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January 8, 2013

128 Million Americans are Now on Government Programmes. Can America Survive as the World's Superpower?

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I have just read a staggering report written by my colleagues Patrick D. Tyrell and William W. Beach for the Heritage Foundation's Center for Data Analysis (I direct the Margaret Thatcher Centre for Freedom at Heritage.) It is a real eye-opener for anyone who cares about America’s future as the world’s superpower, on either side of the Atlantic. Ironically, Britain, through the tremendous determination of Iain Duncan Smith and his team at the Department of Work and Pensions, is starting to roll back the welfare state, precisely at the same time the current US administration is expanding it.

The United States isn’t just gliding towards a continental European-style future of vast welfare systems, economic decline, and massive debts – it is accelerating towards it at full speed. Or as Acton Institute research director Samuel Gregg puts it in his excellent new book published today by Encounter, America is already “becoming Europe,” with the United States moving far closer to a European-style welfare state than most Americans realize.

Tyrell and Beach point out in their Heritage paper, which is based on extensive analysis of the recently released March 2011 US Census Bureau Current Population Survey (CPS), that more than two in five Americans are now on government programs:

The number of people receiving benefits from the federal government in the United States has grown from under 94 million people in 2000 to more than 128 million people in 2011. That means that 41.3 percent of the US population is now on a federal government program.

Just as worrying is the rate of increase in spending on these federal government programmes:

Between 1988 and 2011, spending on dependence-creating federal government programs has increased 180 percent versus “only” a 62 percent increase in the number of people who are enrolled in federal government programs, and a 27 percent increase in the population. Not only are more people enrolled in government programs than ever before, but more US taxpayer dollars are being spent on each recipient every year.

This level of spending is simply unsustainable. “In 2010, over 70 percent of all federal spending went to dependence-creating programmes,” a figure which is likely to rise further in coming years, with the number of Americans enrolled in at least one federal programme growing “more than two times faster than the US population.” As the report’s authors argue:

The time to reform dependence-creating government programs is now. The problem is too much government subsidizing, and too much transfer of wealth from taxpayers to those who pay fewer and fewer taxes. After all, government does not create wealth by spreading it around.

Congress would do well to remember that there are no free subsidies and benefits. The government today is borrowing from future taxpayers to pay the current government program enrollees.

In terms of indebtedness, America is well on the way to financial ruin, with total national debt already exceeding 100 percent of GDP according to the OECD, with publicly held federal debt projected to exceed 100 percent of US GDP by 2024. America’s government debt as a percentage of GDP (109.8 percent) based on 2012 figures now exceeds that of the general Euro area (100.6 percent), as well as France (105.1 percent) and the UK (105.3 percent). Only Greece (181.3 percent), Iceland (124.7 percent), Ireland (123.2 percent), Italy (127 percent) and Portugal (125.6 percent) currently exceed the US in terms of government gross financial liabilities as a percentage of GDP.

Unless there is a dramatic reversal in the overall approach taken by the US government, with deep-seated entitlement reform, significant cuts in government spending and taxes, and a return to policies that advance rather than hinder economic freedom, the United States faces a bleak economic future, with devastating implications for American leadership on the world stage and the future of the free world.

It is simply unimaginable for US leadership to be replaced by that of China, with its callous disregard for liberty, human rights and democratic values. An America that ends up like much of the European Union, dominated by big government ideology, drowning in debt, over-regulation, heavy taxation and chronically high unemployment, combined with weak militaries and an unhealthy deference to supranationalism, is a nightmare scenario. Unfortunately the US presidency remains firmly stuck in denial, as it has been for the last four years. This latest report serves as another warning for an administration perilously sleep-walking America towards economic disaster. It is time for the White House to wake up.

First appeared in The Telegraph.

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