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.




Obama Nation: Lower Living Standards, Rising Poverty

The Dow ended down almost 400 points today. But that’s not the real measure of prosperity or how the U.S. economy is doing. The real measure is per-capita income – i.e. income per person or the quantity and quality of goods and services per person. That’s what separates us from third-world countries. Our per-capita income of course is a lot higher, and over the decades it has increased faster. It’s also what separates us from Europe. Western Europe’s average per-capita income is equivalent to that of our lowest-income state (Mississippi). Europe’s per-capita income used to be equal or higher than ours, 40 years ago. But their welfare state has taken its toll – slower economic growth over the decades since, which really adds up.

But the welfare state is really taking hold here in the U.S., especially under Obama who has raised government’s share of the GDP from about 20 percent to 25 percent, and who has added more to our national debt in two-and-a-half years than George Bush did in eight years (which was bad enough as it was).

And it shows: our per-capita income here in 2011 has fallen to 1996 levels. That’s scary – usually per-capita income rises over time. It may fall during recessions, but then during the rapid economic growth that usually follows recessions, per-capita income spikes up.

In this Obama economy, however, post-recession growth is anemic. It was less than 1 percent at last count, which is slower than population growth, meaning there are fewer and fewer goods and services per person. Normally after deep recessions, growth is in the neighborhood of 5 to 8 percent. But when it comes to the economy, Obama doesn’t know what he’s doing (assuming he genuinely wants to help the economy, in contrast to many hard leftists who want to see growth come to a halt).

What more evidence do we need to show that big government solutions don’t work? They only make our standard of living decline. The main driver of rising per-capita income isn’t government, but the people outside of government who are producing the goods and services. It’s government’s job to make sure there are good ground rules. But too often, they go overboard on the rules, and coerce too much out of the private sector.

Another frightening bit of news: the percentage of Americans living below the poverty level is the highest since 1993.

What more evidence to we need to show that poverty is alleviated by private-sector-driven economic growth, and not clumsy government programs? It’s the latter that exacerbate poverty.

If government programs were the main alleviators of poverty, then practically all third world countries would now be first world, given that most of them have socialist governments. But they’re third world precisely because of their bloated governments. It takes months or years to just get permission to open a business in many of those countries.

So poverty in America reaches an all-time high, even though Barack Obama was expected by the economically naive to bring it to an all-time low.

Hopefully the Obama experience will squeeze that naïveté out of some of them.

Yes, the main cause of poverty is a shortage of goods and services in society. That’s what separates us from a third world country like Haiti. Yet now, goods and services per person are decreasing. Of course we’ll never become like Haiti (except perhaps in certain pockets like Democrat-controlled inner cities), but our standard of living will be a lot lower than what it could have been, had we had fewer economically illiterate people running our country.