Free Markets, Free People

Tipping point? Not really, but …

While I’ll be the first to acknowledge that “government handouts” are bad and at a all time high, this is more of a sensational few paragraphs than real.  It speaks to the general confusion among the mass of American voters concerning what they do and don’t want cut when it comes to “entitlements”:

Households received $2.3 trillion in some kind of government support in 2010. That includes expanded unemployment benefits, as well as payments for Social Security, Medicare, Medicaid, and stimulus spending, among other things.

But that’s more than the $2.2 trillion households paid in taxes, an amount that has slumped largely due to the recession, according to an analysis by the Fiscal Times.

Also, an estimated 59% of the 308.7 million Americans in this country get at least one federal benefit, according to the Census Bureau, based on 2009 data. An estimated 46.5 million get Social Security; 42.6 million get Medicare; 42.4 million get Medicaid; 36.1 million get food stamps; 12.4 million get housing subsidies; and 3.2 million get Veterans’ benefits.

And the handouts from the government have been growing. Government cash handouts account for a whopping 79% of household growth since 2007, even as household tax payments–for things like the income and payroll tax, among other taxes–have fallen by $312 billion.

That is a tough feeding trough to take away from voters.

Uh, we’re into a bit of apples and oranges territory here.  Most who have paid into them all their working lives do not see Social Security and Medicare as a “handout”.  Same with veterans who signed a contract and worked for relatively low wages for the benefits service in the military would bring.   They see SS and Medicare as a “paid benefit” and those going to veterans as an “earned benefit” or contractual obligation.

Medicaid, food stamps and housing subsidies, however, are handouts.   And the case can be made that so are “extended” unemployment benefits as well.

That said, the obvious problem doesn’t change – we’re paying out more than we take in by 100 billion dollars.  But we’ve been doing that for decades overall – thus the yearly deficit and the huge debt.

There are a number of ways to change that but in general they are:  A) cut spending,  B) raise taxes, C) a combination of both.

There are advocates for each of those courses of action.  Generally Republicans favor course A.   Democrats favor course B but would probably live with course C if the cuts weren’t too deep and the rich got nailed in the tax regime.

One of the reasons I support course A first is the amount in revenue we currently have coming in the door.  It is plenty.  It is also in the 19-21% of the GDP range which seems to be the historic range above which we collect taxes.  Regardless of the marginal tax rates, we never take in more in taxes than this range.  The reason, I would assume, is there’s a point at which those being taxed begin to take action to legally avoid taxation.   And in a capitalist system, there are those who studiously comb the tax regulations for loopholes and then sell them to those who have a growing tax liability.  Thus the historic percentage.   People are only willing to part with so much of their earned money to government.

That brings us to why course B is unpopular.   Most citizens of the US innately agree that government gets plenty of revenue.  And that means most also feel that the problem isn’t revenue, but instead profligate spending.  The reason that most are not open to new taxes is they feel government gets plenty now, but, more importantly, that it spends it for any number of things it has no business involving itself in.

So what’s the answer?

Course A first and foremost.  Show us (the citizenry) that you’re seriously committed to cutting spending and all that entails (trim government size, scope and reach).  Take action now to do what is necessary to put “entitlements” on a sustainable footing.  I think it is clear that their elimination is not something which is in the cards at this point, but there is much that can be done to make them viable.  And yes, that may mean privatizing portions of them.

Then and only then, when the citizenry is convinced government has been reduced to an appropriate size and all the spending that can be wrung from it has been wrung from it will they finally be open to the possibility of increasing revenue – but again, only if they see it as necessary.

I’m not sure why the left doesn’t get this.  Maybe it is just me, but this seems as clear as the nose on your face – it is spending which has gotten us in this mess, not “lower taxes”.  The fact that spending has outstripped revenue is not the fault of tax payers.  The fact that government is in areas never envisioned by the Constitution or founders is not the fault of the taxpayers.   The fact that Congress and various presidents have mortgaged the future of our republic and billed our grandchildren and their children is not the fault of the taxpayer.

So why must the taxpayer foot the bill?

