Americans Rely on Government Aid More Than Ever
Two years into the “recovery” and Americans are more dependent on government than ever. And the increasing reliance on government aid shows no indication of reversing. In the process, the amount of money the government spends on social programs has skyrocketed.
The government is set to spend $2.3 trillion on Social Security, Medicare, food stamps, unemployment benefits and other government programs this year. This is approximately how much the government will collect in total taxes this year. The rest of the government—including education, defense, highways, etc.—is being paid for by borrowing money from foreign countries.
And for the first time since the Great Depression, households are receiving more from the government in benefits than they are paying in taxes, according to the Fiscal Times. It is a shocking statistic about America’s welfare state.
USA Today reports that during 2010, a record 18.3 percent of total personal income in the United States came from the government in the form of government programs. Wages accounted for only 51 percent of total personal income, which is the scantest percentage since the government started recording rates in 1929.
The decline in wages as a percentage of total income has continued this year, with wages falling in February to another record low of 50.5 percent of income.
From 1980 to 2000, federal assistance remained fairly constant, hovering around 12.5 percent of total personal income. In 2010, Americans received an average of $7,427 each in government aid, which is up from an inflation-adjusted $4,763 in 2000, and $3,686 in 1990.
The drastic increase, especially since 2008, reflects three foreboding trends: the population is aging, economic ailments remain, and government assistance programs are expanding.
These trends combine in a way that exacerbates the problem and reveals that the dependence will only increase in the months and years ahead. Seventy-seven million of America’s 310 million people were born between 1946 and 1964, making up the “baby boomer” generation. And the oldest wave of these baby boomers turn 65 this year.
“What’s frightening is the baby boomers haven’t really started to retire,” said Donald Grimes, economist at the University of Michigan. “That’s when the cost of Medicare will start to explode.”
The trend reveals that the nation’s economic recovery, following a recession that officially ended in June 2009, is government-dependent and very delicate. The rising dependence on federal aid also indicates how difficult it would be for policymakers to reduce federal spending by cutting assistance programs—and how socially destabilizing it will be when budget realities eventually dictate drastic cuts. In the words of economic analyst Bill Bonner, “Those who count on the feds for their daily bread will soon go hungry.”
To understand why Americans’ mushrooming dependence on federal assistance is significant, read “The United Welfare States of America.”