have always expressed concern about becoming dependent on
government. This is partly because they worry that such dependency
will erode the spirit of independence and self-improvement.
This concern explains why there was such broad support in the 1990s
for welfare reform designed to reduce dependency.
this concern is also partly explained by the fear that, as citizens
become more dependent on government, the very nature of our
democracy begins to change. A citizenry that reaches a certain
tipping point in dependency on government runs the risk of evolving
into a society that demands an ever-expanding government that
caters to group self-interests rather than pursuing the public
are we more or less dependent on the government's income and
social support programs- especially federal programs-than we were
40 years ago? Are we close to a tipping point that endangers the
working of our democracy? Or have we passed that point
explore these questions, we need to measure how much federal social
programs have grown. We might also look at how such programs have
"crowded out" what were once social obligations and services
carried out by community groups, family networks, and even local
governments. In other words, has the civil society yielded
substantial ground to the federal public sector?
of Dependency is an attempt to measure these patterns and
provide data to help us assess the implications of the trends.
Using the Index, Heritage Foundation analysts have found a steady
and perhaps alarming growth in dependency in recent decades.
benchmark index of 100 for 1980, the Dependency Index for 2004
stands at 212, a 1 percent increase over its 2003 score of 210.
This increase marks the first year since 2001 that the Dependency
Index has risen by less than 5 percent. Since 1980, the Index has
doubled, increasing by 112 percent.
significant growth in this year's Index score came in three
components: health care and welfare, retirement, and
contains the Index scores from 1962 to 2004, with 1980 as the base
Index's Purpose and Theoretical Motivation
of Dependency is designed to measure the pace at which federal
government services and programs have been growing in areas in
which private or community-based services and programs exist or
have existed to address the same or nearly the same needs. Thus, it
allows patterns to be analyzed. Policy analysts and political
scientists can also use the Index to develop forecasts of likely
trends and to assess how these trends might affect the politics of
the federal budget.
uses data drawn from a carefully selected set of federally funded
programs. Programs were selected by their propensity to
duplicate or substitute for support given by families, local
organizations, neighborhoods, and communities to people in
need (middle-class as well as poor), such as those without adequate
shelter, food, income, education, or health care and those facing
calamity, such as unemployment.
individuals and local entities typically provided more
assistance than they do today. Over the course of the 20th century
in particular, government came to provide more and more of the
services that previously had been provided by self-help and
mutual-aid organizations. Lower-cost housing is a good example.
Mutual-aid, religious, and educational organizations had long
provided limited housing assistance. However, after World War II,
the federal and state governments began to provide the bulk of
low-cost housing. Today, nearly all housing assistance comes from
care is another example of the pattern. Before World War II,
Americans of modest income typically obtained health care and
health insurance through a range of community institutions, some
operated by churches and social clubs. That entire health care
infrastructure has today been replaced by publicly provided health
care coverage, largely through Medicaid and Medicare. Whether or
not the medical and financial result is better today, the
relationship between the person receiving health care assistance
and those who are paying for it has changed, and few would dispute
that this change has affected the total cost of health care and the
politics of the relationships among patients, doctors,
hospitals, and those needing care.
help to those in need has also undergone a profound change.
Again, local, community-based charitable organizations once played
the major role, which resulted in a particular relationship
between the person receiving help and the community. Today, Social
Security and other government programs provide much or all of
the income in indigent and modest households. Unemployment
insurance payments provide nearly all of the income to temporarily
unemployed workers- income that once was provided by unions,
friendly societies, and local charities. Indeed, income
assistance is quickly becoming a government program with
little if any connection to the local civil society.
shift from local, community-based mutual-aid assistance to
government assistance has clearly altered the relationship between
the person in need and the service provider. In the past, the
person in need depended on people and organizations in the
community for help. The community knew the person's needs and
tailored assistance to meet those needs within the budgetary
constraints of the community. Today, housing and other needs
are addressed by government employees who typically do not know the
person and have no tie to the community where the needy person
course, a dependent relationship exists in both cases. However, the
first is a dependent relationship with the civil society that
includes expectations of the person's future civil viability
or ability to aid another person. The latter is a dependent
relationship with a political system without any reciprocal
expectations. The former is based on mutual and reciprocal aid with
future aid dependent upon returning to civil viability, which
in turn is essential to the life of civil society itself. The
latter is usually based on unilateral aid in which the return to
civil viability is not essential. Indeed, "success" in the latter
political system is frequently measured by the growth of the aid
program rather than its outcome. While the former leads to a
balance between the interests of the person and the community,
the latter runs the risk of interest-group political pressure-from
provider organizations and local communities as well as from
recipients of assistance from distant government-to expand
of Dependency provides a way of assessing the magnitude and
implications of the change in the form of dependency within
American society. While the steps that we took in preparing this
year's Index are described in the methodology section, it is worth
noting that the Index is based principally on data provided
annually by the White House when the President submits his budget.
The base year for the 2005 Index is federal fiscal year 2004. A
simple weighting scheme and inflation adjustment restate these
publicly available data into an index. We encourage replication of
our work and will provide the data that support this year's
presentation of the Index of Dependency for 2005 is organized into
four sections. Matthew Spalding leads with a discussion of how
dependency has been viewed in American history. That analysis
is followed by brief reviews of major policy changes in six areas
important to the Index: housing, health care, welfare,
retirement, education, and agriculture. These discussions of
important policy changes are followed by a description of how the
Index is constructed. The presentation concludes with some thoughts
on the number of Americans who received support from the
programs contained in the Index.
