Election 2012

Forget Romney: Should We Be Concerned That 49 Percent of Households Get Government Money?

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Let's leave aside at least for a minute the flap over Mitt Romney's 47 percenters. Should we be concerned that somewhere around half of Americans live in households that get a direct cash benefit from the government?

To the right is a chart created earlier this year by Reason contributor Veronique de Rugy of the Mercatus Center.

Using data from the third quarter of 2010, de Rugy found that just three programs—Social Security, Medicare, and Medicaid—account for the overwhelming majority of the payouts.

…government at all levels spent $7,500 per capita on 50 benefit programs designed to help citizens. Social Security, Medicare and Medicaid account for $7,000 of the per capita total.

Should high rates of government payouts matter? Yes, and not because of politicking that is ultimately designed to get one or another candidate elected as president. The numbers and percentages matter because government at all levels is broke and the only way it's going to get less broke is by spending less money. If you're relying on federal tax revenues staying above 19 percent of GDP for more than a quick cup of coffee, you're dreaming.

To underscore it: We need to spend less money, not more money. Yet increasing outlays is precisely what both the GOP and the Democrats plan to do. Writing in February, just after Barack Obama released his budget proposal for 2013, de Rugy notes

President Obama released a budget plan this week that proposes to increase spending from $3.8 trillion in 2013 to $5.8 trillion in 2022.

As limited-government types wonder how to reverse this trend, they need to confront the following: Americans in every possible demographic group are increasingly dependent on government. That makes it that much tougher to cut spending.

Arguably, the real scandal of Romney's fundraising comments is that his own party has passed a budget plan that does nothing to cut spending. Indeed, the GOP House this year passed a version of Vice President candidate Paul Ryan's plan that would increase annual spending from around $3.5 trillion to $4.9 trillion in 2022.

Does anyone seriously think that Medicaid, the nation's insurance plan for the poor that's funded jointly by the feds and the states, as it is currently operated is a good program? Would anyone other those who are forced into it choose it if given a viable alternative? Almost certainly not, and with good reasons.

I support a tax-based social safety net for those too poor or incapacitated to help themselves, but Medicaid should not be confused with quality care that is cost effective. It is, in fact, the basic reason why states are so broke (along with spending on education, but that's another issue). Whoever wins in November will need to overhaul Medicaid. Period.

Then there's Social Security and Medicare, the other two programs that account for most of government payouts to people. As de Rugy and I argued in our August-September Reason cover story, "Generational Warfare," these programs are both fiscally and morally bankrupt. Everyone agrees they are mathematically unsustainable in their current guises; there is simply no way to generate the revenues necessary to pay expected benefits. Worse still, they take money from relatively poor and relatively young people and give to relatively wealthy and politically connected people (retirees). So not only is the transfer going in the wrong direction, it robs the young of money that might be used to build savings over a lifetime of work. So whoever wins in November will need to overhaul Medicare and Social Security too. Period.

I have no interest in defending Mitt Romney, for whom I will not be voting in November (nor will I cast a ballot for the incumbent). But Romney is right when he flags as a problem high levels of government spending on those who can get by without it. He may well be wrong in all his particulars—GOP voters are a big chunk of the 47 Percent and their checks break the government bank just as much as those who lean Democratic—but he's right on the larger issue.

Hell, he might even have a chance in November if he would only generate an economic plan that grows out of that insight rather than one that simply echoes Obama's proposal. Gallup finds that 54 percent of Americans agree that "the government is trying to do too many things that should be left to individuals and businesses." That number is down a bit from a recent high of 61 percent but it suggests that Americans recognize that the free-lunch days are numbered, that even after years of a recession that was tough and a recovery that's even worse we need to change what we're doing.

But hope and change is so 2008, right? This time, both sides seem to be more interested in the same old, same old that got us stuck in this ditch in the first place.