Share of Government Aid in Personal Income Doubles
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  • Mrs. Davis

    It is interesting how the Social Security program has changed over my life. When I began working the box for the deduction was called FICA (Federal Insurance Contributions Act) and it was called my Social Security Contribution. Not a tax. Now it’s labelled Social Security and called Payroll Tax.

    When I was young, you paid in your money to your account while you worked and it came back from your account when you stopped working. Now you pay your tax and get Saftey Net benefits from the government.

    All this wordsmithing is to set us up for means testing and the transformation of Social Security into a welfare program. When that happens, watch for public support for them to fall as fewer and fewer receive benefits commensurate with their contributions in any actuarial sense.

    This is unfortunate because Social Security is not nearly so close to insolvency as Medicare. But they both will be turned into welfare entitlements to be means tested as they approach insolvency.

    And calling veterans benefits a government benefit like Medicaid is just plain wrong.

  • No, the Blue government won’t redouble the redistribution of money to lessen the inequality gap. I think that’s pretty clear.

    Rather they will destroy the economy (our deficit-to-GDP ration the last two quaters already is worse than Greece, BTW), reducing the wealthy to broke, thereby leveling income at near-zero. Only the Prog leadership will be more equal than the rest of us.

  • Kris

    Uncle Sam loves the poor. That’s why…

  • Mark Michael

    There are boring technical details concerning distribution of income, how it’s used/spent by the different income groups, and how much it really “buys” per group that (IMO) are important but often aren’t discussed. They can seriously distort the top-level perception of the US’s income inequality if they’re ignored. A few examples:

    1. The top quintile of income earners save a lot more of their incomes than do the bottom quintile of income earners. An interesting measure is how much each quintile consumes and how wide is the inequality of that measure. It turns out that the top quintile only consumes about 2.5 times as much as the bottom quintile.

    What we consume determines how comfortable our daily lives are – not how much our income is. “Income” is a “paper” figure, rather than a here & now concrete benefit. It represents deferred consumption – we’ve delayed it for future use. (Of course, the savings by the top quintile are used by banks, investment houses to fund our capital equipment needed to develop new products & services, new labor-saving equipment, software, etc. The savings of the bottom 3 quintiles is awfully small – it’s mostly the top two quintiles that do the saving.)

    Economist Diana Furchtgott-Roth has written papers discussing this. For instance, see:

    (TANGENT: I see she’s now an economic adviser to Rick Santorum in his race for the GOP prez nomination. She worked in a variety of jobs studying these issues, including the Labor Dept. BLS.)

    2. Over the past (say) 40 years the quality of many items that the bottom quintile buy and use has gone up a lot and their prices have dropped a lot. Surveys of what the poor own in the way of TVs, home appliances, cars, clothes, size of their living quarters has improved a large amount. Most have flatpanel color TVs, at least 1 car, often 2, A/C, cellphones, the sq. ft. of living space has gone up, etc. These improvements in their “consumption” standard of living is due to the large increases in labor productivity, new inventions, that benefit everyone.

    This IMO is a more important measure of how well off the poorest in our society really are than their paper incomes.

    3. There are lots of statistical pitfalls in comparing families in the 21st Century with families in the 20th Century, say, the 1970s. Families are smaller today than in the 1970s. If you compare family income without adjusting for family size, it will make the 21st century family seem poorer. But that income supports fewer people. It is better to compare income on an individual basis, not per family.

    3(a). We’ve had an explosion in single-parent households. They only have (at most) a single breadwinner. They comprise a huge percentage of the people in the lowest income quintile. More & more men in the prime of their lives – 25 – 40 – are out of the workforce. They contribute a lot less to the family incomes today than 40 years ago.

    3(b). These factors strongly impact the income distribution, but “fixing” them with the “blue” school model nostrums of redistributing income from the top quintile to the bottom quintile via federal welfare programs has a near-perfect track record: abject failure.

    4. Furchtgott-Roth points out that after the 1986 Tax Reform Act, many small businesses switched from a standard corporate income tax basis for reporting their federal business taxes to filing for partnerships under the individual income taxes. This resulted in a big jump in alleged income inequality. Those small businesses now seemed to be high-income individuals rather than what they were: small businesses (S Partnerships, etc.).

    This resulted in a big jump in our income inequality – on paper – but nothing changed in the “real” economy. (Our “Gini factor” leaped up, artificially.)

    5. In the 1970s before Reagan lowered the top marginal income tax rate from 70% to 50%, many income earners in the top quintile “hid” much of their income by various measures. Companies paid “income” as perks such as use of a company hunting lodge for vacations, a company airplane for travel. Paid for this or that benefit for their top employees, etc. All to avoid paying 70% of their income to Uncle Sam. After the rates were lowered, especially to 28% in 1986, the incentive to do this dropped, and more income was direct and on the taxable “books”. The also was an artificial increase in income inequality IMO.

