Skip to comments.Government Cash Handouts Now Top Tax Revenues
Posted on 04/23/2011 8:27:36 AM PDT by JustTheTruth
U.S. households are now getting more in cash handouts from the government than they are paying in taxes for the first time since the Great Depression.
Households received $2.3 trillion in some kind of government support in 2010. That includes expanded unemployment benefits, as well as payments for Social Security, Medicare, Medicaid, and stimulus spending, among other things.
But thats more than the $2.2 trillion households paid in taxes, an amount that has slumped largely due to the recession, according to an analysis by the Fiscal Times.
Also, an estimated 59% of the 308.7 million Americans in this country get at least one federal benefit, according to the Census Bureau, based on 2009 data. An estimated 46.5 million get Social Security; 42.6 million get Medicare; 42.4 million get Medicaid; 36.1 million get food stamps; 12.4 million get housing subsidies; and 3.2 million get Veterans' benefits.
And the handouts from the government have been growing. Government cash handouts account for a whopping 79% of household growth since 2007, even as household tax payments--for things like the income and payroll tax, among other taxes--have fallen by $312 billion.
That is a tough feeding trough to take away from voters.
One of the recurring themes FOX Business has been covering is how the world has been turned upside down well, the business world at least, notes FOX Director of Business News, Ray Hennessey. In a free market, profit is generated by hard work and enterprise," Hennessey notes, adding: Because of the labor of the worker, companies generally have the ability to prosper and make more money, both for their employees and their owners," which in turn creates tax revenues.
Seems like common sense, right? Thats because it is. But not in our country today. Somehow the DNA of our country is changing. Wealth creation is coming from DC, not from Americas entrepreneurs.
In short, Americans have the government, not private enterprise, to thank for their wealth growth.
Obviously, there are big implications to this.
For instance, Hennessey asks, if indeed more households have the government to thank for their wealth, does that mean those households are more inclined to re-elect politicians who are pushing for more government handouts?
Does the workforce erode because it is easier to collect a check than answer to an alarm clock each morning?
Is our competitiveness as a nation hurt because profit is generated not by American capitalism but by European-style socialism? Can we, as taxpayers, afford to carry the burden of government-sponsored wealth creation?
All this comes at a time when a growing number of Wall Street houses, including JPMorgan Chase (NYSE:JPM) and Barclays Capital (NYSE:BCS), Bank of America (NYSE: BAC) and Morgan Stanley (NYSE: MS) are cutting their U.S. GDP growth forecasts by as much as a percentage point or more.
It also comes as President Barack Obama is already in re-election mode, as he bets his massive spending will woo independents. It also comes as Standard & Poors has joined the International Monetary Fund and Pimco, which runs the worlds biggest bond fund, in downgrading their outlook on US debt.
The negative outlook comes as the government has added the equivalent of Germany and Russia combined in spending from the time Democrat Rep. Nancy Pelosi gaveled in as House Speaker in January 2007. The government, like never before, has put the thumb on the scale as it picks winners and losers.
Yes, the dollar rallied and Treasuries bounced higher after the news that S&P had issued a negative outlook on the U.S. debt picture. Some argued that happened because eventual austerity would slow growth, which is deflationary and in turn good for bonds.
But that ignores the flight away from rocky overseas markets toward the Treasury's safe haven status, which drives yields down. Potential sovereign debt defaults are a huge problem in the Eurozone, particularly in Greece, where yields rocketed above 13% earlier this week.
The bullish view about U.S. bond prices also ignores the fact that the Federal Reserve has been buying Treasury bonds and notes, $600 billion so far this year, more than half of the Treasury Dept.'s issuance. That keeps a lid on bond yields. When bond prices rise, the government doesn't have to lure investors with higher yields. When bond prices fall, the government offers higher yields to reel investors in.
The bullish view about U.S. bond prices also ignores the negative trend in the dollar, which has been weakening.
And it ignores the bond markets brutal reaction to spending under President Bill Clinton, where yields spiked several percentage points higher beginning in 1994, rising from around 5% before topping out above 8%, before then-Treasury Secretary Robert Rubin forced austerity, leading to welfare reform.