Danger of Dependency:
A Historical Perspective
was the theme of the American Revolution. The colonists sought
independence not only from Great Britain, but also from military
occupation, royal overseers, arbitrary laws, taxation without
representation, and-as it says in the Declaration of
Independence-all that "evinces a design to reduce them under
way to understand independence is to recall the classical goal of
self-sufficiency. Not exclusively or even primarily material,
self-sufficiency encompasses more a sense of moral
purpose and well-being. For America, this meant freely
choosing their own leaders, establishing their own laws, and
setting up a government to ensure their own safety and happiness,
or as the Declaration of Independence says, "to assume among the
powers of the earth, the separate and equal station to which the
Laws of Nature and Nature's God entitle them" and obtain the full
power to do the "Acts and Things which Independent States may
of right do."
opposite of independence is dependence, which the American
Founders deplored following Blackstone's definition: "Dependence is
very little else but an obligation to conform to the will or law of
that superior person or state upon which the inferior depends." Thomas
Jefferson, as usual, was more to the point: "Dependence begets
subservience and venality, suffocates the germ of virtue, and
prepares fit tools for the designs of ambition."
establishing a new nation, the challenge was to create the
institutional arrangements for restricting power and securing
the rights promised in the Declaration of Independence while
preserving a republican form of government that reflected the
consent of the governed. The American Founders sought to assure
independence and prevent dependence in two ways.
was to limit the power and scope of government. They did this by
creating a strong government of adequate but limited powers,
all carefully enumerated in a written constitution. A
diversity of opinions would make it nearly impossible to form
a majority on narrow interests that are contrary to the common
good. Thus, the greatest bulwark of our independence as a
self-governing people is our limited government.
obverse of restraining government was to encourage the flourishing
of the institutions of civil society-families, churches, schools,
voluntary associations, and charitable organizations-that
would not only form the habits of and create the conditions for an
independent, self-governing citizenry, but also perform and provide
charity and assistance to meet the demands of social
American Founders understood the need for a minimal safety net but
believed that the primary method of helping the poor and preventing
dependence was through the non-governmental sphere of civil
society, on the one hand, and the promotion of economic
independence, on the other. With economic independence created
through the encouragement of commerce and the protection of
private property, each citizen "possesses a common interest with
his fellow citizens," wrote James Wilson, and "is not in such
uncomfortable circumstances as to render him necessarily
dependent, for his subsistence, on the will of
Franklin wrote that "the best way of doing good to the poor, is not
making them easy in poverty, but leading or driving them
out of it," and observed that the growing welfare system in
England removed "the greatest of all inducements to industry,
frugality, and sobriety, by giving [the poor] a dependence
on somewhat else than a careful accumulation [of wealth]
during youth and health." Instead, the Founders-and Franklin is the
greatest example of this effort-encouraged and formed private
associations to promote mutual aid and assistance and to do
precisely what they thought civil society should do to help those
understanding of independence and dependence changed radically
toward the end of the 19th century with the rise of modern
liberalism. Thinkers such as Herbert Croly and John Dewey
argued that the forces of industrialism and urbanization had
shattered America's traditional social order and that the
conditions of the modern world required a new activist government
to better manage political life and human affairs. Beginning with
the Progressive Movement and continuing with the New Deal and
the Great Society, this liberalism set out to transform the old
constitutional structure into a "living" governmental system that
was progressive, increasingly centralized, and focused on social
Franklin D. Roosevelt argued that true independence cannot exist
without economic security-"Necessitous men are not free," he
said-and proposed a second bill of rights that included a
government guarantee to decent housing, a living wage,
adequate health care, a good education, and social security, among
other things. By this view, dependence means economic want, and the
new primary task of government is to alleviate economic want
and protect against economic insecurity.
Society took the argument one step further by asserting that the
purpose of government is no longer the securing of rights as
much as it is the creation of the political and economic
conditions of equality-"not just equality as a right
and a theory," as Lyndon Johnson put it, "but equality as a
fact and equality as a result."
consequence is that the idea of an independent, self-governing
citizenry is replaced by individuals and groups who see the
federal government as the guarantor of economic security and the
primary provider of social services. Rather than basic or
temporary programs, benefits come to be understood as
something to which one is entitled.
point, as significant numbers of citizens come to look more and
more to government for benefits, they come to expect or depend
on those benefits. In the worst case, some are largely if not
completely dependent on the services and benefits provided by
government. By the old definition, one is less independent and has
less freedom of action. At best, regular economic benefits become a
real and substantial interest and bias one's opinion in favor of
maintaining, if not expanding, those benefits.
point, especially as benefits expand beyond primary needs to
middle-class entitlements, there could well be a conflict
between immediate self-interest and a long-term, common interest
that argues against expanded benefits.
all of this mean? For one thing, it encourages a politics in which
government benefits and programs are seen as payoffs to existing or
potential voter groups-a modern-day Tammany Hall method of building
political majorities. We might also consider whether, and to what
degree, dependence on essentially permanent government programs
serves to create a large number of Americans who are "united
and actuated by some common impulse of passion, or of
interest, adverse to the rights of other citizens, or to the
permanent and aggregate interests of the community." That
is the definition of what James Madison in Federalist 10
called a faction, and a majority faction is what the American
Founders thought to be the greatest threat to republican
dependency also creates the conditions for a greater problem.
Dependency, when combined with the egalitarian spirit and
regulatory power of the modern state, can lead to what Alexis
Tocqueville described as a form of democratic
Democracy in America, Tocqueville warned that the American
future is "an innumerable multitude of men, all equal and
alike, incessantly endeavoring to procure the petty and paltry
pleasures with which they glut their lives." Government
becomes the parent, he writes, as "it provides for their security,
foresees and supplies their necessities, facilitates their
pleasures, manages their principal concerns, directs their
industry, regulates the descent of property, and subdivides their
inheritances: what remains, but to spare them all the care of
thinking and all the trouble of living?"
power," Tocqueville concludes, "does not destroy, but it prevents
existence; it does not tyrannize, but it compresses, enervates,
extinguishes, and stupefies a people, till each nation is
reduced to nothing better than a flock of timid and industrious
animals, of which the government is the shepherd."
American Founders opposed dependency, feared the dominance of a
majority faction, and saw the solution in constitutional
self-government. They never imagined that a majority faction could
be animated by a dependence on big government. For his part,
Tocqueville vividly describes what might happen when
subservience is combined with the modern administrative state
and warns of the dangers of the despotism of dependency.
consists of five broad categories of programs:
care and welfare assistance,
subsidies at the post-secondary level, and
programs and state activities supported by federal appropriations
were selected to fit in each category. To be included in the
initial dataset, each program had to meet the standard set up by
the definition of dependency: that a reasonable argument could be
made that publicly provided goods or services could crowd out or
constrain private or local government alternatives and that
the immediate beneficiary had to be an individual. This standard
ruled out any expenditure by the states on programs that would
otherwise meet the definition of dependency. However, federally
funded programs, in which the state acted as an intermediary,
and secondary education is the principal state-based program
excluded under this stipulation. Post-secondary education is
the only part of government-provided education that is included in
and federal employees are also excluded because national defense is
viewed as a primary function of the government and thus does not
promote dependency in the sense used in this
following six sections discuss how these program areas have changed
in the past few years, particularly since publication of the most
recent Index of Dependency.
