not taking the payouts would amount to extortion and self-imposed impoverishment. If you had your way, you wouldn’t in a million years have invested in the Ponzi scheme. Where else are you going to get the money due to you?

Yale Grad Shocked that Dems Take from Poor and Give to Rich

There was a commentary in HuffPo focusing on the 15.3 percent Social Security and Medicare tax that the working poor have to pay.

I commented that this 15.3 percent tax on low-income earners originally was meant to be put in a lockbox or savings fund for their use after they retire, but it just gets immediately spent on current government programs – and perversely, helps fund the Social Security and Medicare payouts to middle- and high-income retirees.

That means we need to put that 15.3 percent in an actual savings fund for the worker’s own use when he or she retires, and also stop transferring payroll tax money from the poor to middle- and upper-income retirees.

Guess who’s standing in the way of that? Dems. Whenever the Repubs try to enact personal savings accounts, the Dems quash the idea, and whenever the Repubs propose means-testing so that transfer payments don’t go to the rich, the Dems kill that as well. The latter aren’t just for welfare for the poor, but for all.

Later I got a reply from “NOTSUPERMOM” whose tagline is “A waste of a perfectly good Yale education,” who’s a “HUFFPOST SUPER USER” and who has 151 fans. She wrote, “I’m surprised and disappointed to hear that Democrats are not in favor of wealth-based social security payouts. It seems completely in line with party policy to direct the payouts to those who actually need them. Can you give me a citation for that vote? Thank you!”

I replied to her, sure. Google “means-testing” and you’ll find lots of material indicating Repub support for it but not Dem support. A case in point is here.

Well, so much for that perfectly good Yale education.

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.

An Incomplete Apology to the Posterperson of the Gimme Generation

If there’s one thing that the whole Rush Limbaugh flap has made apparent, it’s that society holds conservatives to much higher standards of decency than it holds liberals.

When a Bill Maher or an Ed Schultz or others on the left make gratuitous and vulgar remarks about women, it’s met with a shrug, a laugh, or silence. People don’t expect them to have high moral standards. When a Rush Limbaugh does the same thing, there’s heck to pay. That’s because the right is expected to have higher moral standards than the left.

And I’ve no beef with that. I’d much rather be a part of the group to which society holds a higher standard.

As for Rush, in his apology he said he descended to the left’s level when he used the disparaging words to describe Sandra Fluke. He became like them, he said, instead of maintaining a high degree of integrity on his radio program.

OK Rush, that’s a good start, but demonstrating your sincerity requires more than just renouncing the use of those disparaging words. You have to go beyond that. If you mean what you say about not adopting the tactics of the left, you have to pledge to renounce the use of the term “feminazis” to describe feminists, “Chicago thug” to describe President Obama and any similar words you’ve used to describe those on the left. You can’t just not say those words in the future. As part of your pledge, you have to explicitly say that you’ve been wrong to use those words, that you were adopting the tactics of the left in using those words (many, but certainly not all, of them sickeningly call their political opponents “nazis”), and that integrity means erasing those words from your lexicon forever – unless of course you’re talking about actual National Socialists or actual thugs.

Regarding Sandra Fluke herself, in the 1980s young people were said to be in the “me generation” because all they wanted to do was make money and supposedly not share it with others. Well 30 years later, Sandra Fluke is the posterperson for the gimme generation, a large and growing group of Americans who expect other people to give them money – even money for accessories (i.e. contraception) that enable them to engage in pleasures of the flesh!

Note that the gimme generation, aka the entitlement generation, doesn’t just include people in Fluke’s age group, and doesn’t imply that all of them are of that mentality. There are many in the younger generation who shun the entitlement culture and who prize independence and self-reliance. The gimme generation refers to anyone, of any age, who accepts welfare but who doesn’t need it. Remember, two-thirds of welfare goes to the middle class and rich.

Wow – so with Obamacare, we Americans are not only being coerced into financing the routine healthcare costs of rich and middle class Americans, including law students who attend expensive, elite universities, but we’re also being coerced into financing what enables them to engage in their worldly pleasures.

Yes the boiling frog principle is alive and well. Five or 10 years ago if someone were to tell you that’s what’s in store for Americans, you’d think they’d be out of their minds. But that reality is here. And the water boils on.

The Food Stamp President? No, The Welfare President.

The Food Stamp President? Nah – that doesn’t nearly go far enough.

The Welfare President.

And we’re not talking about welfare for the poor. We’re talking about welfare for the middle class and rich. Welfare means free money the people get from the government, money that’s coerced out of the pockets of people who earned it.

Fully two-thirds of welfare goes to the middle class and rich. That’s a tragedy. Obama and especially Obamacare are boosting that proportion even higher.

Yes, the welfare president is a much more accurate description of the man.

For details, click here.

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.

 

 

 

Putting the brakes on rising living standards

GDP growth was revised upward for the first quarter of 2011, from 1.8 percent to a whopping 1.9 percent.

When looking at living standards, the GDP growth rate is practically meaningless if you don’t take population growth into account. And considering that the population growth rate of the U.S. is about 1 percent, that means per-capita GDP growth was a measly .9 percent.

This is scary stuff. The single biggest indicator of a country’s standard of living is the per-capita GDP average growth rate over the long term. There have been plenty of times when recessions put GDP growth way below average. But typically during the immediate-post-recession period, GDP growth skyrockets, making up for the negative growth during the recession. For example after the deep recession of the early 1980s, GDP growth shot up to 8 percent.

Yet now, post-recession (nominal) growth has been 2 to 3 percent. That’s way too slow to bring up our average economic growth rate to historical levels.

It can’t be emphasized enough how important long-term GDP growth is. It is what separates first-world countries from third-world countries. The difference between 2 percent and 3 percent GDP growth may not sound like much, but over the long term, it really adds up. Over 40 years, growing 1 percentage point higher means 50 percent higher per-capita income.

A seemingly small difference in GDP growth really manifests itself when comparing per-capita income of the United States vs. western Europe.  Some 30 years ago per-capita income was about the same. But since that time U.S. GDP growth has been slightly higher, as Europe’s massive welfare state has taken its toll. That has resulted in big differences in per-capita income; in 2010 it was $47, 200 in the U.S., whereas in Germany and France it was $36,000 and $34,000 respectively.

Regarding our slow post-recession growth, what’s going on? Obama’s economic policies, no doubt. They’re stifling economic growth, at at time when it should be flourishing. In a word, Obama is making our economy more like that of slow-growth, massive-welfare-state Europe.

The trillion-dollar “stimulus” has been a big stifler. It’s the same sort of policy that Japan tried during the 1990s in futile attempts to jump start its economic growth. But it only put itself deeper and deeper in debt, with the result that now its living standards are stagnant or falling. See this NYT article on what today’s Japan looks like, after spending itself into a hole, like Obama is now doing for the USA.

Such anemic growth post-recession is unprecedented in modern U.S. history as far as I know. And it’s because we have a president whose been successful in implementing a growth-inhibiting agenda, mainly such huge government spending. It just goes to show that government spending doesn’t spur growth. Keynesianism, as they call it, is unfortunately alive and well, but it only results in sickness.