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  • Dependence on Government vs. the American Dream

    Mother Jones has opened a broad debate about the role of government in our society.

    In a clandestine tape recorded in May and obtained by the magazine, former Governor Mitt Romney (R-MA) remarked that 47 percent of taxpayers pay no federal income taxes. He notes, among other things, the increase in dependency on government in the country.

    This is not a widely held secret: 47 percent of all tax filers paid no federal individual income taxes in 2009, and in 2011 that figure was 46 percent. This is all perfectly legitimate as taxpayers take advantage of various credits, deductions, exemptions, and the like. These filers are largely (but not exclusively) low-income Americans including seniors and students.

    This doesn’t necessarily mean that these taxpayers are dependent on the federal government. (More on that later.) But it does raise a crucial issue for our democracy: Who should pay to fund the federal government?

    Who Pays Taxes

    At 47.4 percent of federal revenue, the federal income tax is by far the single largest source of revenue for the federal government. The payroll tax is next largest, raising 35.6 percent. But those revenues are reserved for Social Security and Medicare benefits. So the individual income tax funds the bulk of operations of the federal government, including such core things as national defense, homeland security, and the judicial system.

    Shouldn’t all Americans have some stake, even if just a nominal one, in funding these government programs? Should nearly 50 percent of Americans really be exempt from funding the most basic constitutional functions of government—along with education, food stamps, energy, welfare, foreign aid, veterans’ benefits, housing, and so forth?

    Do the non-taxpayers represent those Americans who are dependent on government? Not necessarily, but there is overlap. Many take advantage of Washington policies that remove their liability or even send them money, via the IRS, that they never paid in to begin with. But to really understand government dependence requires looking at the full panoply of government programs and direct benefits.

    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.

    So we find the nation at a tipping point. Nearly half of all taxpayers pay no income tax, while nearly half of all Americans receive direct government support for income, food, housing, medical care, school lunches, etc. This makes strong incentives for those who pay no income taxes to press for more and higher benefits. But government programs are rife with poor outcomes.

    As Heritage scholar Robert Rector writes, “The federal government operates more than 80 means-tested welfare programs to provide cash, food, housing, medical care, and social services to poor and low-income people. President Obama has increased federal means-tested welfare spending by a third since taking office. Last year, combined federal and state spending on means-tested welfare hit $927 billion.” Yet according to the Census Bureau, 15 percent of the population still lives in poverty.

    Growing these dependency programs, as the President would do, will balloon the federal checkbook. Moreover, government dependency erodes human dignity and civil society. As Curtis Dubay writes, “the goal of government policy shouldn’t be to make more people dependent. It should be to maximize the ability of all Americans to make the greatest use of their abilities so they can lead meaningful, purposeful lives.”

    Can We Afford This?

    We reach this tipping point just as the nation struggles to confront our twin crises of spending and debt. The total national debt just surpassed $16 trillion; total federal spending is projected to be nearly 23 percent of the economy in 2012; and, for the fourth year in a row, the federal government will run a deficit in excess of $1 trillion.

    That’s just for starters. Nearly 78 million baby boomers are already starting to pour into Social Security and Medicare, while Medicaid is exploding. Within just one generation, total federal spending will reach nearly 36 percent of GDP, and debt held by the public will reach nearly 200 percent of GDP. (continues below chart)

    This is unsustainable. But it is also economically and morally bankrupting. America is on the verge of becoming a nation in decline—economically stagnant and permanently debt-ridden, more dependent, and less self-governing.

    Government should be smaller. Taxes should be flatter and should not penalize ordinary and low-income Americans for saving—whether for a car, a condo, or retirement. Federal dependency programs should be redesigned to not just assist low-income individuals, but also move them out of dependency. Social Security, Medicare, and Medicaid should be overhauled. The goal is to strengthen the safety net, not destroy it. The out-of-control growth of these programs virtually ensures their ultimate destruction, so we should act now.

    These choices, while difficult, are not radical: extending the means testing in Medicare today further to fix the program’s finances while also embracing premium support to improve health care delivery and outcomes; extending means testing in Social Security further (after all, do Bill Gates or Warren Buffett really need Social Security?); gradually moving Social Security away from a benefit for everyone to a benefit that, unlike today, guarantees that seniors won’t live in poverty because their benefits are so low.

    Ah, Mother Jones, these are the kinds of solutions that will help in Saving the American Dream.