Assistance. The Department of Housing and Urban
Development (HUD) was created in 1965 by consolidating several
independent federal housing agencies into a single Cabinet
department. The purpose of the consolidation was to elevate the
importance of government housing assistance within the
constellation of federal spending programs. At that time, it was
believed that the destructive urban riots that broke out in many
cities in the early 1960s were a consequence of poor housing
conditions and that such poor housing conditions were contributing
to urban decay. To this end, the two initiatives- housing
assistance and urban revitalization-were combined in a single
HUD spending patterns still largely reflect that dual mission.
Broadly speaking, in any given year, about 80 percent of HUD's
budget is targeted toward housing assistance while the other 20
percent is focused on urban issues by way of the
Community Development Block Grant (CDBG) program. Given the
nature of these programmatic allocations, HUD's budgetary and staff
resources are concentrated on low-income households to an extent
unmatched by any other federal department.
the 80 percent are a series of means-tested housing programs, some
dating back to the Great Depression. Typically, these programs
provide low-income households, including the elderly and
disabled, with an apartment at a monthly rent scaled to their
income: the lower the income, the lower the rent.
HUD and the local housing agencies with which it works provide
eligible low-income households with an apartment unit owned and
operated by the government. This type of housing assistance is
referred to as "project-based." Public housing projects have
been the most common form of such assistance, but they began to
fall out of favor in the 1960s because of the rampant decay and
deterioration that followed from concentrating too many troubled,
low-income families in a single complex or neighborhood.
Periodically, a new form of project-based program is adopted as a
"reform," but it too tends to fall out of favor after several years
of disappointing results. The most recently created form of
project-based assistance is called HOPE VI, but high costs relative
to benefits have led the Administration to terminate the program in
form of HUD housing assistance for low-income households is
provided in the form of rent vouchers and certificates. Referred to
as "tenant-based" assistance, these certificates help
low-income households to rent apartments from private-sector
providers by covering a portion of the rent charged by the
landlord. The lower the household's income, the greater will
be the share of rent covered by the voucher/certificate.
Implemented in the early 1970s as a cost-effective replacement for
public housing and other forms of expensive project-based
assistance, vouchers, because of industry resistance to terminating
the lucrative project-based programs, still account for only a
portion of the assistance provided.
out the total for HUD is the CDBG program, which provides
block grants to cities and communities according to a needs-based
formula. Grant money can be spent at a community's discretion
among a series of permissible options. Among the allowable spending
options is additional housing assistance, which many communities
choose in order to provide assistance to a greater number of
eligible low-income households. In 2005, President Bush proposed
transferring the CDBG program from HUD to the Department of
Commerce and reducing the amount of money available to the
HUD programs are means-tested to determine eligibility, they are
not entitlements. As a consequence, because of funding limitations,
many eligible households do not receive any housing assistance, and
the waiting list for housing assistance in many communities is
that HUD's housing assistance can create dependency among those who
receive its benefits, some Members of Congress have attempted to
extend to HUD programs the work requirements that have been
implemented so successfully in welfare reform. Regrettably,
advocates for the poor have succeeded in thwarting these efforts,
and to date the most that can be required of HUD program
beneficiaries is that they provide eight hours per month of
volunteer effort to the community or housing project.
complexity of HUD's changing mix of project-based housing
assistance can make it difficult to measure degrees of
dependency unambiguously over time. For example, trends in
real HUD spending suggest that dependency has been rising for many
years. However, alternative measures, such as periodic census
tabulations of the share of renters receiving some form of housing
assistance, indicate no change over some of the period. For
example, while inflation-adjusted HUD spending increased by 11.6
percent from 1993 to 1999, the U.S Census estimates that the share
of renters receiving some form of rent subsidy fell from 18.4
percent in 1993 to 17.8 percent in 1999.
such Census estimates are available for only those two years, so it
is difficult to determine the extent to which such trends may have
characterized the entire period under investigation. The shift
of HUD's assistance to the relatively more costly HOPE VI program
over that period of time may account for the difference. By
shifting resources to programs with higher costs per household
assisted, HUD could spend more but assist fewer eligible
Care Assistance. Public health
programs, particularly Medi-care and Medicaid, are
contributing to the growing dependence on government
programs. These programs were enacted in 1965 to provide
health care coverage for the elderly, poor, and disabled.
Combined, they provided coverage for close to 90 million
individuals in 2004 and spent approximately $441 billion in federal
dollars alone, consuming 20 percent of federal
spending in 2004.
provides health care coverage for those age 65 and older and for
certain disabled individuals. Medicare enrollment has increased
steadily since the program's enactment, increasing the number of
individuals dependent on the program for their health care. In
1970, an estimated 20 million individuals were enrolled in
Medicare. By 2003, the number of enrollees more than doubled,
reaching over 41 million. Moreover, in less than 10
years, there will be an unprecedented flood of new Medicare
enrollees as 77 million baby boomers begin to retiree.
enrollment also means increased pressure on the program to expand
benefits and services, not only to keep up with medical technology,
but also to counteract changes in supplemental coverage. While
Medicare is the primary source of health care coverage for these
populations, many enrollees have additional, supplemental sources
of coverage, such as employer-based retiree coverage for
benefits and services not covered by Medicare-most notably for
private prescription drug coverage. However, more employers are
deciding not to provide retiree coverage and/or are imposing
additional cost-sharing requirements on these populations. For
example, 66 percent of firms with 200 or more employees offered
coverage in 1988, compared to 34 percent in 2002.
trends place additional pressure on Medicare to fill in these
gaps and thereby create greater dependence on Medicare as the sole
provider of coverage to this population. In fact, recent efforts to
"reform" the Medicare program were overwhelmed by the demand for
more services, specifically prescription drug coverage-even
though almost half of all seniors had existing private prescription
drug coverage. Thus, efforts to control future dependence on
the program were thwarted.
the joint federal-state government health care program for the
poor, including the disabled and elderly, is also struggling
to cope with growing dependency, especially in recent years. In
2003, Medicaid had approximately 42 million individuals
enrolled. Somewhat different from Medicare,
Medicaid serves a diverse population of the poor that includes
children, adults, the disabled, and the elderly. There is also
diversity among states. Each state is able to establish its own
eligibility levels provided that they meet a minimum standard.
