6/15/2011 12:52 PM ET|
A big boom in government handouts
Nearly 20 cents of every dollar of disposable income comes from the government, often in the form of Social Security, Medicare or unemployment benefits.
Government social benefits accounted for almost 20% -- or 20 cents of every dollar -- of Americans' disposable income in March, a figure that's been growing amid a weak economy, stubbornly high unemployment and an aging population. As recently as the 1980s, that figure was closer to 12% or 13%, according to the U.S. Bureau of Economic Analysis. "That (20%) is a pretty big chunk of what people have as their disposable income," says Chris Christopher, economist at IHS Global Insight.
Government benefits -- also called transfer payments -- are made to citizens by federal, state and local governments through programs such as Social Security, Medicare, unemployment insurance and disability insurance.
Not surprisingly, the recession has accelerated Americans' dependence on government transfer payments. In this sputtering job market, many Americans are getting most, if not all, of their income from unemployment benefits. "The economy has been weak for the last three or four years, so more people are collecting unemployment benefits, and they're collecting them for longer," says Russ Koesterich, iShares global chief investment strategist and the author of "The Ten Trillion Dollar Gamble."
While the Great Recession can be blamed for the relatively recent spike in transfer payments as a proportion of disposable income, it doesn't account for the general upward trend seen since the late 1950s, the earliest data available from the Bureau of Economic Analysis. In January 1959, government social benefits accounted for about 6.7% of disposable income, on average. Twenty years later, that figure had jumped to almost 13%.
An aging populace has a lot to do with the overall surge in the level of transfer payments, experts say. As baby boomers age and retire, a larger proportion of the population will receive Social Security benefits and Medicare coverage, programs that are becoming increasingly costly.
If the economy fails to improve as quickly as economists hope, dependence on government support could increase even more, says Christopher, with transfer payments possibly breaching 22% or 23% of Americans' disposable income. "There are so many things that play a role in this, but as a percentage of disposable income, (transfer payments) aren't going down," he says. "If the economy doesn't keep getting better, especially on the employment front, things could get a lot worse."
While Americans are more dependent on the government than they were 20 or 30 years ago, how and when to wean consumers off government subsidies is a complex and delicate matter. "You still have a fairly fragile consumer, largely because of the labor market," Koesterich says. A host of other head winds confront Americans as well. For hourly workers, wages are growing below the rate of inflation, and many consumers are carrying far too much debt relative to their incomes, he says.
"The key point is that you're somewhat restricted in the short term with how much you want to be cutting back on spending, given this dependency," Koesterich says.
Spending more on entitlements might be a tough pill to swallow for taxpayers, who are already saddled with trillions of dollars in government debt, but experts fear sharp cuts could derail economic growth. But, budget battles in Washington and the looming debt ceiling have underscored the need to cut government spending and get the national debt under control. Add to that worries that bond investors could start demanding higher interest rates on Treasury bills, and the future of government social benefits is murky, at best.
"The paradox is that long term, it's not sustainable," Koesterich says. "But in the short term, how do you get out of this without creating yet another head wind for the U.S. consumer?"
This article was reported by Meg Handley for U.S. News & World Report.
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I don't see how working for over 45 years and contributing into these funds my whole life can be considered a handout. Tell you what, just give me what I put into them back, even without the interest, and we'll call it even. If I got that, then I could actually retire instead of working until I was 70......
Just wait, you'll be older too. I guarantee it.
Get rid of the Federal Reserve!! The Federal Reserve IS NOT PART OF THE US GOVERNMENT!! It is NO MORE FEDERAL, than Federal Express.
The Federal Reserve Act was passed into law, illegally in 1913, while many of our law makers were not able to vote on it.
Our president, at that time was Woodrow Wilson. When Woodrow Wilson was leaving the White House after his pesidency, he said this: (Look it up!)
"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men." -Woodrow Wilson
He was talking about the FEDERAL RESERVE!! Look it up for yourself!! This is one of OUR PRESIDENTS, admitting that he made a HUGE MISTAKE!! He was tricked, and so was the rest of our lawmakers!!
The Federal Reserve Act is UNCONSTITUTIONAL..... IT WAS PASSED, ILLEGALLY!!!
Look it up!! Research it!! It will piss you off!!
Once you do the research, and you are mad as hell, that our country has been hi-jacked, then you can do something to change it.
What can you do to change it??
EDUCATE people about the ILLEGAL FEDERAL RESERVE ACT, and vote for Ron Paul in 2012. Ron Paul is the ONLY congressman who is willing to take on the Federal Reserve! Ron Paul is NOT a REPUBLICAN OR DEMOCRAT, HE IS AN AMERICAN who is trying to save America!!
I am a disabled Army veteran... PLEASE, help me save America.
Neither Social Security nor unemployment benefits qualify as "government handouts." Folks have bought into those systems over the course of many years of hard work, and are rightfully being paid what is owed to them by those systems.
Example of a government handout: An illegal immigrant enters the U.S. either pregnant, or soon-to-be pregnant. As quickly as they calve, they apply for benefits for the new-by-birth U.S. Citizen, and are granted them. That's a handout.
I don't know about other Baby Boomers, but I can't afford to retire and take advantage of Social Security, Medicare, etc. I plan on working until they pry my cold, dead fingers off my keyboard. So, based on that, and the fact that a lot of other Baby Boomers that I know are in the same boat because of the economy, I don't see how we're contributing to the deficit!!
Additionally, those "entitlements" come from monies that I've had taken out of my paycheck since I started working over 45 years ago.....the money they took from MY paycheck enabled another senior citizen to survive.....now it's my turn. Plus, if the government hadn't kept "borrowing" money from the SS accounts....we wouldn't have the problem of not having enough money to support our older people! They kept putting in IOU's, but never paid them back!! So, don't blame the Baby Boomers for the lack of money in the Social Security accounts. And, as for Medicare....if they'd hire enough people to check on fraud, etc., we wouldn't be having problems with Medicare either. There's so much fraud involved and not enough people in Government to follow up on it....what do you expect?
The paradox is that long term, it's not sustainable," Koesterich says. "But in the short term, how do you get out of this without creating yet another head wind for the U.S. consumer....
You mean the consumer of today, because the unborn citizens (who will be footing this bill) don't get a say so, just $14T of debt.
YOU BE HAPPY IT IS THERE, IF THE TIME COMES YOU OR SOMEONE IN YOUR FAMILY, , EVER NEEDS IT!The problem is the ones who need it most, can't seem to get it because its being given away to those that don't deserve it.
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