Republicans now want to shrink the U.S. government, but Democrats want to stymie their efforts. This, after the President touted $38 billion in spending cuts as the largest in our nations history, just four months or so after touting the massive spending increase pushed through in the lame duck Congressional session.
And after the White House shelved the Bowles-Simpson debt commission report, a panel which the President asked for, endorsed and then ignored, hoping such hard decisions might be delayed until after the election.
President Obama had asked for the debt commission to "address the long-term quandary of a government that continually and extravagantly spends more than it takes in," only to initially set aside the commission's recommendations.
And earlier this year the White House first introduced a budget that would have added $6.7 trillion more in deficit spending over the next 10 years, yanking the national debt higher to more than 75% of gross domestic product, according to the Congressional Budget Office. That, until GOP Rep. Paul Ryan offered his $4.4 trillion in spending cuts over ten years, causing the President to offer $4 trillion in cuts over 12 years.
The Fiscal Times reports that the only other time government income support exceeded taxes paid was from 1931 to 1936. The Times notes that government transfers of income to households started to overtake personal taxes at the start of 2008, and the gap has been widening.
The difference between what households received and what they paid in taxes is about $125 billion, equal to a little more than three times the amount Republicans and Democrats agreed to cut from government spending through Sept. 30, the Fiscal Times said. Typically, the gap between government transfers and taxes runs the other way, the Times reports.
In normal times the household sector gives about eight percentage points more of its income in taxes than it receives in direct transfers, the Times quotes J.P. Morgan economist Michael Feroli as saying, adding that a return to normalcy, or this eight-percentage-point spread, is equal to about $1.2 trillion in income.
So the question is: What government policies will bring the U.S. labor market back to robust health, enough to drive economic growth, consumer spending -- and higher tax revenues?
When will the U.S. government pull back from its intervention into the U.S. economy, so the economy can try to stand on its own?
Ladies and Gentlemen, this is the tipping point.
I think Conservatives have got to be very careful how they buy into the enemy's propaganda lines or they'll start sounding funny.
This is the tipping point for America. Now we simply get to wait until the collapse.
After a few short years, SS payments (for the majority) exceed what was paid into the system.
As an aside...
Heritage has a SS calculator where you can calculate your rate of return on money you paid in
versus what you will receive. Mine was -3% annually. I’d be better off if is was buried in a tin
Others pay in the minimum and pull out money for decades...
exactly. To equate SS with food stamps and housing subsidies is patently dishonest.
exactly. To equate SS with food stamps and housing subsidies is patently dishonest.
It’s hard to facilitate redistribution if we don’t raise taxes!
What, the benefit of being forced to pay into it all my working life against my will to eventually not see a dime of return from it when I retire because someone else has spent it for me?
I guess my tagline has become reality.
Well, no job, no taxes. A unique way to save on taxes, one of the few good things about being jobless.
There’s no way we survive this.
To do what must be done means ‘zombies in the streets’.
More correct, you could not be. The problem with SS being a government liability, at this point, has been caused by the raiding of the SS trust fund and the replacement of those funds with US Treasury Bonds. If the cash were all still in the trust, it would not be a cash liability, at least yet.
The problem with SS is the manner in which it has been bastardized since inception:
The original 1935 statute paid retirement benefits only to the primary worker. Many types of people were excluded, mainly farm workers, the self-employed, and anyone employed by an employer of fewer than ten people. These limitations, intended to exclude those from whom it would be difficult to monitor compliance, covered approximately half of the civilian labor force in the United States.
The 1935 Act also contained the first national unemployment-compensation program, aid to the states for various health and welfare programs, and the Aid to Dependent Children program. The initial tax rate was 2.0% of the first $3,000 of the employee's earnings, shared equally between the employee and the employer. The tax rate has been raised several times over the years, beginning in 1950, when it was raised to 3.0%. In 1939, the 1937 Federal Insurance Contributions Act (FICA) tax was amended in three important ways: The widowed, nonworking spouse of a someone entitled to an old-age benefit also became entitled to an old-age benefits, Survivors (widows and orphans) became eligible for a benefit, Retirees who had never paid any FICA taxes became eligible for old-age benefits. This feature was very popular among the millions of elderly Americans hard hit by the Great Depression, and fatefully decoupled benefits eligibility from work history.