The majority of Medicaid enrollees are children, followed by
adults, the disabled, and the elderly.
if not all cases, the states are the sole provider of care and
service to these populations. This sole source of coverage creates
tremendous pressure on the state to ensure that needs are met.
Because of the diversity of the populations, the benefits and
services needed are also far-ranging. As with enrollment,
states are able to establish their own level of benefits provided
that they meet a minimum standard, and most states have
adjusted their benefit package beyond the minimum. While the
majority of enrollees is made up of children and adults, the
majority of spending on services is concentrated on the disabled
and the elderly. Medicaid accounted for 43 percent of all long-term
care spending, and these services consumed 36 percent of Medicaid
spending in 2003. In recent years, states have begun to
feel the consequences of the growing dependence on the program as
maintaining enrollment and benefit levels has proven
the consequences of greater dependency is its effect on spending.
Spending on both programs is skyrocketing and is projected to
get even worse. Over the next 10 years, Medicaid is expected to
cost close to $5 trillion in combined federal and state spending.
Medicare spending is expected to reach $766 billion by 2015.
Recent Congressional Budget Office estimates anticipate that the
two programs will consume between 5.7 percent and 11.5 percent of
gross domestic product (GDP) by 2030 and between 6.4 percent and
21.3 percent of GDP by 2050.
health care for the poor, elderly, and disabled is
unsustainable without real reform. Without change, there will be
far greater dependence on these public health programs and less
demand for private-sector solutions. This is clearly evident in
regard to long-term care services. Analysts have found that
Medicaid long-term care services essentially "crowd-out" the demand
for private long-term care insurance.
programs will continue to face more enrollees, increased
demand for new benefits and technology, and higher levels of
health care spending. To manage this growing dependency,
policymakers will be forced to make difficult decisions, such
as whether to limit enrollment, reduce and/or ration benefits,
or simply raise taxes. Only through reform can these public health
programs be transformed from programs of dependency into
programs of independence in which individuals, not the
government, are empowered to improve their lives and
Assistance. Even with the historic reform of welfare
in 1996, the welfare system is expensive and growing. In the 40
years since President Lyndon Johnson launched the War on
Poverty, the nation has spent over $8.5 trillion on
means-tested assistance: food, housing, medical care, and social
services for poor and low-income Americans. Welfare spending dwarfs
many other government expenditures. In recent years, for example,
the nation has spent $1.45 on means-tested welfare for every $1.00
spent on national defense. Despite such prolific spending,
throughout most of the period since the beginning of the War on
Poverty, most social problems have grown worse, not
Congress successfully reformed part of the welfare system to build
self-sufficiency. The conventional welfare system rewarded
non-work and non-marriage. By promoting dependence and
illegitimacy, it increased poverty, crime, and a host of
social ills. In 1996, Congress partially changed the direction of
welfare assistance by replacing the failed Aid to Families with
Dependent Children (AFDC) with Temporary Assistance to Needy
Families (TANF). Under TANF, many recipients are required to
work or engage in constructive activities that lead to
self-sufficiency as a condition of getting aid. Consequently, the
child poverty and welfare dependence rates have plummeted, and
employment among single mothers has skyrocketed.
However, welfare reform remains incomplete. Despite the success of
the reform, many the work-related aspects of welfare reform are
quite limited. Half of the 2 million adults on TANF rolls are idle,
collecting welfare without engaging in work or other constructive
activities. Moreover, closely related programs, such as food
stamps and public housing, do not include any meaningful work
continues to subsidize illegitimacy and penalize marriage. Today,
one child in three is born out of wedlock. Not surprisingly, the
welfare system for families is overwhelmingly a subsidy
system for single parents. Roughly three-quarters of the aid
to children through programs such as public housing, food
stamps, TANF, and the Earned Income Tax Credit (EITC) goes to
single-parent homes. In 2003, the nation spent over $150 billion in
means-tested aid to single-parent families. Overall, the
government spends $1,000 subsidizing single parents for every
$1 it spends trying to reduce illegitimacy and increase
erosion of marriage is the predominant cause of child poverty and
welfare dependence and a major factor in most of America's social
problems. The absence of marriage and fathers in the home has a
strong negative impact on almost all aspects of child development.
More than 80 percent of long-term child poverty occurs in broken or
these facts, Congress wrote two basic national goals into the 1996
welfare reform act: reducing illegitimacy and restoring marriage.
State governments were expected to use TANF funds to promote these
goals. They have received nearly $100 billion in federal TANF
dollars over the past seven years, but only about $20 million-a
minuscule 0.02 percent-has been spent on promoting marriage.
Despite the existence of many promising experimental pro-marriage
programs (mainly in the private sector), state welfare
bureaucracies have failed to implement any significant pro-marriage
agenda. As a consequence, the nation continues to run a welfare
system that actively penalizes rather than promotes marriage, with
devastating social consequences and continuing welfare
is expected to reauthorize TANF this year, and this is a crucial
opportunity for Members to expand and deepen the original reforms.
Reauthorization efforts should strengthen existing work
requirements by not continuing to reward idleness and dependence
through one-way handouts. The creation of federal work requirements
in TANF was a successful revolution in welfare, but it is far from
complete. When TANF is reauthorized, the states should increase the
percentage of adult recipients who are engaged in community service
work or supervised job search and increase the numbers of hours of
work required each week. Likewise, work requirements should be
established in food stamps and public housing. Able-bodied
non-elderly adult recipients should be required to perform
community service work, supervised job search, or
training as a condition of receiving aid.
of TANF funds should also be directed specifically at programs that
strengthen marriage and reduce illegitimacy. Congress should uphold
the Administration's efforts to have $300 million in TANF funds
allocated to voluntary programs that promote healthy marriages,
particularly among low-income couples. Such programs should include
education on the value of marriage for high-school students in
at-risk communities, public advertising campaigns,
pro-marriage counseling and relationship skills training for
unmarried parents at the time of a child's birth, and
premarital counseling for engaged couples. All participation in
marriage programs would be voluntary and would utilize existing
marriage-skills education programs that have proven effective in
decreasing conflict and increasing happiness and stability among
couples. These programs have also been shown to be effective
in reducing domestic violence.
pro-marriage initiative would not merely seek to increase marriage
rates among target couples; it would also provide ongoing
support to help at-risk couples maintain healthy marriages over
time. The plan would not create government bureaucracies to provide
marriage training. Instead, the government would contract with
private organizations that have successful track records in
providing marriage-skills education.
marriage penalties inherent in all means-tested welfare programs
should also be reversed. While it is not possible to eliminate
fully the anti-marriage bias in the welfare system, it is possible
to reduce it through programs such as the Earned Income Tax Credit
for married couples with children.
