The great chronicler of early America, Alexis de Tocqueville, speculated, “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” Alexander Hamilton (an infantryman and economist I greatly admire) called debt a “natural disease of all governments.” Given the long observation of these problems, it would be surprising if we could not today identify a good many folks who rely on government largesse in lieu of hard work. Gov. Mitt Romney even went so far as to claim this as a source of electoral defeat. I am no political strategist, so I don’t know if making these sorts of statements is wise politics, but I am afraid that the folks getting the "gifts" he spoke of are not really who he thinks they are. There is adequate data on the matter, which is in need of parsing on these pages.
In mentioning “Scooby Snacks” last week, I was referring to people or groups who get something from the government for nothing. There may be plenty of people who get too much for what they do for government, but that is for another column. Here, we’ll focus on the “something for nothing” crowd. These include households, business and unions, which I will discuss in order.
Total direct federal spending on the poor was $927 billion last year, with states kicking in a roughly equal amount. More than half of this amount is health care costs (Medicaid). There are other, smaller programs tucked away in other federal agencies. We’ve been winterizing homes and subsidizing poor (and rich) people’s telephone service for a long time. It must be admitted that the patchwork of anti-poverty programs is inefficient, prone to fraud and populated by many who are bilking the system. I don’t know how big the problem is, but if we were, for example, to end all pure welfare payments (Temporary Assistance to Needy Families), we could balance the budget for six weeks each year. There is more to our problems.
The federal government also provides Scooby Snacks to business. The home construction industry, whose customers buy their goods tax-free and deduct the cost of local taxes from their federal income, reap about $100 billion a year through the home-mortgage deduction. Then there’s the farm subsidy of more than $35 billion a year, and more than $70 billion on all other forms of direct business subsidies. All of this is long before the TARP and stimulus, which was a one-time gift of several hundred billion dollars to businesses. Unions, too, receive huge subsidies, most especially through federal efforts to stabilize pension funds. Moreover, state and local governments are far larger culprits, and tax abatements in many communities represent half their annual budget.
There are plenty of folks who get “something for nothing” from other taxpayers. The truth is, it is ultimately most of us. Soon we must have a serious, honest and fact-laden talk about government distribution of taxpayer money. We cannot afford to do otherwise.