In the early 2000s America had become a bona-fide welfare state. More than 60 percent of U.S. federal government spending consisted of transfer payments.
That’s right: nearly two-thirds of government went toward redistribution.
Call it what you will — wealth transfer, entitlements, government benefits, welfare, unearned income, handouts. The government became one big redistribution machine.
Spending on entitlements was crowding out spending on essential government activities — national defense, law enforcement, foreign affairs, transportation infrastructure, environmental clean-up, NASA, and the like.
So did we finally get our act together and start to tame the redistribution leviathan?
After eight years of Obama, you guessed it. We just piled it on.
Now, nearly three-quarters — 72 percent — of U.S. federal government spending consists of transfer payments.
These are the Obama White House’s own statistics. The Office of Management and Budget (OPM) historical table “Composition of Outlays: 1940-2021” tells the story.
Transfer payments, expressed as "payments for individuals," comprised about 20 percent of government outlays in the 1950s. By 1992 they had surpassed 50 percent.
Barack "spread-the-wealth-around" Obama, true to his word, ballooned redistribution from 60 of government spending at the start of his presidency to 72 percent now.
The biggest entitlements are Social Security, Medicare, and Medicaid plus an alphabet soup of programs including Obamacare subsidies, Section 8 housing, civil service retirement, and refugee assistance.
The infamous budget sequestration that began in 2013 has exacerbated the crowding out. It slowed spending on essential government services across the board, but deliberately barely touched entitlements.
National defense as a percentage of total government outlays fell from 45 percent in the 1960s to less than 16 percent now. OMB projects that to fall to 12 percent in 2020.
With 72 percent of federal spending allocated to transfer payments and 6 percent to interest payments on the national debt, only roughly 6 percent of the U.S. federal budget is available for non-entitlement, non-defense government functions. Interest rates’ inevitable rise combined with continually expanding entitlements will squeeze these government functions even more.
Is it any wonder why our transportation infrastructure is crumbling, our national parks are suffering, our space program is faltering, and our military readiness is in jeopardy? We’re a wealthy country that easily could finance those activities, were we fiscally responsible.
But too many Americans and the politicians who cater to them have drunk the Kool-Aid of free government stuff be it in the form of money, goods, or services.
We could have remedied our predicament by converting major spending programs into savings programs, but the last time anyone tried that was George W. Bush vis-à-vis Social Security. Amid the blowback he dropped that effort like a hot potato.
We’ve reached the tipping point where more voters receive free money from the government than there are voters earning that money. Just try proposing cutting back someone’s free stuff and see the outcry that ensues.
Only clever and courageous leadership can get us out of this predicament. While President-elect Trump said he plans to reform Obamacare, it remains to be seen whether he’ll attempt the same with the big entitlement programs.
What will happen as redistribution’s share of government spending continues to swell?
Deteriorating military readiness and the degrading of traditional government functions will continue to take their toll. Another consequence is anemic economic growth, as government handouts and higher taxes sap people’s motivation to work and invest.
Growth has averaged just 2.1 percent over the past five years, versus 3.2 percent average growth of preceding decades. This is manifested in lower overall wages and greater poverty than would otherwise be the case.
The dire situation is contributing to America’s waning influence in world affairs. More welfare spending means less taxpayer money available for our military, embassies, foreign aid, and cultural outreach. A less-vibrant economy further diminishes our influence abroad.
Absent reform, America’s economic dynamism will continue to ebb as the entitlement culture permeates society.
But we’ll muddle through — until we get a rude awakening. One day, some foreign enemy will be at our doorstep. And we won’t be able to adequately defend ourselves because for far too long we used our tax money to expand welfare rather than stave off warfare.
That’s when the bill will come due in a big way.
Patrick D. Chisholm is a writer and editor whose articles have appeared in many publications including The Washington Post, The Wall Street Journal, USA Today, Baltimore Sun, San Francisco Chronicle, National Review, and Christian Science Monitor. Previously he worked for financial and business publications, and in the State Department's Office of Mexican Affairs. For more of his reports, Go Here Now.
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