Income. Since the time of President Franklin
D. Roosevelt, the American retirement system has been
described as a three-legged stool consisting of government-paid
Social Security, employment-based pensions, and personal
savings. Regrettably, for about half of the workforce, the
reality of their retirement is closer to a pogo stick consisting
almost totally of Social Security. In large part due to
government policies, pension coverage is mainly limited to
employees of large companies, while few workers are able to save
enough for retirement.
1935, Social Security has served as the basis for most Americans'
retirement income. The program pays both a monthly check to retired
workers and benefits to surviving spouses and children under
the age of 18. (It also has a separately financed disability
program that is outside of the scope of this discussion.) Monthly
benefits are based on the indexed average of a worker's monthly
income over a 35-year period, with lower-income workers getting
proportionately higher payments and higher-income workers
proportionately less. As a result, lowest-income workers receive up
to about 70 percent of their pre-retirement income while
average-income workers receive about 40 percent-45 percent and
upper-income workers average about 23 percent.
the demographic forces that once made Social Security affordable
have reversed, and the program is facing a fiscal crisis. In order
to break even, Social Security needs to have at least 2.9
workers paying taxes for each retiree receiving benefits. In
1950, 16 workers paid the benefits of one retiree, but the current
ratio is 3.3 workers per retiree and dropping. Because the baby
boomers produced fewer children and are now nearing retirement,
that ratio will drop below 2.9 workers per retiree in 2017 and
continue to drop until it reaches close to 2.0 workers per retiree
in the 2030s.
This is a
problem because current retirees' benefits are paid from the
payroll taxes paid by today's workers. Since 1983, workers have
been paying more in payroll taxes than the program needed in
benefits. These additional taxes were supposed to build up and to
help finance retirement benefits for baby boomers. However, those
excess taxes were not saved or invested for the future. Instead,
they were spent to finance the government, and in return, the
Social Security "trust fund" received special-issue U.S. Treasury
bonds. When it comes time to repay those bonds, the money will have
to come from either higher taxes or massive borrowing.
Although the additional money that Social Security will need to pay
full benefits will be fairly low at first, by about 2027, the
program will need $200 billion per year (in 2005 dollars) more than
it will receive from its payroll taxes.
matters worse, about half of the American workforce has no
retirement program other than Social Security. These workers are
not covered by an occupational pension, and few have any
significant savings. To a large extent, they are dependent on
the government to provide their retirement income.
dependency is largely due to government policies. Social Security's
high tax rate, by soaking up money that could otherwise be
invested for the future, makes it much harder for lower-income and
moderate-income workers to accumulate any significant savings.
Taxes on interest and investment income further reduce the
incentive to save.
policies also discourage the growth of occupational pensions to
cover a higher proportion of the workforce. A host of
confusing and changing tax policies, including the Employee
Retirement Income Security Act (ERISA), imposes a regulatory burden
that especially discourages smaller employers from offering pension
plans. Over the past few decades, costs imposed by the ERISA and a
changing workforce have resulted in the closure of thousands
of traditional defined-benefit pension plans.
many larger employers have substituted defined-contribution plans,
such as 401(k) plans, these plans are also subject to burdensome
provisions designed to ensure that workers of all income
levels receive fair retirement benefits. Many smaller employers
either lack the resources to hire a good funds manager or, knowing
of ERISA's complex requirements, hesitate to offer their workers a
retirement plan for fear of accidentally violating one of the
Educational Subsidies. In 2005, a record number
of students and families will depend on the federal government for
financial aid for higher education. Programs under the Higher
Education Act of 1965 provide guaranteed loans, grants, and support
services to students and their families. In 2000, over half of
full-time undergraduates attending four-year public
universities and 67 percent of those at private four-year
institutions received aid under one of these programs. While
participation was higher among the poor, a quarter of
undergraduates from families with incomes over $100,000 received
the federal government will make over $116 billion available to
students in the form of loans, grants, and institutional aid under
the Higher Education Act: over $13 billion for voucher-like Pell
Grants and Supplemental Educational Opportunity Grants to poor
students; $1 billion in employment (work-study) subsidies;
$101 billion in Perkins Loans; $166 million in state matching
grants; $41 billion in guaranteed loans (the Federal Family
Education Loan Program); $13 billion in direct loans; and $43
billion in consolidation loans. Taxpayers will provide an
additional $2 billion for TRIO programs, fellowships, academic
scholarships, grants to universities for teacher education and
foreign language acquisition, and funds to institutions
serving large numbers of minority students.
the HEA the only source of government funding. Higher education
institutions receive billions of federal dollars for research
and contracts. At the state level, taxpayers gave $63 billion in
subsidies to higher education. Additionally, various tax
credits and deductions provide over $9 billion to mostly
middle-income and upper-income students.
Stafford loans" is a misnomer. All guaranteed loans are subsidized
to one degree or another. Taxpayers may not pay the interest on
"unsubsidized loans" as they do on the "subsidized loans," but they
do pay subsidies to banks to keep the interest rate artificially
low and to cover bank administrative costs. This year,
Americans will pay billions in federal tax money to subsidize
students, banks, and institutions of higher education. Ironically,
these subsidies are borne in large part by those who do not have a
college degree. Two-thirds of Americans do not hold a bachelor's
degree or higher. Those with such a degree earn an average of
$21,800 more per year, which tranlates to almost $1 million of
additional income in a lifetime.
increase in the number of Americans dependent on government higher
education programs has its disadvantages. While the research
is inconclusive, there is evidence that federal loans and tax
credits have contributed to the rise of tuition. Tuition and fees
at public and private four-year institutions have risen 38 percent
in the past 10 years. In the past 23 years, the cost of a public
four-year college education has increased by 202 percent.