That’s the ideological fight we face.  It has to be made clear that we’re not willing to give them more until there’s real and huge progress in reducing spending and with that a commensurate reduction in the size of government.

Without that, “no new taxes” is as valid an argument as any out there and Republicans shouldn’t cave on that principle regardless of the pressure to do so.



15 Responses to Tipping point? Not really, but …

  • The fact that government is in areas never envisioned by the Constitution or founders is not the fault of the taxpayers. The fact that Congress and various presidents have mortgaged the future of our republic and billed our grandchildren and their children is not the fault of the taxpayer.

    Not so sure about that…the obvious rebuttal is we vote the fools in. So perhaps i misunderstand what you mean.

    • I understand your point, Josh, but what I’m alluding to here is the money is not spent by the taxpayers and even when politicians who do spend are punished the spending goes on – it’s like the politicians never seem to get the message. How long have we been saying “no new taxes” and “cut spending”?

      • I just don’t understand the end game here. The facts are quite clear, no matter the taxation scheme used, revenues will be 15-20% of GDP. That is simply a historical fact. Proven in times are low taxation and time of high taxation. To see this data and NOT budget based on it, to in fact even champion spending which is orders of magnitude above this amount is either pure ignorance to the facts of willful destruction of our financial stability.
        Yet i still don’t see the strategy, what is the intended outcome of financial ruin to left? Utopian socialism? Is that it, is it simply a desire to ruin us into submission to the state? I just don’t see that ending well for them, or anyone for that matter. There will be a point where the frog jumps from the pan, perhaps that time is now.

        • One goal could be enough social upheaval to justify more intrusive government control “for our own good/safety/security/wellbeing”.
          Of they could be good intentioned idiots.
          The difficulty comes in determining which is which – the first is far more insidious and therefore hard to accept, but the second is hard to believe.

        • Yeah, it’s called Hauser’s law.
          Some sort of empirical law that shows that as you increase taxes, those who can move more of it into shelters and such.
          Even during the sky high rates of the Eisenhower presidency, it still amounted to no more than that.

  • Same with veterans teachers who signed a contract and worked for relatively low wages for the benefits service in the military schools would bring.   They see SS and Medicare  their pension as a “paid benefit” and those going to veterans teachers as an “earned benefit” or contractual obligation.

    • No one is arguing they otherwise, Tito. Again, there’s a difference between contractual obligations and handouts. That said, handouts should go first and if we still have an unsustainable fiscal problem and all other cuts have been made to everyone’s satisfaction, even “earned benefits” may have to be modified.

      As I said in another post, the primary priority of government must be fiscal responsibility and sustainability, not giving money away that it doesn’t have.

  • Hmm, your strike through didn’t work

  • Yesterday Barry was off buying the votes of college students telling them the EVIL Republicans wanted to take away their Pell grants and other assorted hand outs, but HE would save them, in fact he’d give them MORE, AND!!!!!! Cut the deficit!
    Nothing new, just another day of buying and lying.

  • Can you please post a link to the article.  I’d like to read the whole thing.  thx.

  • Perhaps a revolution, at least on paper, is required.  Call it an “accountants revolution.”

  • Saying “all we have to do is go back to the tax rates under Clinton” is effectively saying “all we need is another asset price bubble that funnels a huge amount of money into the pockets of the rich”.  This seems neither particularly feasible, nor desirable. 

    At least that explains some of the love for “cap-and-trade”.

  • I may have missed something, but aren’t the numbers way off?  Aren’t most of the 46.5 million who get SS also likely to be part of the 42.6 million who get Medicare (and possibly housing subisidies and veteran’s benefits)?  And many who get Medicaid almost certainly get food stamps, etc…  That 59% number comes from adding up those categories as if mutually exclusive and dividing by the 308.7 total population (I tried it). 
    That being said, the premise of the post is still dead on, in my opinion.  I’d just like to see what the real number is (or let me know what I missed)…

    • I think you may have a point, but I’d suggest that food stamps and medicaid, now at all time highs, are a substantial part of that number. And certainly those on extended unemployment benefits are most likely not SS or Medicare recipients.