    That’s enough tedious detail about material inequality today vs. the 1970s or earlier!

  • Corlyss

    Just one reason why entitlement reform will probably have to come at the point of a gun.

  • La Marque

    The blue model (democrat and big govt repubs) wants income inequality and a culture of dependency. Politicians are all about control with power. The normal state of human existence is dictatorship, usually benign.

    Social Security and Medicare will become needs based in the next few years as the US eliminates the middle class. My experience with Medicaid on behalf of a family member is that SSA is not very helpful and determined to make sure the client has less than $2000 to their name, not counting a house.

  • John

    Walter and Mark (in particular),

    Great posts. Thanks.

  • Toni

    Mark Michael’s analysis is really interesting.

    For the reasons he cites, and more — such as non-income benefits the bottom quintile get in the form of food stamps etc. — I think the more interesting statistic would be income mobility.

    Some immigrants to this country quickly leave the bottom quintile. Some native-born manage to do so. Meanwhile, some middle class and rich people slide down the scale or go bankrupt after making foolish and imprudent choices.

    Behavior matters. To what extent should prudent Americans be obliged to support the imprudent and/or lazy? I think of the Fishtown workers whom Charles Murray describes as working just long enough to re-qualify for unemployment insurance. They’ve learned how to game the system, and the bigger the system, the more ways for the marginally honest to game it. No doubt some portion of that 18% goes to other people also gaming the system.

    Behavior matters, and no government program can force citizens to work hard, husband their resources, and refrain from gaming the system their fellow citizens pay for.

  • Jeffersonian

    “…unless, that is, the goal is to create a permanent client class that depends on Uncle Sam for its daily bread.”


    As my namesake once noted, dependency breeds subservience. Moral people see that as a warning, but the Blue model sees it as a prime directive.

  • Byron00

    Excellent comment by Mark Michael. But shouldn’t government programs of income redistribution get some specific mention in any such discussion? Surely those in part explain the relative equality in consumption — is a negative income tax check from the US Treasury paying for that flat-screen and cell phone? How is it possible for large numbers of males of working age to be out of the labor force — who is paying their way and making that life possible?

  • Robert Sendler

    “They’ll make us all beggers because beggers are easier to please”

  • Mrs. Davis, I agree that in days past, FICA/SS was perceived as a “you get what you pay” program, but the reality is that is has never been that way since inception.

    When FDR proposed Social Security, it was a three-part program: a manditory contribution to an annuity fund; a voluntary additional contribution to the annuity fund, and; a temporary tax to fund payments to those who have not had enough contributions to fully fund their annuity. Congress passed the last, but never got around to actually enacting the first (one might argue that the voluntary part is covered by IRA and 401k eligibility).

    From the beginning, SS has been a Ponzi scheme of using contributions from current investors to fund payments to current bennificiaries. The only difference now is that Congress has raided that “lock box” so often it no longer has any semblance of being a secret.

  • theBuckWheat

    Socialism is the idea that we all must live at the expense of others. Christians should easily see how this is based on coveting and theft, both violations of the Ten Commandments. Further, socialists assert we all will be better off if we participate in the grand scheme, which is a lie, yet another violation of the Commandments.

    Please tell me again how a system based on lies, coveting and theft is morally better than a system based on voluntary free exchange. Baring that, please tell me how it will yield more economic benefits.

    While we are at it, how many millions died under capitalism in the last century and how many tens of millions died under socialism?

  • michael

    Viamedia should take a look at “What’s the Matter with Kansas?”, if they want to know how to reverse the trend. The answer to the incredibly unobservant author’s snarky, ivy elitist question is that Some People WILL vote their principles (and for the good of the nation) against even when it carries a personal cost to themselves… aka, have to surrender an entitlement or reimbursement. I’m from Kansas myself and have seen this often, but I’ve lived elsewhere and found many of the same quality of people in those places.

  • Some Sock Puppet

    I just don’t get it. With so many examples across history and current day examples aplenty, why is it that we’re charging headlong to follow these terrible examples?

    It can only be graft or corruption. No one is that suicidally stupid. No one.

    The old maxim is correct. Power corrupts. It’s gotten very, very bad here if we’re willing to drown out entire generations in debt to sustain entitlements.

    People need to step up. This is not a time for half measures and email discussions. it’s time to call, write, discuss and not let up what is going on. It is time to vote and to make sure you let all public officials know what the problem is. Document everything you do and do not let up.

    This isn’t an election the truly effective conservatives should be sitting out so they can sweep back in to waves of adulation and desperation in a landslide victory – because I’m not sure but it sure feels like this country can’t stand another 4 more years of this. I’m not sure it can handle a year of this if the administration finds itself in actual trouble over Fast and Furious, Soylandra, Iran, etc., or re-election.

  • EvilBuzzard

    You, I and Paul Krugabe know that more government stimulus is the answer. The sooner we achieve what Keynes described as the Euthanasia of The Rentier, the sooner nirvana commences.

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