How the federal government has changed

4 Sep

This is going to take a while so grab a cup of coffee.

America has endured for well over 230 years.

But just in the last 50, our government has drastically changed.

The federal government’s size, what it considers most important and what its purpose is, would stun Franklin D. Roosevelt and those before him.

Since 1960, entitlement programs have come to dominate the federal budget.

What is so new about our government today is the vast amount of entitlement payments that it protects, manages and finances.

Compared to 60 years ago it has become an entitlements machine.

It devotes more attention and resources to the public transfer of money, goods and services to individual citizens than anything else – spending more than everything else it does combined.

The growth of entitlement payments over the past half-century has been breathtaking.

In 1960, US government transfers to individuals totaled about $24 billion in current dollars, according to the Bureau of Economic Analysis.

By 2010 that total was almost 100 times as large.

Even after adjusting for inflation and population growth, entitlement transfers to individuals have grown 727% over the past half-century, going up at an average rate of about 4% a year.

In 2010 alone, government at all levels oversaw a transfer of over $2.2 trillion in money, goods and services.

The burden of this comes to slightly more than $7,200 for every person in America.

For a family of four, the average entitlements burden for that year alone approached $29,000.

This half-century of entitlement expansion has completely upended the priorities, structure and functions of federal administration as these were understood by all previous generations.

Until 1960, the accepted task of the federal government was governing.

The overwhelming share of federal expenditures was allocated to some limited public services and infrastructure investments and to defending the country against enemies foreign and domestic.

In 1960, entitlement payments accounted for well under a third of the federal government’s total outlays — about the same fraction as in 1940, when the country was climbing out of the Great Depression.

But over the following years, entitlements as a percentage of total federal spending sky rocketed.

By 2010 they accounted for just about two-thirds of all federal spending, with all other responsibilities of the federal government making up barely one-third.

In a very real sense, entitlements have turned American governance upside-down.

You can divide entitlement spending into six categories:
Income maintenance
Medicaid
Medicare
Social Security
Unemployment insurance
All the others

Broadly speaking, the first two categories concern entitlements based on poverty or income status.
The second two, entitlements are for aging or old-age status.
And then entitlements based on employment status.

Those account for about 90% of total government transfers to individuals, and the first four categories comprise about five-sixths of all such spending.

Poverty, or income-related, entitlements — transfers of money, goods or services, including health-care services, accounted for over $650 billion in 2010.

Between 1960 and 2010, inflation-adjusted transfers for these jumped by over 30-fold, or by over 7% a year.

Entitlements for older Americans — Medicare, Social Security and other pension payments — worked out to even more by 2010, about $1.2 trillion.

In real terms, these grew by a factor of about 12 over that period — an average growth of more than 5% a year.

But in purely mathematic terms, the most astonishing growth of entitlements has been for health-care guarantees based on claims of age (Medicare) or income (Medicaid).

Until the mid-1960s, no such entitlements existed; by 2010, these two programs were absorbing more than $900 billion annually.

So, blame the Democrats?
You can’t.

Here’s the biggest surprise:

In the current political atmosphere, many think of the Democrats as the party of entitlements.
That’s not true.

Long-term trends tell a different story.

From a purely statistical standpoint, the growth of entitlement spending over the past half-century has been greater under Republican administrations than Democratic ones.

Between 1960 and 2010, the growth of entitlement spending was exponential, but in any given year, it was on the whole roughly 8% higher if the president happened to be a Republican rather than a Democrat.

Even with the criticisms of “big government” that came from the Oval Offices, the administrations of Richard Nixon, Gerald Ford and George W. Bush presided over especially lavish expansions of the American entitlement state.

Even with the charges flying back and forth between the Democratic and Republican parties today, the numbers underscore the unsettling truth that both political parties have, on the whole, fueled the explosion of entitlement spending.

From the founding of our nation until quite recently, the US and its citizens were regarded, here and abroad, as exceptional in a number of deep and important respects.

One of these was their fierce and principled independence, which gave birth to the political experiment that is the US Constitution.

The self-reliance of the people through the years extended to personal finances.

The American “individualism” still included civic associations and voluntary organizations.

But in an environment bursting with opportunity, American men and women viewed themselves as accountable for their own situation through their own achievements — an outlook much different from the attitudes of the Old World from where they came.

On one hand there was an affinity for personal enterprise and industry and, on the other, a horror of dependency and contempt for anything that smacked of a mendicant mentality.

Although many Americans in earlier times were poor, even people in fairly desperate circumstances were known to refuse help or handouts as an affront to their dignity and independence.

People who subsisted on public resources were known as “paupers,” and helping them was something for the local community.

Neither side held the condition of pauperism in high regard.

This country has lost its cultural resistance to government entitlements.

America is now on the verge of a symbolic threshold:
The point at which more than half of all American households receive and accept transfer benefits from the government.

From cradle to grave, a treasure chest of government-supplied benefits is there for the taking for every American citizen — and exercising one’s legal rights to these many handouts is now part of the American way of life.

As people dig ever more deeply into the pot of entitlement, the question of how to pay for this inescapably comes to the fore.

Instead of trimming, we have become ever more willing to tap new sources of finance for supporting our appetite for more entitlements.

The taker mentality has now gravitated toward taking from a pool of citizens who can offer no resistance to such schemes: the unborn descendants of today’s gimme population.

The unescapable fact is America’s greediness for entitlement benefits has put the country on a financially untenable trajectory, with the federal budget generating ultimately unbearable expenditures and levels of public debt.

So don’t blame the Democrats or the Republicans.

Blame the change in our American culture.

One Response to “How the federal government has changed”

  1. Pension Providers September 13, 2012 at 11:01 am #

    Cheers for quality content in your blog post How the federal government has changed.
    Cheers..

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