    Posted in Economics [slideshow_deploy]

    25 Responses to Dependence on Government vs. the American Dream

    1. Maribel D.S. says:

      If saying the truth means risking an election, we are up-side-down for sure. Way to spin reality…

    2. J. Trail says:

      When Mr. Romney, made the statement, that 47% of Americans are on government assistance, he was off by several millions According to your post it is more like 63.7 million. So why then are so many people ready to hand this country over to Obama, for 4 more years. or actually if he is re-elected, it will be for a life time. It is more likely to abolish elections for new leadership forever. We will be the next Socialist country. We need more honesty in the White House, we need Mr. Romney. and he has my vote

      • The Libertine says:

        If you're a dependent in a culture of dependency, what is your incentive NOT to vote for Obama? The Democrats have understood this for a long time and effectively leveraged it with their base — Republicans have been complacent and even enabling in many cases in creating this outcome with which we are hopelessly faced. The power base in our two party system cares not one iota for the middle class — we're plow pullers and collateral damage in their minds. Rousseau said our form of government would only work for gods — and he was right.

    3. June Rice says:

      Romney spoke only the truth AND was speaking to potential donors who naturally would want to know his expectations from various voting segments. Again, he spoke the truth and not a pile of political rhetoric!

      When did people in this country get to the point they preferred the words of a con artist intent on the destruction of this country over the truthful words of a man of integrity who loves America and wants her to thrive once again?

    4. Eddie G. says:

      Time to clean out Washington with it's excessive regulations and endless agencies that stymie the economy and leave the job market in disarray. Too many people unemployed,like being unemployed. Shrink the government,junk the Fed and bring back the gold standard thus making it inane to continue lazy people on the dole. With substantial job growth these people can be moved off the dole,become productive and stop living off the currently working taxpayer's back. If they don't like it they can starve,there's no such thing as "entitlement" from the taxpayer and their taxes paid. And that doesn't make any difference if you're white,green,black,yellow,or purple. I don't need to hear a race card here about minorities are primarily in need of assistance. They can assist themselves, the world, or the government,or the taxpayer owes them nothing. I can see assistance for the disabled but if healthy enough to pull two plows,then go earn a paycheck.

    5. Kent says:

      You are absolutely right!

      Responsibility should first be with the individual, second with the family, third with faith based or community organizations, fourth with local government, fifth with state government, and sixth with federal government.

      Taxes are not charity; charity is voluntary. Our country is going down hill because of selfishness — whether through the government or the individual.

    6. Linda west says:

      We must reform our programs. We are in crisis.

    7. Patsy Cochran says:

      Very well written article. I also agree that multimillionaires don't need social security money, but when you pay into a program for 40 or more years, do you think they would voluntarily give that up? Then it really becomes redistribution of wealth, with the poor being the beneficiary.

      I do think that all of the entitlement programs need to be revamped: I am just not sure how it should be done that would be equitable to everyone. I am a baby-boomer getting ready to retire, but I am not the average person that is going to retire and then not contribute anything. I will be finishing my nursing degree and continue to work probably until I am at least 70 or until my health fails me. Hopefully every other baby-boomer will feel as I do and think about their children and what will happen to their children if they are unable to depend on Social Security and Medicard

    8. I agree that when you pay into a retirement program, you expect a return, and Social Security is no different. If you don't need that money, there are a ton of charities out there who could use that money. I am no tax expert, but it might help your taxes if you do so as well.

      Or invest the money. That helps stimulate the economy and create jobs. Don't take the money back into the government where it will be wasted.

    9. J. Powers says:

      Alison. Great. But where in the Constitution does it provide for a "safety net" ?

    10. Jim says:

      Ms. Fraser,
      I agree with your opinion, but I ask that you investigate "The Fair Tax", which is a consumption tax. This would put skin in the game for all Americans who purchase food, clothing, fuel, gifts etc.

      And, in the process, allow American-made goods to be exported without imbedded taxes: gee, this might make us more competitive globally, and bring manufacturing jobs to the USA.

      Please study the Fair Tax and give us your opinion.
      Thank you,

    11. Jim says:

      Ms. Fraser,
      Overall I agree with your commentary.

      I believe that the best approach to taxation and getting more Americans having skin in the game is to enact the Fair Tax, which is a consumption tax, not a flat tax.

      The Fair Tax would allow American-made goods to be exported without embedded taxes and make our goods competitive on a global basis. Would not this be a boon to manufacturing jobs in the USA.

      Please review the Fair Tax and provide us with your opinion.

    12. Pete says:

      It is the insensitivity of some conservatives to the plight of those less fortunate or unemployed that is causing Obama's numbers to remain high. Those of you who take this stance are leading America to the brink of economic disaster. Case in point, seniors now make up a large voting block. Having dealt with my Mother's and Father's finances and situation, I know that in the end they will be bankrupt by the nursing home system unless they die early. In the nursing home, after their money is gone, on the state. There is greater than 8 per cent unemployment of which I am now one. I have worked since I was 13 first as a dishwasher, then slinging hamburgers, bartending, and eventually as an engineer and vice president. But, now at 59 I find myself unemployed. I paid much into unemployment, social security, income and property taxes. I can tell you that if you threaten my retirement, I will turn around and vote democrat. Wake up! Any solution must not let the 47% behind rather it must find a solution that puts people back to work and protects the county. Note the constitution is chartered to" form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity." While it does not specifically state that there should be a "safety net", promoting the general welfare would imply that it seeks to help ALL to have a decent life especially those who want to work or have worked all their lives. While unions have been given too much power and now keep us from being competitive, so to have lobbyists, corporations and politicians and big government hurt us with greed and bribery. Republicans and conservatives, let's get off the high horse and seek a general solution that will help all not those more fortunate. Make it tough, but make it fair.

