Free Markets, Free People


Government dependency tipping point? Been there, done that ….

More on the increasing culture of dependency on government:

The percentage of people who do not pay federal income taxes, and who are not claimed as dependents by someone who does pay them, jumped from 14.8 percent in 1984 to 49.5 percent in 2009. This means that in 1984, 34.8 million tax filers paid no taxes; in 2009, 151.7 million paid nothing.[2]

It is the conjunction of these two trends—higher spending on dependence-creating programs, and an ever-shrinking number of taxpayers who pay for these programs—that concerns those interested in the fate of the American form of government. Americans have always expressed concern about becoming dependent on government, even while understanding that life’s challenges cause most people, at one time or another, to depend on aid from someone else. Americans’ concern stems partly from deeply held views that life’s blessings are more readily obtained by independent people and that growing dependence on government erodes the spirit of personal and mutual responsibility created through family and civil society institutions. These views help explain the broad public support for welfare reform in the 1990s.

This ethic of self-reliance combined with a commitment to the brotherly care of those in need appears threatened in a much greater way today than when this Index first appeared in 2002. This year, 2012, marks another year that the Index contains significant retirements by baby boomers. Over the next 25 years, more than 77 million boomers will begin collecting Social Security checks, drawing Medicare benefits, and relying on long-term care under Medicaid. No event will financially challenge these important programs over the next two decades more than this shift into retirement of the largest generation in American history.

And yet we just got a budget from the President of the United States which essentially ignores that fact.  Just like his previous three.

But more important than that is this culture of dependence that has perniciously grown in this country over the preceding decades fueled by politicians and the ideology of the left.  

Libertarians and many Conservatives have been warning about this phenomenon for years.  But in 2008, what had been a relatively slow ride to growing dependence became a ride on a rocket sled:

Not only did the federal government effectively take over half of the U.S. economy and expand public-sector debt by more than all previous governments combined, it also oversaw a second year of enormous expansion in total government debt at the federal level. Much of that growth in new debt can be traced to programs that encourage dependence.

master research graphic templateNEW

 

In 40 plus years we’ve gone from a dependency percentage of 28.3% to over 70% in 2010.  I don’t think anyone realized how big the change has been or what significance it has.  But it has made us a nation of takers vs. makers

As Heritage’s Bill Beach and Patrick Tyrrell explain, "the index score has grown by more than 15 times its original amount. This means that, keeping inflation neutral in the calculations, more than 15 times the resources were committed to paying for people who depend on government in 2010 than in 1962."

It is the same trap that countries like Greece were in and will result in the same collapse.

Ed Feulner adds some context to the increased percentage of dependence:

Perhaps the most startling part of the index concerns how much assistance is being distributed. Americans who rely on government receive an average $32,748 worth of benefits. How high is that? Higher than the average American’s disposable personal income: $32,446.

Why work?

And:

More than 67.3 million Americans rely on assistance from Washington for everything from food, shelter and clothing to college tuition and health care. These benefits cost federal taxpayers roughly $2.5 trillion annually.

So the president offers a 3.8 trillion dollar budget of which, according to these numbers, all but 1.3 trillion goes to “assistance”.

And in order to offset these “assistance” payments somewhat, the president decides that the only Constitutionally mandated expense within the budget – defense – has to pay the butcher’s bill.

We talk about “tipping points” often, but looking at that chart, I’m convinced that tipping point may have been passed years ago.

Some quotes to leave you with.  Rep. Allen West, this past weekend said he has no problem with a safety net.  His problem is “when that safety net becomes a hammock.”  In this case a $32,000 hammock.

Alexis de Tocqueville reputedly said that the American republic will last only "until the majority discovers it can vote itself largess out of the public treasury."  We’ve seen that majority discover it with a vengeance.

And finally, George Bernard Shaw said, ““Liberty means responsibility. That is why most men dread it.”

70% dependence says a majority now dreads “it”, and has decided it likes others, the makers, paying their way.

As one friend aptly described it on reviewing these numbers, “we’re screwed”.

~McQ

Twitter: @McQandO

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10 Responses to Government dependency tipping point? Been there, done that ….

  • Welcome to #Occupy America

  • How can there be 151.7 million fed tax return filers when we only have about 300MM people in the USA?

  • Another approaching tipping point (hopefully)…

    “And as more middle-class families … land in the safety net …, anger at the government has increased alongside. Many people say they are angry because the government is wasting money and giving money to people who do not deserve it. But more than that, they say they want to reduce the role of government in their own lives. They are frustrated that they need help, feel guilty for taking it and resent the government for providing it. They say they want less help for themselves; less help in caring for relatives; less assistance when they reach old age.”
    –NYT

    That is a hopeful sign.

  • Someone has to explain this to me: my teenage kids who work part-time minimum wage have to pay taxe, ie taxes are withheld and they don’t get all of it back at filing time.
    .
    How in the heck does someone not pay any income taxes?

    • @dfgardner Not being a tax guy…I bet they DO get all the INCOME TAX back.

      • @Ragspierre @dfgardner Ain’t nobody gets the Social Security and Medicaid portions back, well, not till you’re, what is is now… 72, 75, 90?

        • @looker @Ragspierre @dfgardner
          For those entering the workforce now, It is my understanding that SS will provide negative returns.

          It is likely that the market distortions of third party paying has made Medicare negative returns now.

        • @newshutz @looker @Ragspierre @dfgardner SS has been on a course to provide negative returns for most taxpayers for quite a while. I am 17 years from collecting SS and have been paying in the max for the last 15 years, and I could still beat SS returns by a mile starting at zero today if I could invest that 14% for just the remaining 17 years. This is an area where I agree with conservatives 100%, the government should not be in the pension business. Old age safety net, sure, but this inter-generational wealth transfer is a guaranteed loser. Government can be good at insurance, not at investment. If I had my druthers, we would have single payor health insurance for all (with private options for those that wanted more), and turn SS into a means tested safety net, with most of the payroll deductions going into private accounts. That’s my one sentence solution to the looming debacle of SS and Medicare.

        • @CaptinSarcastic @looker @Ragspierre @dfgardner

          What most people call “health insurance” is not insurance. The whole problem with health care costs is a direct result of third party payer systems distorting the markety (i.e. what most people call “health insurance”)