The Wall Street Journal has a poorly done front-page story this morning trying to make the case that the U.S. has become a welfare state.
As evidence, the paper points to the percentage of households where a member receives some kind of government benefits. That number has jumped from 30 percent to 44 percent over the last quarter of a century. Wow, nearly half of the country is on the dole!
That’s the impression the Journal would like you to get. You can tell that by the holes in the story.
For one, we’re not told how that 44 percent breaks down. How many are on Social Security? How many are on food stamps or Medicaid? How many get veterans benefits (that’s not even mentioned in the piece somehow)? Do, say, subsidized Stafford college loans count as government bennies? If so then your Audit Seattle bureau is a dirty freeloader! But we’re not told any of this. Those distinctions matter.
Second, the Journal fixes most of the blame on the expansion of government programs. It mentions the aging population briefly, but doesn’t quantify it. There’s been about a 20 percent to 25 percent rise in the percentage of retirement age people over the last quarter century. Glaringly, it doesn’t mention income inequality at all. The people at the bottom of society have fallen behind during that time frame while most (58 percent) of the income gains of the last thirty years have gone to the richest 1 percent.
As of the 2004 Census, most of the country—the bottom 60 percent—earned five percent less than it did twenty-five years earlier, according to the Times.
So how many get Social Security, which, after all, is an insurance program funded by years of regressive (or at least non-progressive) tax payments? The Census says 29 percent. That’s funded specifically by the payroll tax. Another five percent get veterans or unemployment benefits.
How many get means-tested welfare payments like school lunches, Medicaid, and food stamps? Twenty-four percent. That should have been broken out.
Third, we don’t find out how much money these benefits are worth. How much does the average household on benefits receive? That’s a pretty big hole in a story about how this causes structural deficits.
And what percentage of individuals receive benefits? The household number makes this look larger than it really is—though I’ll point out that that number is what the government itself uses. If your kid gets free lunch, then your household gets counted even though you and your husband didn’t get any yourselves. If your grandpa lives with you, you get lassoed in with the Social Security households.
Most problematically, though, the story doesn’t mention the fact that all these benefits were in place in 2008, but the deficit in that first year of recession was hardly in the trillions. It was $438 billion, or 2.9 percent of GDP. A year earlier, the deficit was just $161 billion, or 1.2 percent of GDP. All these programs were in place then (though unemployment benefits hadn’t then been temporarily extended).
In other words, the recession is to blame for most of the deficit. And if you think the economic misery of the last three years has been bad, try to imagine what it would have looked like without these programs. You’d have had rioting in the streets.
The spread of entitlements is a real story—a huge one. But context is critical.