affects students and their families. Such programs encourage
borrowing rather than saving. A Hart Research Associates poll found
that half of parents surveyed had saved less than $1,000 for
college. High loan limits-$23,000 for dependent
undergraduates, $46,000 for independent students, and $138,500
for professional students-encourage students to take on large
amounts of debt and discourage smart shopping. The National
Commission on the Cost of Higher Education acknowledged that high
loan limits and an increasing preference for borrowing rather than
saving had contributed to the sharp increase in student
can promote a sense of entitlement among students and
special-interest groups who continuously push Congress to increase
loan limits and enact new programs. Forbes writer Ira
Carnahan puts it this way:
past three decades the Federal Government has poured three-quarters
of a trillion dollars into financial aid for college
students.… So why is college getting less- not
more-affordable? One answer seems to be that all those federal
dollars have given colleges more room to jack up tuition.…
The more cash the government pumps into parents' pockets, the more
the schools siphon from them.
and Agricultural Services. Much of the rapid increase
in "rural and agricultural assistance" dependency is rooted in farm
subsidy programs. A multitude of farm subsidy programs-such as
direct payments, countercyclical payments, market assistance loans,
and non-recourse loans-generally work together to compensate
farmers for low crop prices. Conservation payments pay farmers to
initiate conservation projects or simply to stop farming their
land. Export subsidies effectively lower the price of American
products so they can undercut international competitors.
of farm subsidies often describe farmers as impoverished-as victims
of unpredictable weather and large global economic forces. In
reality, farmers are doing quite well. The average farm has a net
worth of $564,000 (double the national average household net worth)
and an annual income of $64,347 (17 percent above the national
average household income), despite being located in a rural area
with significantly lower costs of living. By no means a teetering
industry, the failure rate for farms is just one-sixth of the rate
for non-farm businesses.
subsidies have become America's largest corporate welfare program.
Two-thirds of farm subsidies are distributed to just 10
percent of farms, most of which have annual household incomes
over $130,000. In contrast, the bottom 80 percent of farmers
receive just one-fifth of the subsidies. If farm policy were truly
designed to help poor farmers, Congress could guarantee every
full-time farmer in America an income of at least 185 percent of
the federal poverty line ($34,873 for a family of four in 2004) for
just $4 billion per year.
of need, farm subsidies are based on two factors. The first factor
is which crops are grown. Approximately 90 percent of all farm
subsidies goes to growers of just five crops: wheat, corn, cotton,
soybeans, and rice. Growers of most other crops are ineligible
for most subsidy programs, regardless of need.
second factor is the amount of crops grown, with those who plant
more crops receiving larger subsidies. This is where the economic
logic of farm subsidies falls apart. Subsidies are intended to
compensate farmers for low prices that result from an oversupply of
crops, but granting larger subsidies to those planting the most
crops only encourages farmers to plant more crops, leading to
even lower prices and calls for larger subsidies. Then, while
paying some farmers to plant more crops, the Conservation
Reserve Program pays other farmers to plant fewer crops. One
analyst accurately describes U.S. farm policy as "one foot on the
brake, one foot on the accelerator."
Congress acknowledged the failures of centrally planned
agriculture. The 1996 Federal Agricultural Improvement and
Reform Act (known as the Freedom to Farm Act) was designed to phase
out farm subsidies by 2002 and bring a free market back to
agriculture. After spending just $6 billion on farm subsidies in
1996, Congress overreacted in 1998 to a temporary dip in crop
prices (resulting from the Asian economic slowdown) by passing the
first in a series of annual emergency bailouts for farmers. By
2000, farm subsidies hit a record $30 billion. Farmers quickly grew
accustomed to massive government subsidies, and competition
for the farmer vote induced a bipartisan bidding war on the eve of
the 2002 elections. Lawmakers gave up on reform and enacted the
largest farm bill in American history, projected to cost at least
$180 billion over the following decade. Despite escalating
costs and negative economic effects, farm subsidy programs are
now the overwhelming preference of Congress and the White
point to farm dependency continuing. Policymakers see farm
subsidies as the solution to-rather than a significant cause of-low
crop prices. Expensive disaster payments are doled out if the
weather is bad (crops are destroyed) or good (crop oversupply
lowers prices). Finally, farm subsidies have created an entitlement
mentality among a class of farmers who will likely punish any
elected officials who pursue reform. As a result, there are no
plans to move farmers toward self-sufficiency.
the Dependency Index Is Constructed
this initial analysis, the data were examined further to identify
the components that contributed to variability. Short-term programs
were eliminated, as well as relatively small programs that
required little funding. The remaining expenditures were
summed on an annual basis and divided into the five major
lists the individual components of each category. The program
titles in this table are those used by the Office of Management and
Budget for budget function and subfunction in the budget accounting
collected for federal fiscal years 1962 through 2004. Deflators
centered on 2000 were employed to adjust for changes in the general
price level, thus producing a series for each program in Table 1 of
real or inflation-adjusted values.
are intended to provide insight into phenomena that are so detailed
or so complicated that simplification through arbitrary but
reasonable rules is required for obtaining anything other than a
rudimentary understanding. Thus, the Consumer Price Index
(CPI) of the Bureau of Labor Statistics is a series based on an
arbitrarily selected "basket of goods" that the Bureau surveys
periodically for changes in price. The components of this
basket are weighted to reflect their relative importance to overall
price change, which results, for example, in energy prices being
more important than clothing prices. Multiplying the weight times
the price produces a weighted price for each element of the CPI,
and summing up all of the weighted prices produces (roughly) the
of Dependency generally works the same way. The raw (or unweighted)
value for each program (i.e., the yearly expenditures on that
program) is multiplied by its weight. Summing up these
weighted values produces the Index value for that year. (See Table
weights, which sum to 100 percent, are "centered" on the year
1980. This means that the weighted values for the Index components
will sum to 100 for 1980, giving the Index a reference year from
which all other Index values will be evaluated.
