October 26, 2010 | Commentary on Economy
We use a variety of yardsticks to judge whether our country is on the right track. Is inflation up? Has unemployment dropped? What's the stock market doing today?
Here's another one: Are Americans, who have long prided themselves on their freedom and self-reliance, becoming more dependent on government, or less?
It's a yardstick we seldom check. But we should.
Consider health care. Before the 1960s, Americans who didn't get their insurance through work typically got it through civic organizations such as churches and social clubs. Now they're more likely to get it through government public programs such as Medicare, Medicaid and the Children's Health Insurance Program. The result? Greater dependence on government.
According to The Heritage Foundation's 2010 Index of Dependence on Government, Medicare, Medicaid and CHIP enrolled approximately 98.2 million individuals in 2009. That's almost a third of the population. Combined, these programs accounted for $886 billion in federal spending in 2009. That's more than double the $399.1 billion spent on these programs in 1999, just a decade before. To say that such a trajectory is unsustainable is putting it mildly.
Another example is lower-cost housing. Up until World War II, it was mutual-aid, religious and educational organizations that provided housing assistance to low-income Americans. As with health care, it was a neighbor-helping-neighbor approach. But then the federal and state governments got into the act, offering more generous assistance. Today, government provides nearly all housing assistance on offer.
Government housing assistance, in fact, is at its highest level since 1962, the first year charted by the Index. As recently as 1980, it stood just above $20 billion (in 2005 dollars). Now, however, government data shows that it tops $52 billion.
Many other areas, alas, also show increasing dependence - in welfare, education and agriculture. The overall trend line is inexorably up.
As a result, the private sector winds up being crowded out. Take the Medicare drug benefit that was added in 2003. Two-thirds of all Medicare enrollees had drug coverage from another source before the Medicare drug benefit was enacted. One study showed that the new benefit resulted in a 72 percent crowd-out of private coverage. For every seven prescriptions paid for by the government, it found, five would have otherwise been financed privately.
Worse, the number of people paying for this largesse is dwindling.
In 1962, the first year measured in the Index, the percentage of people who didn't pay federal income taxes themselves, and who were not claimed as dependents by someone who paid federal income taxes, stood at 23.7 percent. By 2000, the percentage was 34.1 percent. By 2008, 43.6 percent.
"In short," the Index notes, "the country may be rapidly approaching a point where one-half of 'taxpayers' do not pay taxes, while receiving generous federal benefits."
Talk about a perfect fiscal storm. On the one hand, more and more spending on dependence-creating programs. On the other, an ever-shrinking number of taxpayers to pay for these programs.
It's worth recalling what Thomas Jefferson called "the sum of good government" in his first Inaugural Address: "a wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned."
The 2010 Index of Dependence shows that we're drifting further and further from this ideal. Let's hope that Americans wake up before we go too far down this dangerous path.
Ed Feulner is president of The Heritage Foundation.
First appeared in The Charlotte Observer