January 22, 2015
There may be some case here, but of course that is not what George Will is actually arguing. He is pulling numbers from outer space to tell a story of a run away welfare state. As he quotes that great welfare reformer of the past, Daniel Patrick Moynihan:
“the issue of welfare is not what it costs those who provide it but what it costs those who receive it.”
Okay, none of us like to see healthy people in their prime working years scamming the rest of us rather than working. But in spite of Will’s best efforts at playing with numbers, he does not have much of a story. He tells readers:
“Transfers of benefits to individuals through social welfare programs have increased from less than 1 federal dollar in 4 (24 percent) in 1963 to almost 3 out of 5 (59 percent) in 2013. In that half-century, entitlement payments were, Eberstadt says, America’s “fastest growing source of personal income,” growing twice as fast as all other real per capita personal income. It is probable that this year a majority of Americans will seek and receive payments.
This is not primarily because of Social Security and Medicare transfers to an aging population. Rather, the growth is overwhelmingly in means-tested entitlements.”
If we go to the Congressional Budget Office, we can quickly find data going back to 1973. This shows entitlement spending, which accounts for the vast majority of federal government transfers, went from 7.5 percent of GDP in 1973 to 12.3 percent in 2014. I’m not sure that this sort of growth will destroy the nation’s fiber. (I realize that this excludes the 1963-73 period, but if that is the story, then the nation’s fiber was destroyed more than 40 years ago.)
Furthermore, contrary to what Will tells us, most of the growth was in Social Security and Medicare payments to an aging population, which went from 4.2 percent of GDP in 1973 to 7.8 percent in 2014. This increase accounts for 3.6 percentage points of the 4.8 percentage points of growth in entitlement payments over this period. (Most of the rest can be accounted for by Medicaid, which increased by 1.2 percentage points as a share of GDP. This is a means-tested program, but more than half of expenditures go to low-income seniors.)
The one area where Will can clearly point to an increase in spending is food stamps. The average monthly benefit under this program is $133. That comes to just under $1,600 per person per year or $6,400 for a family of four. Is this undermining the American character?
To get a better sense, let’s compare it to the mortgage interest deduction. Let’s say that we have an upper middle income family in home with a $400,000 mortgage. If they pay 4.5 percent interest, then their annual interest payment is $18,000 a year. (Yes, the interest rate is a bit high, but they also get to deduct property taxes.) If they are in the 33 percent bracket, the government is effectively paying this family $6,000 a year for their home. Should we summon Daniel Patrick Moynihan to ask what this payment is doing to the family who recieves it?
If you object to the comparison of a tax deduction to a government benefit, then you need to think more carefully. We decide on our tax bill, like a condo association decides on the monthly condo fee. Saying someone doesn’t have to pay their share is the same thing as handing them money, just as it is the same thing for the condo association to give someone $100 off on their monthly fee as it is to hand them $100 a month.
One final point, Will can’t decide whether he wants to go after Social Security and Medicare, but he obviously does since they are the real story of rising costs. In this case we have insurance programs that are run through the government. Apparently Will thinks if the government requires everyone to save 5 percent of their earnings to have for retirement, it would be fine. But if the government taxes them 5 percent of their earnings to pay for Social Security retirement benefits, we have a problem of government dependency.
Maybe If Senator Moynihan were still alive he could explain it to us.
Comments