Obama’s America: Dependence and Redistribution

| September 20 2012
Christopher Cook

Barack Obama doesn’t know what the debt was when he took office. What he does know is that . . .

A) We don’t need to worry about it in the short term, and

B) It’s all Bush’s fault.

Stating that we do not need to worry about it in the short term is a tacit admission that it is a problem in the long term. Bush left a shamefully high 10.6 trillion dollars in debt. But it took 220 years to build up to that amount. Under Obama and the Democrats, the debt has increased almost 60% in less than four years. Blaming the current debt on inherited debt only makes sense if one is reducing or at least slowing the growth of the debt—not slamming on the gas.

But this is Obama’s America, where truth is of secondary importance to narrative . . . where the media has decided its job is to get Obama reelected, no matter how far they have to stray from journalistic integrity, no matter how much covering they need to do for the president under their guardianship.

Obama’s most recent admission against interest (which the media are desperately trying to cover up) comes in the form of an audio recording from a 1998 address in which he tells a Loyola audience that it is necessary to ”pool resources and hence facilitate some redistribution, because I actually believe in redistribution.

History has shown that redistribution does reduce income inequality, but only in a perverse way. It does so not by lifting up the lower income groups, but by reducing the status of the upper income groups. In other words, in a redistributive scheme, some people are made worse off, but no one is made better off. The lower income groups simply stay where they are, becoming locked into a semi-permanent state of dependence.

Looking out over Obama’s America, that is precisely what we see.

On the other hand, if you are on the receiving end of government benefits, that is likely to color your perception of how taxpayers’ money should be spent. According to the Heritage Foundation’s 2012 Index of Dependence on Government, 63.7 million Americans, or about one in five, is receiving direct government support from Social Security, welfare, or Pell Grants—and that is at its highest level ever. (continues below chart)

These individuals are very likely to be receiving additional benefits from other government programs such as Medicare or Medicaid, food stamps, etc., and the total share of Americans receiving benefits is likely to be even higher when considering benefits available on everything from housing to school lunches. The Wall Street Journal found that in 2011, 49 percent of Americans lived in a household where at least one member of the family received a government benefit.

Heritage also answers the question . . .

Who’s Dependent on the Government

The 2012 Heritage Index of Dependence on Government found that 63.7 million Americans received either Temporary Assistance for Needy Families, Social Security, or support for higher education—an 8 percent increase over the previous year. These same people were very likely to receive other federal benefits, such as Medicare or food stamps. Separately, The Wall Street Journal found that in 2011, 49 percent of Americans lived in a household where at least one member of the family received a government benefit.

 

Mitt Romney has been taking flak for comments he made in May about the 47% of Americans who don’t pay income taxes. Some of the criticism does accurately point out that many of those 47% do pay other taxes, such as payroll taxes. Theoretically, however, those payroll taxes are supposed to be placed in “trust” for the payee’s later benefit—in other words, payroll taxes are putatively paid to support oneself. (In actuality, payroll taxes support the retirement and benefits of current retirees, and our benefits will have to be paid by future generations, though that is a discussion for another time.)

If payroll taxes are titularly paid to support oneself, then anything not covered by payroll taxes has to come from elsewhere. That “elsewhere” is income taxes, which are the single largest source of government revenue, and (of course) more borrowing. If at least one person in half the nation’s households is dependent on government in some way, and if half of the people aren’t paying any income taxes, then what we have is a two-fold problem.

First, the dependency problem—it is an intrinsic problem for any nation to have that many people dependent on transfer payments.

Second, and far more dangerous, is the economic bondage problem. The people receiving government support are, more often than not, the least likely to pay income taxes. The people who pay income taxes are less likely to receive government support. This means that, to some extent, half the country is supporting the other half. That is obviously an oversimplification, but it is a generally accurate representation of the situation.

Another simplification, but an instructive one, comes from these two cartoons from Silvia Morandotti.

welfare_state_entitlements

welfare_state_entitlements

 

The bottom line: Mitt Romney was right. America, we have a problem.

 

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