The Inexorable Rise of the Welfare State

The New York Times published an interesting analysis yesterday on entitlement spending in the United States. Since 1929, entitlements as a share of income rose from 1% to 18% in 2011. Despite some ups and downs, the overall trend line has been steadily rising over the decades. It began with FDR’s New Deal policies. It continued with President Johnson’s Great Society program. It was exacerbated by the Medicare Part D drug benefit program signed into law by President G.W. Bush. It has continued to accelerate under President Obama with a dramatic increase in food stamp participation, and the passage of nearly $1 billion in healthcare legislation that has done everything but decrease healthcare costs.

The costs of these entitlement programs threaten to overwhelm the budget. They consumed “nearly 66 cents of every dollar of federal and state revenues in 2010” with almost half of American households receiving some form of benefit. Social Security, Medicare, and Medicaid are responsible for the lion’s share of these costs, in that order. Furthermore, Medicare and Medicaid are the two programs whose costs are projected to rise the fastest.

Despite the left’s rhetoric about “fair share”, couples with low to average wages are projected to consume 10% more money than they put into Social Security, while couples with average to high wages will consume 11% less. Both groups are projected to consume more than their “fair share” of Medicare with poor to average income couples consuming 4.2x what they contributed in taxes, and average to high income couples consuming 2.4x.

57% of Americans think the Social Security system will not have enough money available to provide the benefits they expect for retirement. 56% believe Medicare will not have the money available they expect for retirement. Their perception of the dire situation in which the country finds itself seems to be a realistic one, and one on which both parties can forge a solution.

At least Americans are realistic. Unfortunately, the politicians they elect appear to be willing to sacrifice long-term fiscal sanity for short-term political gain.

About Sean Patrick Hazlett

Finance executive, engineer, former military officer, and science fiction and horror writer. Editor of the Weird World War III anthology.
This entry was posted in Finance and Economics, Policy, Politics, Social Security, Taxes and tagged , , , , , . Bookmark the permalink.

6 Responses to The Inexorable Rise of the Welfare State

  1. Annabel Lee says:

    My only problem with the debate over entitlements is the term itself. They’re not entitlements. They’re insurance policies with the government. It’s Social Security Insurance. It’s Unemployment Insurance. It’s the Children’s Health Insurance Program.

    To call it an entitlement, regardless of the side you stand with, is absurd. People pay into the program through their taxes, expecting to benefit when needed. It is insurance, plain and simple. The programs carry the term “insurance” in their legislative wording. We aren’t talking about car insurance companies going broke. We aren’t talking about home owner’s being denied the benefits covered in their policies.

    What we’re seeing with the federal insurance programs is mismanagement of the programs. Politicians have raided the trust funds for decades, replacing the liquid cash reserves from the funds with Treasury Bonds, essentially IOUs which count against the national debt. The funds have been stolen, creating the problem of insolvency. Funds were used under former President Clinton to “balance the budget”. Funds were funneled to pay for Vietnam by President’s Nixon and Johnson. Trust fund money was used to support tax cuts in 2001 and 2003. The Cold War spending under conservative icon Ronald Reagan were funded with trust funds.

    The problem isn’t the insurance. It’s not the people using the benefits. It’s the mismanagement of those funds, which were diverted from the people to pay for pet projects and goals of the administrations. People paid into the insurance programs, and have the right to use them when the time comes. After all, that’s the purpose of insurance.

    • Annabel,

      I half agree and half disagree. I would absolutely agree that the government has completely mismanaged these programs. I would also agree that many of them are insurance policies like unemployment insurance. That said, I think social security in particular serves as an insurance program for a large segment of the population but serves as an entitlement for those who don’t need, but expect it.

  2. pobrian says:

    The government started deducting social security from my paycheck in 1966. Only in the last decade or so has the word entitlement surfaced. Before that it was a promised future payment and now all of a sudden, because I want that promise fulfilled, entitlement becomes a dirty word? I can’t accept that.

    • Pobrian,

      Social Security was always a poorly devised system with a good intention. It should have been an insurance program for those who became poor in their old age. Instead it became an entitlement, in many cases, for the wealthy rich at the expense of the young poor. Because of the demographic surge of the baby boomer generation, people like me, who have been putting money in the system for fifteen years, will likely see nothing.

      So yes, I see it as an unambiguous and unnecessary entitlement for many baby boomers.

      No one is going to take this entitlement away from anyone over 55 today. But for those who do not want to see the system collapse under its own weight, the system needs serious reform that will probably all but guarantee that some of us will never see social security when we retire.

  3. billriordan says:

    Having grown up in England, I’ve seen the effects of this at first hand, as the government struggles to keep up with its promises. On the national level, the military disappears; on the local level, police forces are cut to the bone.

    We are already starting to see it, with the gradual demise of the space program. And we see in Greece what happens when the government tries to renege on its promises.

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