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 “successful” 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?
