Where Government Spending Goes ... Our Fellow Americans Want to do the Right Thing

Even Critics of Safety Net Increasingly Depend on It details the current status of government spending and who directly benefits therefrom. About 50% of us, it seems.

In 1850 French economist Frederic Bastiat said in "The Law," "Government is the great fiction through which everybody endeavors to live at the expense of everybody else. People are beginning to realize that the apparatus of government is costly. But what they do not know is that the burden falls inevitably on them."

Well, we're learning. In fact, the middle class that President Obama is working so hard to save is already getting much of the money spent by government. In political terms, where the votes are is who he wants to "help" this election year. And of course, he wants to help the elderly as well.

In any event, the above referenced well researched article has several short videos accompanied by an in depth review of what's happening today in Chisago County, Minnesota, a typical midwestern community.

If you'll take some time to review the article's contents, graphs and charts, it will be time well spent. Besides, if you're like me, you'll come away impressed with our fellow Americans and how they are thinking these days about the government's proper role in our lives.

A few excerpts follow:

1- "Dozens of benefits programs provided an average of $6,583 for each man, woman and child in the county in 2009, a 69 percent increase from 2000 after adjusting for inflation. In Chisago, and across the nation, the government now provides almost $1 in benefits for every $4 in other income.

Older people get most of the benefits, primarily through Social Security and Medicare, but aid for the rest of the population has increased about as quickly through programs for the disabled, the unemployed, veterans and children.

The government safety net was created to keep Americans from abject poverty, but the poorest households no longer receive a majority of government benefits. A secondary mission has gradually become primary: maintaining the middle class from childhood through retirement. The share of benefits flowing to the least affluent households, the bottom fifth, has declined from 54 percent in 1979 to 36 percent in 2007, according to a Congressional Budget Office analysis published last year.

And as more middle-class families . . . land in the safety net in Chisago and similar communities, 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."

2- "The problem by now is familiar to most. Politicians have expanded the safety net without a commensurate increase in revenues, a primary reason for the government’s annual deficits and mushrooming debt. In 2000, federal and state governments spent about 37 cents on the safety net from every dollar they collected in revenue, according to a New York Times analysis. A decade later, after one Medicare expansion, two recessions and three rounds of tax cuts, spending on the safety net consumed nearly 66 cents of every dollar of revenue.

The recent recession increased dependence on government, and stronger economic growth would reduce demand for programs like unemployment benefits. But the long-term trend is clear. Over the next 25 years, as the population ages and medical costs climb, the budget office projects that benefits programs will grow faster than any other part of government, driving the federal debt to dangerous heights.

Americans are divided about the way forward. Seventy percent of respondents to a recent New York Times poll said the government should raise taxes. Fifty-six percent supported cuts in Medicare and Social Security. Forty-four percent favored both."

3- "Almost half of all Americans lived in households that received government benefits in 2010, according to the Census Bureau. The share climbed from 37.7 percent in 1998 to 44.5 percent in 2006, before the recession, to 48.5 percent in 2010.

The trend reflects the expansion of the safety net. When the earned-income credit was introduced in 1975, eligibility was limited to households making the current equivalent of up to $26,997. In 2010, it was available to families making up to $49,317. The maximum payout, meanwhile, quadrupled on an inflation-adjusted basis."

4- "Few federal programs are more popular than Medicare, which along with Social Security assures a minimum quality of life for older Americans.

None are more central to the nation’s financial problems. The Congressional Budget Office projects that government spending on medical benefits, even taking into account the cost containment measures in the 2010 health care law, will rise 60 percent over the next decade. Then it will start rising even more quickly. The cost of caring for each beneficiary continues to increase, and the government projects that Medicare enrollment will grow by roughly one-third as baby boomers enter old age.

Spending on medical benefits will account for a larger share of the projected increase in the federal budget over the next decade than any other kind of spending except interest payments on the federal debt.

Medicare’s starring role in the nation’s financial problems is not well understood. Only 22 percent of respondents to the New York Times poll correctly identified Medicare as the fastest-growing benefits program. A greater number of respondents, 27 percent, chose programs for the poor. That category, which includes Medicaid, is slightly larger than Medicare today but is projected to add only half as much to federal spending over the next decade.

Medicare’s financial problems are much worse than Social Security’s. A worker earning average wages still pays enough in Social Security taxes to cover the benefits the worker is likely to receive in retirement, according to an analysis by the Urban Institute. Social Security is still running out of money because the program must also support spouses who do not work and workers who earn lower wages. But Medicare’s situation is even more dire because a worker earning average wages still contributes only $1 in Medicare taxes for every $3 in benefits likely to be received in retirement. . . . Medicare is often described as an insurance program, but its premiums are not nearly high enough. In simple terms, Americans are getting more than they pay for."

5- "One of the oldest criticisms of democracy is that the people will inevitably drain the treasury by demanding more spending than taxes. The theory is that citizens who get more than they pay for will vote for politicians who promise to increase spending.

But Dean P. Lacy, a professor of political science at Dartmouth College, has identified a twist on that theme in American politics over the last generation. Support for Republican candidates, who generally promise to cut government spending, has increased since 1980 in states where the federal government spends more than it collects. The greater the dependence, the greater the support for Republican candidates.

Conversely, states that pay more in taxes than they receive in benefits tend to support Democratic candidates. And Professor Lacy found that the pattern could not be explained by demographics or social issues."

Summing Up

One great thing about Americans is that we want to solve the very problems we've perhaps unknowingly created for ourselves.

Today we don't know exactly how to do what needs to be done, but we do know what we need to do--reduce government and increase self reliance, while still providing help for those who need it.

We don't want the government to tell us what they'll do for us and how much they'll take from us to do that. We'd much prefer a self help approach.

Ignorance and denial are ending when it comes to knowing about the reasons for our nation's financial problems and their primary contributing causes.

Now we can all get on with dealing with our big government and too expensive entitlement programs.

Choosing between paying higher taxes across-the-board or providing lower entitlement benefits across-the-board, or some combination thereof, is fundamental to "saving the middle class." And everybody else in America, too.

Thanks. Bob.