Americans Unprepared for Consequences of Freewheeling Federal Spending

COMMENTARY Budget and Spending

Americans Unprepared for Consequences of Freewheeling Federal Spending

Jan 23, 2023 3 min read
COMMENTARY BY
Rachel Greszler

Senior Research Fellow, Roe Institute

Rachel researches and analyzes taxes, Social Security, disability insurance, and pensions to promote economic growth.
Support dropped to less than half of Americans—48%—if a federal government-paid family and medical leave program would cost them $450 per year in taxes. alfexe / Getty Images

Key Takeaways

Recent polls find that a strong majority of Americans support government-provided things—but once the cost is revealed, their support plummets.

Supporting such expansive programs without even knowing the costs seems irrational.

Policymakers need to treat taxpayers’ money like their own and the federal budget like their household budgets.

While waiting at a red light one day, my then-4-year-old son piped up from his car seat, “Mommy, the government should give everyone a dolphin.”

Yikes. How did my 4-year-old come to think of the government as a fairy godmother that could create things out of thin air?

Unfortunately, it’s not just 4-year-olds, but also 40-year-olds who increasingly think government spending comes out of nowhere and is without consequence.

Recent polls by the Cato Institute find that a strong majority of Americans support government-provided things—but once the cost is revealed, their support plummets. Yet all too often, government programs are sold to the public without a per-household price tag.

Take paid family and medical leave: A 2018 Cato poll found that 74% of Americans were in favor of a federal government-paid family and medical leave program. Support dropped to less than half of Americans—48%—if the program would cost them $450 per year in taxes. (That’s less than the Congressional Budget Office’s estimates, which implied a cost of at least $550 per year for median-wage workers).

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Support plummeted to 29% if a national paid family leave program would mean fewer benefits, less vacation or a lower likelihood of promotions for women—all outcomes we can expect from most paid family leave programs currently being proposed in Washington.

And only 21% of people supported a national paid family leave program if it would mean less spending on education, Social Security and Medicare—also likely outcomes of such programs.

Social Security and Medicare are prime examples of government programs that gained passage and support based on their promised benefits with little regard for their costs.

Consequently, both programs have amassed $73 trillion in unfunded obligations. That’s equal to $560,000 per household. And it’s a safe bet that few people would support preserving them in their current forms if it meant paying an extra $560,000 on top of the Social Security and Medicare taxes they already pay.

A more recent 2022 Cato poll found that 64% of Americans support the federal government forgiving up to $10,000 in federal student loans for people who make less than $150,000 per year and married couples who make less than $300,000. But when told about the actual costs, support cratered. Only 36% of respondents supported loan forgiveness if it would raise their taxes. At a cost of roughly $500 billion, it almost certainly would.

If forgiveness were to lead to other likely consequences, such as encouraging colleges to raise their prices and causing more employers to require college degrees, only about a quarter of Americans would support it.

Supporting such expansive programs without even knowing the costs seems irrational. We don’t buy groceries or cars or take vacations without knowing the price and the tradeoffs.

The disconnect between how Americans handle their own personal finances—where buying an expensive home and failing to pay the mortgage will land you on the streets—and their views of government spending has some logical rationale, though.

The hidden consequences of excessive government spending and exploding debt—things like a smaller economy, lower incomes and slower technological growth—aren’t apparent because we only know what we have experienced and not what could have been.

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Additionally, the future unresolved consequences of that spending and debt are decidedly negative: How could over $230,000 of total government debt per household—debt that must eventually be repaid—not burden younger and future generations?

Yet those consequences are similarly unapparent because we don’t know when our patently unsustainable fiscal situation will become practically unsustainable nor what and how severe the consequences will be.

Japan’s excessive debt led to decades of slow and no growth while Greece and Puerto Rico’s large debts led to sudden and severe fiscal crises that required significant austerity measures and bailouts in Greece and a bankruptcy process in Puerto Rico.

Low interest rates and a relatively strong economy have eased the current burden of excessive U.S. government spending and exploding debt, but at the cost of generations of Americans who’ve been conditioned to believe in a false reality that will eventually come back to bite them.

Policymakers need to treat taxpayers’ money like their own and the federal budget like their household budgets. They can start by looking at solutions like The Heritage Foundation’s Budget Blueprint, which provides nearly 200 recommendations on how policymakers can balance the federal budget, reduce the government’s drain on household incomes and help promote fiscal sanity—for 4- and 40-year-olds alike.

This piece originally appeared in ArcaMax