Wednesday, March 9, 2011

Welfare Nation: One third of US wages comes from Uncle Sam

CNBC: Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement.
Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.
“The U.S. economy has become alarmingly dependent on government stimulus,” said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. “Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits.”[MORE]
There was a time in America when being on the public dole was a bad thing, today it is rapidly becoming a way of life. Getting this number back down to size is not going to be pain free.

The economist gives the country two stark choices. In order to get welfare back to its pre-recession ratio of 26 percent of pay, “either wages and salaries would have to increase $2.3 trillion, or 35 percent, to $8.8 trillion, or social welfare benefits would have to decline $500 billion, or 23 percent, to $1.7 trillion,” she said.

With more and more jobs fleeing America due to high corporate taxes, lavish union salaries/ benefits and a poorly educated workforce, the chances of increasing salaries and wages looks very grim.  That leaves cutting the welfare state down to size.  Make no mistake this option will be painful.  Recipients of government payments will not give up their benefits no matter how much it hurts the country.  Even when they do, the economy must take a hit as recipients transit from social welfare to real jobs.

To prevent ourselves from getting back into this jam, we must scrap the progressive tax system.  So long as there are those who do not pay taxes and vote, they will continue to vote for more "free government money".  A flat tax system where everyone pays, no exemptions and no deductions, would insure that the welfare state could only grow at the most modest levels.

Via: Memeorandum


Anonymous said...

You're right about how bad it will be to cut the welfare state down. I imagine there will be More protesting by people with nothing better to do with their time.
But we have a "damned if you do, damned of you don't" situation.
That sucks.

SB Smith

John Myste said...

Unfortunately, I do not have time to browse this site more, but I would like to point out that if more of the wages are welfare, that could be a sign that the economy is bad and joblessness is up.

If republicans don't want a welfare state, stopping tax cuts for the rich and giving a little more tax cuts to lower income people is a good place to start. Building bridges instead of tanks is another.

Please do not discuss the demerits of Keynesian economics, as I now realize that no one understands them, myself included, well enough to refute the theory.

I find this rather enlightening, though:

Fiscal conservatism is probably now what we need.

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