1980 was chosen because of its apparent significance in the
history of American political philosophy. Many students of American
politics believe that historians will view 1980 as a watershed
year in U.S. history. It may mark the beginning of the decline
of left-of-center public policy, which is based on the belief that
social systems fail without the guiding hand of government, and the
emergence of right-of-center challenges to these
certainly reflects such a watershed. Chart 7 plots the Index over
the period 1962 through 2004. The drift of the scores is clearly
upward over the entire period.
two plateaus in the Index: the first eight years of the 1980s and
the period 1994 through 2000. This drift of the data suggests that
policy change may have significantly influenced the growth rate of
the Index. The early 1980s saw the rate of growth of some domestic
programs slowed to pay for increased defense spending, and the
1990s saw significant policy changes in welfare and public housing,
all of which reduced the growth rate of the Index.
connects the Index to major public policy changes. It is hardly
surprising that the largest jump in the Index occurred during the
Johnson Administration following passage of the President's Great
Society programs. Not only did the Johnson Administration launch
Medicare and other health programs, but it vastly expanded the
federal role in providing and financing low-income housing. It is
somewhat more surprising that the Index jumped 127 percent
(from 33 to 75) under President Richard Nixon and President Gerald
Ford. However, during these years, Congress was funding and
implementing substantial portions of Johnson's Great Society
periods of more conservative public policy with respect to the
Index components stand out clearly in Table 3. The slowdowns in
spending increases during the Reagan years and after the 1994
elections produced two periods of slightly negative change in the
Index. These periods saw significant retreats from Great Society
goals, particularly in the nation's approach to welfare. The
return of budget surpluses during the last years of the Clinton
Administration led to significant increases in spending for all of
the components, particularly education and health care. Thus, the
Index has resumed growing at roughly the average pace of the past
of Covered Population
reflects the growth of federal government programs that
arguably crowd out or substitute for similar initiatives at
lower levels of government or within the organizations of civil
society. While Index values do not depend on the number of people
who receive support through these programs, that number
nevertheless sheds additional light on what the Index
the number of people enrolled or benefiting from the programs
listed in Table 1 between 1962 and 2004 were drawn from a
variety of public sources. A significant effort was made to
eliminate duplicate enrollments. For example, many people who
receive food stamps also receive their medical services through
Medicaid. Despite this effort, duplicates undoubtedly
remained, and an arbitrary reduction of 5 percent in each year was
imposed to account for this undetected double counting.
shows the annual number of program participants from 1962 through
2004. On the eve of the Great Society programs, some 18 million
people received assistance through the programs listed in Table 1
that existed at the time. Today, 52.6 million people (18 percent of
the total U.S. population) receive some level of assistance
through the programs covered by the Index.
income and non-financial support among program participants has
accompanied the expansion of the numbers of people receiving
assistance. As Chart 9 shows, per capita support (both
financial and non-financial) stood at about $7,400 in 1966. By
2004, this support had grown to nearly $27,000.
Data in the Index and complementary estimates of program
populations raise concerns about the ability of local governments
and civil society organizations to provide aid and other
assistance. They also raise a traditional republican concern about
the long-term viability of political institutions when a
significant portion of the population becomes dependent on
government for most or all of its income.
of six Americans (18 percent) may or may not be a sufficiently high
number to trigger this concern. However, this percentage grows to
25 percent when the number of federal and state employees is added
to the population of Americans receiving aid through Index
programs. In 1962, the sum of these two categories (Index program
participants and government employees) stood at 26.9 million.
As Chart 10 shows, the estimate had grown to 75.6 million by the
end of 2004, an increase of 181 percent since the early 1960s. This
percentage growth is three times the U.S. population growth
rate over the same period and twice the growth rate of the
population age 65 and above.
11 shows, the annual growth rates of federal and state government
employment have generally subsided since the 1960s and 1970s.
However, the growth rate of state government employment has been
positive for all but three years out of the past 39. Federal
employment grew during the military buildup of the 1980s, and the
military downsizing following the breakup of the Soviet Union and
its empire led to declining federal employment throughout the
policies appear to matter in the growth of the Index of Dependency.
Its rapid increase in the 1960s and 1970s marked a commitment by
the federal government to solve local social and economic
problems that had previously been the responsibility of local
governments, civil society organizations, and families. As Chart 12
shows, the annual growth rate in the sum of government employees
and the population covered by Index programs grew dramatically,
even if one accounts for the military buildup during the Vietnam
7 and 12 both show, the 1980s and 1990s generally witnessed much
slower growth in the Index. Indeed, if the period 1989 through 1993
reflected the policies of the periods 1981 through 1988 and 1994
through 1999, the Index would have decreased in value. However,
rather than fall, the Index appears to have regained the growth
rates it maintained in the Carter and Bush years.
this reinvigorated Index appears to owe its newly found vitality
mostly to the spending opportunities provided by budget
surpluses rather than to dramatic reversals in conservative public
policy, it is likely that several key policy debates of the next
few years (e.g., welfare reform, federal support for higher
education, and health care reform) will determine the Index's rate
of change for the next decade, if not well beyond.
W. Beach is John M. Olin Fellow in Economics
and Director of the Center for Data Analysis at The Heritage
Foundation. A number of policy personnel at The Heritage
Foundation contributed significantly to this year's Index
of Dependency. Margaret Hamlin managed the numerical components.
Spencer Anderson coordinated the process of updating the policy
sections. Stuart Butler set the tone and focus of this year's
section of the Index of Dependency was prepared by Matthew
Spalding, Ph.D., Director of the B. Kenneth Simon Center for
American Studies at The Heritage Foundation.
Blackstone, Introduction, Section 4, "Of the Countries Subject to
the Laws of England," in Commentaries on the Laws of England
Jefferson, Notes on the State of Virginia, Query XIX
Wilson, Lectures on Law, "The Legislative Department"
Franklin, "On the Price of Corn and Management of the Poor,"
November 1766 (emphasis added).
D. Roosevelt, "Message to the Congress of the United States on the
State of the Union," January 11, 1944.
Johnson, "To Fulfill These Rights," commencement address at Howard
University, June 4, 1965.
Madison, The Federalist No. 10, 1787.
Tocqueville, Democracy in America, Vol. 2, Part 4, Chap. 6
section was written by Ronald D. Utt, Ph.D., Herbert and Joyce
Morgan Senior Research Fellow in the Thomas A. Roe Institute for
Economic Policy Studies at The Heritage Foundation.
section was written by Nina Owcharenko, Senior Policy Analyst for
Health Care in the Center for Health Policy Studies at The Heritage
Management and Budget, Budget of the United States Government,
Fiscal Year 2006 (Washington, D.C.: U.S. Government
Printing Office, 2005), p. 362, Table S-10, at
(June 8, 2005). The calculation does not include $4 million in
Walker, Comptroller General, U.S. Government Accountability Office,
"Saving Our Future Requires Tough Choices Today," presentation at
The Heritage Foundation, February 10, 2005.
for Medicare and Medicaid, "Medicare Enrollment: National Trends,
1966-2003," modified September 17, 2004, at
(June 6, 2005).
