Monday, February 13, 2012

Who Relies on the Safety Net: Must Read for All Gridlockers

Jackson was the first to post on the fascinating article in the New York Times yesterday, but I am writing separately to recommend that everyone in the class take a close look at it. The core message of the piece is that Americans are becoming increasingly dependent on the federal government's safety net and that this dependence is expanding more and more from the truly poor to the middle class.   The counterfactual is that the areas of greatest dependence on federal benefits tend to be geographical regions where opposition to government spending and increased taxes tends to be the strongest.  Here are some other important findings:

 **  The share of benefits flowing to the bottom 20% of US incomes has decreased since 1979 from 54% to 36%;

**  The amount of safety net spending by federal and state goverments for every tax dollar they bring in has increased from 37 percent to 66 percent in just a decade.  

**  Only 22 percent of respondents to a recent poll corretly identified Medicare as the fastest growing benefits program.  The greatest number of respondents pointed to programs for the poor. 

** A majority of Americans (55%) believe they will pay more in taxes than they will get back in benefits (which is wildly inaccurate for the vast majority of Americans). 

Some of the commentary on the piece is worth looking at.  Paul Krugman has a graph analyzing the states in rank order of their ratio of payment of taxes to amount of benefits.  Nine of the 12 lowest states (more in benefits than in tax payments) voted for McCain in 2008. 



  1. I think the piece really highlights that what we term as political "gridlock" goes on in the minds of American voters themselves. On the one hand, we think of government assistance as "welfare"--with all of the class-and-race-bound associations built into the phrase. On the other hand, only 5% (!) of the federal budget is spent on entitlements for the non-working poor. And to be fair to our conservative friends out there, the phenomenon of "class creep" in entitlement spending is something which some conservative commentators have been worried about for a while. Jared Bernstein (of the Center on Budget and Policy Priorities) makes an interesting case that the NYT article highlights the question of whether we want a well-funded and functioning federal government to deal with changing demographics and market failures.

    It's hard to expect politicians to take policy positions (like the elimination of tax expenditures along the lines of Bowles-Simpson) when the voters who put them into office have such a skewed understanding of who benefits from federal spending.

  2. Well put. The real interesting thing is the people who cannot reconcile their distaste for government spending and the notion of dependency, but in the end, need help and are willing to accept it.

  3. This article demonstrates the mantra of an American that Professor Taylor keeps mentioning in class: the government needs to make spending cuts, but don’t cut any of the programs that benefit me. Blake makes a great point because it would be political suicide to promise cuts and then actually take the step and reduce spending toward programs that Americans benefit from. The easier route for these politicians promising decreased spending measures is to find extreme examples like $559,681 for shrimp running on treadmills or $150,000 for a tunnel so that salamanders and other amphibians can cross a road and link them to the real reason for our fiscal troubles. Since so many people are unaffected by these particular programs, I feel that these examples generate anger toward the government for such unwise spending, especially during tough economic times. If only people did their research or could grasp what hundreds of thousands look like compared to trillions. In reality, these programs are a rounding error.
    The stark economic truth is that we are going to have to sacrifice, especially as Blake mentioned, in terms of tax expenditures. Taxes are going to increase, and programs have to be reduced. Perhaps as a class we realize this, but I don’t feel that the rest of the country does…or wants to. In the meantime everyone is just running in place like a shrimp on a treadmill. This treadmill, however, is placed on a train track, and the train’s name is “fiscal meltdown.” We can see it coming in the distance, but until we stop the treadmill and get out of the way, the future looks ominous.