    13. haroldpohl says:

      There is much useful information and social theorizing in this article that should be known by all Americans. If the article continued the non-partisan tone and style it has at the beginning instead of then taking sides and turning it into a poitical harangue, I might be able to induce my Democrat fellow Americans to read it. But I know they will dismiss it as more political hogwash in its present form.

    14. John says:

      If the shoe fits, then wear it!….Since when did the Truth hurt? Every since this Administration took office, that's when! If they don't pay into the system, then why do they get money back from the System (Tax Payers)? ? This is a two edged sword that will never be able to continue off the backs of those of us that do pay Taxes! I get tired of the President saying that we all must pay our so called "fair Share" He speaks with forked tongue! The System is completely out of control, and NO ONE is trying to fix it. The only reason this situation exists is that the Congress allow's it to exist!…November is just around the corner. Please remember who is working for the American people, and the bad ones who are not!

    15. Ed P. says:

      Of course, never mentioned in any of these arguments is the fact that due to this generation's insistence on "free love," we now have 56 million less American taxpayers than we would have had, if Roe v. Wade hadn't made it legal for their mothers to kill them.

    16. Bob Marshall says:

      Foreign aid? How about helping the people in our own country who need assistance first? What about all the money the U.S. taxpayers give to the IMF each year? We have veterans living on the streets,homeless and starving adults as well as children. America has always come to the aid of countries with people in need.

    17. jsh says:

      As FDR is credited with saying: "tax, tax, tax, elect, elect, elcct." The public has an unending appetite for "programs" (i.e., the "free lunch" in all its forms). It's nigh unto impossible to cut, not to mention, eliminate "programs." We are now forever at the mercy of those receiving "benefits." Credle-to-grave benefits have become a "right." In truth, they enslave those receiving them. More important, they enslave those who pay for them. We need to change the language and vocabulary carrying the message that "YOU are entitled to benefits." Recover terms like "charity" or "public dole" and refer to the "tax payer" instead of "government" as the source of the unearned income.
      As DeToqueville wrote, when the public figures out that it can vote itself largesse, the country is finished.

    18. James says:

      Look, I did not like Social Security but I was forced to pay into it. For more than forty years I paid the maximum amount. Had I been able to invest this money along with the employer amount, I would have a pension fund of about 1.5 million and an annual income of over 100k. Compare that to an income of 36k that I do get from SS. I don't consider my benefits as a government handout. If you want to fix it you need to identify the root cause and address the solution to that cause. The cause of the problem is that the government spent the surplus instead of investing it. Any finplan.ancial planner would tell you thats how you build a pension

    19. Richard Camp says:

      I really don't understand why it is considered or referred to as "government dependency" if one is taking social security. I receive monthly social security checks because I paid into the program for my entire working life with the expectation I would get some of it back. That does not make me dependent upon the government, nor an Obama supporter nor a supporter of any candidate with hopes of getting more from the government.

    20. Stacey says:

      There's a hidden cost that no one seems to notice or mention in all these government programs. It isn't the cost of the pittance they pay out to the public at large that is the major portion. It is the cost of all the government employee salaries to run all these things that end up making the programs so bloated. I'd like to see Heritage Foundation study the actual total cost at the federal level of employee salaries and benefits that these programs cost as compared with the amount actually spent in the handouts that everyone seems to think they are entitled to. Continued in next comment…

    21. Stacey says:

      We have created a political class of people who are a burden on the real taxpayers, since government workers actually don't pay any taxes (even though they vehemently complain about it's appearance as a deduction on their pay stubs), they simply receive a salary reduction that is called "taxes" on their pay stubs. This same effect is evident and rampant at the state and local levels, where government jobs are burgeoning as well. Just how many employees are there on the government, state, and local payrolls? These are the real "social program" beneficiaries since they take everything they receive from the pockets of the real taxpayers who work for private industry.

    22. Stacey says:

      I'd love to know just what percentage of Americans are employed by government as their only or primary source of income and benefits because that is where the biggest hidden cost of government is located, I am sure; next to the cost of all the salaries, perks and benefits that our elected officials grant to themselves on the backs of the real taxpayers. It wouldn't surprise me to find out that 1/3 or more of all American workers are employed by some level of government either directly or indirectly through companies whose primary business is to serve government in some way. Where will it end?

    23. Retired Farmer says:

      "This is not a widely held secret: 47 percent of all tax filers paid no federal individual income taxes in 2009, and in 2011 that figure was 46 percent."

      What percent of adult Americans do not FILE a tax return?

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