Kaiser Family Foundation and Health Research and Educational Trust,
Employer Health Benefits 2002 Annual Survey (Menlo
Park, Calif., and Chicago: 2003), p. 144.
discussion of the Medicare prescription drug legislation, see The
Heritage Foundation, "Center for Health Policy Studies," Web site,
Management and Budget, Budget of the United States Government,
Fiscal Year 2005 (Washington, D.C.: U.S. Government
Printing Office, 2004), p. 148, at
www.gpoaccess.gov/usbudget/fy05/browse.html (June 8,
Commission on Medicaid and the Uninsured, "The Medicaid Program at
a Glance," January 2005, at www.kff.org/
(June 6, 2005).
Leavitt, "FY 06 Budget for the Department of Health and Human
Services," testimony before the Committee on Energy and Commerce,
U.S. House of Representatives, February 17, 2005, at
www.hhs.gov/asl/testify/t050217.html (June 6,
Budget Office, The Budget and Economic Outlook: Fiscal Years
2006 to 2015, January 1005, p. 55, at
(June 6, 2005).
Budget Office, "Long Term Budget Outlook," December 2003, p.
R. Brown and Amy Finkelstein, "The Interaction of Public and
Private Insurance: Medicaid and the Long-Term Care Insurance
Market," National Bureau of Economic Research Working Paper
No. 10989, December 2004, at www.nber.org/papers/w10989
(June 6, 2005; subscription required).
section was written by Melissa G. Pardue, Policy Analyst in
Domestic Policy Studies at The Heritage Foundation.
section was prepared by David C. John, Research Fellow in Social
Security and Financial Institutions in the Thomas A. Roe Institute
for Economic Policy Studies at The Heritage Foundation.
section was written by Krista Kafer, former Senior Policy Analyst
for Education, and Jennifer A. Marshall, Director of Domestic
Policy Studies, at The Heritage Foundation.
Department of Education, National Center for Education Statistics,
"Financial Aid," at nces.ed.gov/fastfacts/
display.asp?id=31 (June 6, 2005).
Budget and Management, Budget of the United States Government,
Fiscal Year 2006-Appendix (Washington, D.C.: U.S. Government
Printing Office, 2005), pp. 356-381, at
(June 6, 2005). Figures include matching grants.
Department of Education, "Fiscal Year 2005 Congressional Action,"
May 12, 2005, at www.ed.gov/about/overview/
budget/budget05/05action.pdf (June 6, 2005).
Kane, Peter Orszag, and David L. Gunter, "State Fiscal Constraints
and Higher Education Spending: The Role of Medicaid and the
Business Cycle," Urban Institute Discussion Paper No. 11,
May 22, 2003, at www.urban.org/UploadedPDF/
310787_TPC_DP11.pdf (June 6, 2005).
Management and Budget, Analytical Perspectives, Budget of
the United States Government, Fiscal Year 2006
(Washington, D.C.: U.S. Government Printing Office, 2005),at
www.whitehouse.gov/omb/budget/fy2006/pdf/spec.pdf (June 6,
Student Loan Providers, "Student Loan Facts: 50 Million Students
Served," at www.studentloanfacts.org/loanfacts/
fastfacts/50milstudents.htm (June 6, 2005).
Wirt, Susan Choy, Stephen Provasnik, Patrick Rooney, Anindita Sen,
and Richard Tobin, The Condition of Education 2003
(Washington, D.C.: U.S. Department of Education, National Center
for Education Statistics, 2003), p. 81, at
nces.ed.gov/pubs2003/2003067.pdf (June 6, 2005).
Cheeseman Day and Eric C. Newburger, "The Big Payoff: Educational
Attainment and Synthetic Estimates of Work-Life Earnings," U.S.
Bureau of the Census, P23-210, July 2002, at
www.census.gov/prod/2002pubs/p23-210.pdf (June 6,
on Education and the Workforce, U.S. House of Representatives, "The
Skyrocketing Cost of Higher Education," October 10, 2003, at
factsheetcost101003.htm (June 6, 2005).
Wallace, "College Tuition Scare: Don't Believe All the Hype,"
FoxNews.com, September 26, 2003, at
www.foxnews.com/story/0,2933,98358,00.html (June 6,
Council on Education, Straight Talk About College Costs &
Prices: The Final Report and Supplemental Material from the
National Commission on the Cost of Higher Education (Phoenix,
Ariz.: Oryx Press, 1998), p. 11.
Carnahan, "Back to School: Why Federal College Aid Makes School
More Expensive," Forbes, September 1, 2003.
section was written by Brian M. Riedl, Grover M. Hermann Fellow in
Federal Budgetary Affairs in the Thomas A. Roe Institute for
Economic Policy Studies at The Heritage Foundation.
this information originally appeared in Brian M. Riedl, "Top 10
Reasons to Veto the Farm Bill," Heritage Foundation
Backgrounder No. 1538, April 17, 2002, at
"Another Year at the Federal Trough: Farm Subsidies for the Rich,
Famous, and Elected Jumped Again in 2002," Heritage Foundation
Backgrounder No. 1763, May 24, 2004, at
Bovard, "The 1995 Farm Follies," Cato Institute Regulation,
Vol. 18, No. 3 (Summer 1995), at www.cato.org/pubs/
regulation/regv18n3/reg18n3-bovard.html (June 8,
data for the Index of Dependency were taken from Office of
Management and Budget, Historical Tables, Budget of the
United States Government, Fiscal Year 2003 (Washington, D.C.:
U.S. Government Printing Office, 2002), and Budget of the
United States Government, Fiscal Year 2003 (Washington, D.C.:
U.S. Government Printing Office, 2002).
histories of this republican concern, see Bernard Bailyn, The
Ideological Origins of the American Revolution (Cambridge,
Mass.: Harvard University Press, 1967), and Gordon S. Wood, The
Creation of the American Republic, 1776-1787 (Chapel Hill,
N.C.: University of North Carolina Press, 1969).