AP/File
Under President Nixon and Vice President Ford (shown here during the 1974 State of the Union address), the share of total personal income coming from government soared from 7.6 to 11.9 percent. Now, it stands at 18.0 percent.
America’s welfare state accelerates
By Laurent Belsie | 06.26.09
Perhaps in the next few months, the US economy will turn a corner. The “new normal” will be up, or at least flat, rather than down. Americans will breathe a sigh of relief that they survived the Great Recession – or whatever we decide to call this period.
But something else is happening far less visibly. The creep of the welfare state is accelerating.
One way to measure this is to compare the share of personal income that comes from government payments, like Social Security, Medicare, and unemployment insurance. In the May data, which the Commerce Department reported Friday, that share reached a record 18 percent, up from 16 percent in January.
That means that for every dollar Americans earned last month, 18 cents came courtesy of Uncle Sam. That’s the highest share in 50 years of federal record-keeping. At the same time, the share of total personal income from private-sector paychecks has reached a new low: 43 cents.
Do the math
To some extent, this phenomenon is mathematical. Total wages and salaries usually doesn’t grow very much in recessions because fewer people are working. In the first quarter, they actually fell from a year ago – the first year-over-year decline since 1958. At the same time, governments tend to boost spending in recessions.
May’s increase in government benefits was especially high because of one-time payments. Strip them out and May comes in with the second-highest share on record after April, which was at 16.9 percent.
Demographics plays a big role, too, as America’s growing share of retirees begin to draw on Social Security and other benefits.
Government’s growing role
But none of this fully explains the long, slow upward creep of the welfare state. In May 1959, government benefits accounted for just over a nickel (5.7 cents) of each dollar Americans earned, while private-sector wages and salaries accounted for 54.8 cents. In May 2000, they were 12.6 and 47.7 cents, respectively. Today, they’re at 18.0 and 43.1 cents.
Presidents who start in recessions and end in prosperity can see those trends reverse. Under Reagan, government’s share fell from 11.9 to 11. 2 cents; under Clinton, it plunged from 14.0 to 12.7 cents. But they’re often followed by those who bump up the levels to new highs when a new slump hits, such as Nixon/Ford (7.6 to 11.9 cents), George H.W. Bush (11.2 to 14.0 cents), and George W. Bush (12.7 to 16.0).
Which kind of president will Obama be?
If the economy rebounds and he keeps a reasonable rein on government spending, he could look like a responsible husbander of government resources, at least by this measure. If the economy continues to scrape along the bottom for months on end – or it rises only to fall later under his watch – the final tally could look much worse.
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Comments
2. Marid | 06.28.09
Interesting how the “Welfare State” is money that we give to people mainly to help them pay living costs, while money “Subsidies” that we give to businesses and Corporations is glossed over or completely left out.
An interesting take on this perspective is “Free Lunch” by David Caye Johnston. For poor people is Welfare, for Rich people is subsidy, hmmmmmm.
3. Joe Bonnie | 06.29.09
Some welfare recipients are farmers through subsidies such as ethanol, major government contractors like Lockheed Martin, and major bankers such as AIG. Also, consider the amount in the federal civil service and the military, as well as the retirees drawing a federal pension. I wonder if the 18% takes into account the government contractors salaries.
4. Aggie | 06.30.09
In these discussions, as well as those by reporters, please distinguish between farmers, mostly small and often not making any money, and what you really mean, agribusiness, that is, huge corporate owned businesses, who are the ones with lobbyists and well-connected in Washington, to demand and get subsidies. Big business, big banking, and Big agriculture are the problem.
The Dept. of Agriculture pays out special funds first to the biggest, and if any change is left, it is a pittance for the poor farmer, and guaranteed to keep him that way.
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1. S. Sandlin | 06.28.09
One thing I would remind the author is that the social security we retirees are are getting each month was paid for by–guess who–us, individually, and not the government. And the only reason social security is in such dire straits isn’t because of any so-called “welfare state” and the government not having enough to put into the fund, but, rather, what was supposed to be a nest egg for every wage earner upon their retirement, became a cookie jar for one administration after another. Oh, and that goes for Clinton, too: my gross was taxed before social security was taken out of my paychecks but, after Clinton came in to office, it’s being taxed again, now that I’m receiving it. There’s nothing about “faring well” from the so-called government’s largesse in this country: we already paid for it. And Obama is tweaking the same pot as best he can which is why retirees will no longer have a cost of living increase for the next three years. However, if the administration wants to get rid of social security altogether, just dump it on the stock market like Bush wanted to do.