Pop quiz: What’s the single biggest thing the U.S. government does?
It’s not the military. National defense is a declining component of federal spending, and President Barack Obama has come out with a plan to scale back the military to pre-9/11 levels. It’s not any other kind of security, either.
The government spends most of its budget writing checks to individuals.
Add up the budget for programs like Social Security, Medicare, food stamps, unemployment benefits, student loans, farmers and veteran’s benefits. Direct payments to individuals topped $2.3 trillion dollars, or nearly 66 percent of federal spending last year. Payments to individuals took up only 2.5 percent of the federal budget in 1945.
This trend won’t decline anytime soon. The president has been on the warpath for wealthy individuals to pay their “fair share.”
Never mind that such a term is nebulous. Never mind that the wealthiest 1 percent of taxpayers already fund more than half of the federal budget.
Never mind that wealthy individuals like Mitt Romney and Warren Buffett have gotten wealthy because of how the government has chosen to tax investments versus income.
Behind all of Obama’s recent statements lies a bigger issue. He’s reinforcing the sense that entitlements are a fundamental right. His latest proposal is a $2.4 billion program to provide cell phones for the poor.
Relief and entitlement programs used to carry a stigma to those who utilized them. But there is no stigma for today’s beneficiaries now that it’s viewed as a right and not an act of charity.
The contemporary psychological reaction is a shrug worthy of Atlas. Food stamp usage surged from 26.3 million in 2007 to 44.7 million at the end of 2011. Today the poor can qualify for food stamps but still enjoy the electronic trappings of a middle class lifestyle that didn’t exist two generations ago. As defined in 1965, poverty as we know it in America has been wiped out. Naturally, the government has kept raising the bar.
The increasing role of entitlements shows a perverse incentive. Rather than acquire a minimum wage job, a basket of benefits can provide the equivalent lifestyle, all while freeing up 40 hours a week. At least under most New Deal programs, there was work to be done.
As Ronald Reagan used to say, “If you want more of something, subsidize it. If you want less of something, tax it.” Today, we subsidize indolence. We tax investment success and wage earners. At the rate entitlements and regulations are increasing, we’ll soon end up as little more than Diet Europe.
And we’ll create an environment that completely stifles investment.
Don't get me wrong. I'm not saying we should do away with welfare programs. We've got to restructure them so that the safety net acts more like a trampoline, rather than a spider's web. Until we do, America will continue sliding in economic potential, personal freedoms, and new investment opportunities.
American ingenuity isn’t dead by any means. But it’s becoming rarer. Our current welfare policy hinders, not helps.
© 2016 Newsmax Finance. All rights reserved.