In 1956, the tax rate was raised to 4.0% (2.0% for the employer, 2.0% for the employee) and disability benefits were added and were not based on any contribution to the system. Also in 1956, women were allowed to retire at age 62 with reduced benefits (70%). In 1961, retirement at age 62 was extended to men, and the tax rate was increased to 6.0%.
Medicare was added in 1965 by the Social Security Act of 1965, part of President Lyndon B. Johnson's "Great Society" program. (See List of Social Security legislation (United States).) Social Security was changed to withdraw funds from the independent "Trust" and put it into the General fund for additional congressional revenue.
Automatic annual cost-of-living adjustments (COLAs), not requiring legislation, began in 1975.
During the Carter administration, immigrants who had never paid into the system became eligible for SSI (Supplemental Security Income) benefits when they reached age 65. SSI is not a Social Security benefit, but a welfare program, because the elderly and disabled poor are entitled to SSI regardless of work history. Likewise, SSI is not an entitlement, because there is no right to SSI payments.
Congress has created, borrowed and spent Social Security surplus funds, that only working people and employers paid, to pay for Federal budget items. The Treasury Dept. has issued nearly 3 trillon dollars of worthless Treasury bonds as security for the money it borrowed and spent in place of increasing the income tax. These bonds are worthless because: I) they lack a redemption date which permits each Congress to pass this indebtedness on to the next Congress. II) The same employees and employers will need to be taxed again in order to redeem these bonds, so we are paying interest to ourselves (interest on taxes we have already paid).
The core of Social Security cannot be thought of as a handout, simply because it is not. The changes which liberals kept tacking on permitting illegals, non-contributors, disability, etc is what will destroy the system for the producers who have easily paid for its existence.
“People pay Social Security taxes and this ol’moonbat calls the paybacks “handouts”?
I think Conservatives have got to be very careful how they buy into the enemy’s propaganda lines or they’ll start sounding funny.”
Let’s see. All the money I and my brothers and sisters have paid in FICA has all ready been spent on my mother (98 and late father (past away at 90 3 years ago). I call that a handout. There is no such thing as an “personal SS account”
Not to say you've got a flawed argument, but it is not sufficient to the case. If I and 90 million others are under the impression we BOUGHT AND PAID FOR a government obligation, I don't think your one vote counts.
Ahhhh! “Cloward and Piven” is working.
****An estimated 46.5 million get Social Security;*****
Now, don’t you have faith in YOUR government promises? Here is what the government said back in 1964.
“The program is designed so that contributions plus interest on the investments of the social security trust funds will be sufficient to meet all of the costs of benefits and administration, now and into the indefinite future—without any subsidy from the general funds of the Government. Both the Congress and the Executive Branch, regardless of political party in power, have scrupulously provided in advance for full financing of all liberalizations in the program.”
And here is where the money goes. Read and weep!
In our county, government employment is the top economic driver, then agriculture, then the entitlement sector - human services employment, welfare benefits, food stamps and medical care. Timber, which used to be at the top, has been rendered a sad fifth place after tourism.
Social Security is not a handout, people are forced to pay into it.
I am 66 years old and self employed. I pay 7500 a year in Medicare tax and my monthly premium for Medicare is 375 monthly. I do not call that a handout.
“Not to say you’ve got a flawed argument, but it is not sufficient to the case. If I and 90 million others are under the impression we BOUGHT AND PAID FOR a government obligation,”
Yes FICA Bought and paid for government obligation. The question is who is the government obligated to whom and went? The revenue from the bond sale goes into a general fund and then handed out to whoever the elected elite decides should get the money. Then sometime in the future when the bonds become due they pay it back with money that is NOT WORTH as much.
Money always varies in value. That’s a different issue.