October 13, 2010

October 13, 2010 | Commentary on Economy

The Political Danger of A Rising Dependent Population

Halloween is still weeks away, yet already a specter haunts Washington. It is the specter of dependency. Every passing year sees significant growth in the mass of Americans dependent on the federal government for life's necessities, from basic nutrition to shelter and health care.

This implacable trend — long a concern of economists and political scientists — is beginning to alarm ordinary citizens as well. They rightly sense that growing dependency drives the explosion of federal spending and public debt. They are connecting the dots between out-of-control spending and the public debt crisis here and abroad. They are guessing, again rightly, that every passing day makes controlling dependency more and more difficult, perhaps even more dangerous.

Signs of growing reliance on government — the antithesis of the traditional American value of self-reliance and self-determinism — emerge with alarming frequency. Just last week, a Gallup survey found that the percentage of Americans who rely on government health care programs rose in September to 26.3 percent from 22.5 percent in January 2008. Moreover, only 45 percent of all Americans used employer-provided health insurance in September, compared with 50 percent at the start of 2008.

The 2010 Index of Dependence on Government, released Thursday by the Heritage Foundation, reinforces this health care news. It finds that the overall population of government dependents ballooned in 2009. The number of dependents has increased in almost every year since 1962. But the spike in dependency last year — when 3.5 million people joined the ranks of the dependent — was the greatest single-year jump ever. The dependent population in the U.S. now stands at 64.3 million — 20.9 percent of the total population, or roughly one of every five Americans.

Why the increase? Well, for one thing, dependency-creating programs keep offering Americans more and more benefits. Government support for dependent persons has grown from $7,293 per person in 1962, to $31,950 last year (both figures expressed in 2005 dollars). That's a more than fourfold increase in the richness of the benefits, making dependence on government an ever-sweeter deal — one that gets harder and harder to walk away from.

Another reason is that fewer and fewer people pay for the richer benefits. All adult Americans can vote, but not all voters pay taxes. In 2008, more than 132 million Americans paid no income taxes. That's nearly half — 43.6 percent — of all Americans, more than three times the percentage that prevailed just 25 years earlier.

Spending on dependency-creating programs has increased by 49 percent since 2000. But last year alone it jumped a whopping 13.6 percent. Programs experiencing the greatest increase were: Health and welfare, 22 percent; food support, 20 percent; and housing support, 15 percent.

Of course, the recession accounts for some of this increase, as have prior recessions. Keep in mind, however, that the Index has continued to rise in good and bad economic times. Earlier this year, we tested the theory that the Index is tied to the business cycle. We found that changes in the economy were weakly and not significantly related to Index changes, but policy changes were.

These data should ring alarm bells for citizens worried about the financial and economic future of the United States. Throughout this year, the International Monetary Fund has warned the U.S. about its financial imbalances. In April, the IMF predicted that the sum of federal and state debt would exceed 100 percent of the gross domestic product in 2015. Later in the summer, it urged the U.S. to cut its structural deficit (read, entitlement programs) by more than $300 billion per year through 2015.

Why this urging? Unsustainable growth in dependency programs is at the root of every public debt crisis around the world. While the global recession was the trigger that pushed Greece, Spain and other countries into bankruptcy, the underlying financial problem was unsustainable spending on dependency-creating programs.

Politically involved Americans sense that the pension riots in Greece or the retirement street actions in Paris could come home to the U.S., when the federal government is forced to reduce dependency-related spending. That day could come soon, and the growing connection between financial crisis and political instability has many worried.

Rather than toy with this prospect, Congress needs to address the deep reasons for its excessive spending. That means examining the drivers of dependency and reducing the magnifying utilization of dependency programs. The longer policymakers delay acting on this fundamental challenge, the greater — and graver — both the political and economic stakes will become.

William W. Beach is director of the Heritage Foundation's Center for Data Analysis.

About the Author

William W. Beach Director, Center for Data Analysis and Lazof Family Fellow
Center for Data Analysis

Related Issues: Economy

First appeared in The Washington Times