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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Forgot to mention, she drives a BMW with payments, must be nice to be poor
Someone made a good point, but about having to earn points for Social Security, but has it a little confused. I worked my **** off for years and get twice as much as those who never worked in disability.
SSD is for those who actually contributed
SSI is for those losers who never paid into the system and have no points and is based on their income, with the exception of those born disabled. Most people get SSI bc they claim to be agoraphobic or some other psych disorder that they don't have, or there are the junkies that get it, you actually get rewarded for getting high.
I am greatful I get the money I do as I have two small children, I also have insurance under my husband but still chose to have medicaire which i pay monthly for because my medical bills are astronomical.
One of my daughter's friends complains she only gets $1,600 a month in section 8, $800 a month in food stamps, two out of three of her children eat breakfast & lunch at school for free, vouchers for her furniture, medicaire's paid for, plus medicaide for her and her childern. But yet if not for the drugs used to keep her from getting high she'd be fine.
That pissed me off. I know an agoraphobic who uses a parking permit, what the hell? Nothing is physically wrong with her, get a job.
I am still planning on working again, as anyone collecting knows the SSI people get under $700 a month, it's essentially welfare for losers.
I get almost $1,400 a month, but I had to make a hell of a lot of money to get that, especially by age 37
I would much prefer to work, I've been trying, we can't get food stamps or any household help for the things I can't do, we have too much money, I hate excuses, SSI is really just welfare with a different label, social security when you retire you earn, unless you're from another country and then automatically eligible just by moving here at 65, then there's SSD for those of us with real injuries
When will the moron reporters of this world understand that social security payments to individuals come from a trust fund that was funded by payments made by those individuals and their employers during their entire work life?? It is not a government handout funded by general income tax revenue. Medicare is also partially funded by those same workers through payments that were automatically deducted from their paychecks, which was separate(and in addition to) the income tax they paid.
The real issue is that government(members of congress and the senate) has "borrowed" trillions of dollars from the social security trust fund to pay for other programs that have absolutely nothing to do with social security and have been in bed with "big pharma" and health care providers, trading favorable legislation for campaign donations, with the net result of driving health care prices up at a much faster pace than other inflation.
Bottomline....term limits should be enacted so that legislators focus on "serving the people" and start making the tough decisions that will be "for the good of the country" instead of taking campaigns "payoffs" from lobbyists and making decisions that primarily enhance their re-election chances.
Social Security in not an entitlement program. It is an insurance program which the elderly contributed to their entire working lives and who expect the same from the following generation. Without social security 20, 30 and 40 year olds would not have job opportunities. The 60-70 year olds would neither be willing or able to relinquish those upper and middle management positions for years. How exactly would the next generation ever buy their own houses and raise children?
Nest, Medicare is an insurance program with premiums paid for by each and every Medicare recipient,, each and every month. It is also, not an entitlement program.. Also, stop going looking for something to treat. Stay away from doctors and designer drugs. We are over-doctored and over-medicated in this country.
When will folks stop acting like sheep being led to slaughter and learn to think. Propaganda and political posturing is driven by fear and distorted and untrue "facts". It is time for us to turn away from the media and use our brains. We are going to be inundated with this campaigning from now until 2012. Learn where the MUTE button is on your remote.
Mr. President & Democrats...... we know the wealthy & powerful who are running the republican platform are trying everything they can to rape the middle class, rape the poor & give the wealthy & the wealthy corporate conglomerates fat tax breaks! We get that!
But Mr. President & Democrats...... we expect you NOT to cave into these greedy bloodhounds! We expect you to be strong & stand your ground & stand up for the middle class, the poor, the unfairly laid off, the baby boomers who have become the biggest target for the republican party to dispose of, & the millions of people who are suffering due to the corrupt banks, corrupt Wall Street, corrupt corporations, corrupt republican politicians who have caused all of this misery while the wealthy have been out on their yachts!
how sick & perverse is it when the almighty wealthy & powerful who truly run the republican platform snake the American public again...for the bazillionth time... ... by deceiving the public into believing our economy is due to Obama & the Democrats..... & therefore making the public believe the answer is to continue to rape the poor, rape the middle class & give huge tax breaks to the wealthiest & the largest corporate conglomerates?
it's mind boggling that people other than the wealthy buy that crock....... it's mind boggling that people continue to vote for these paid off lying, sleezy, hypocritical, moral-less republican politicians enabling them to continue to rape our most vulnerable citizens.... WAKE UP people......... republican platform does not care about you or any of the rest of "the little people" as they refer to all people who are not rich.
Countries need to take care of the weakest citizen's. The attacks on the social programs is a decoy tactic. There are some who scam, but most need the helping hand. It's our responsibility to care for those who can not care for themselves, while being thankful we are able to. It's not our responsibility to pay for over indulgence of the political parties. While we are falling for the decoy tactic, the fat cats are pulling in more benefits and getting fatter.
So you know, SS and Medicare are not social programs. I can't believe the headline says they are.
Who decides what is disposable income? Does this mean every 20 cents I earn the government just disposes of it as they see fit? The government has absolutely no business in taking our money because they have no idea what to do with it.
Once and for all the feeding trough needs to be closed down and we, the citizens need to make the financial decisions for this country. Our elected representatives are not representing us, only themselves.
To Richie Bee Dumbutt...
Wait a minute here Paano...who says it is the American governments job to support senior citizens?!?! Put your own money away, and work as long as you want to or need to. Live within your means, and if you happen to get SOME help from the government, consider yourself blessed!
So let me get this straight Brainiac... Since it is my money they took out, you are basically saying that the government should give me all the money back that they took out for my eventual retirement, which was taken out under the guise of taxes? I hear you. I agree that I should get all my money back that they have taken out of my paychecks, since I earned the money they took out...When can I expect my check? you should be a comedian...lol lol :)
Obama and the democrats are ruing this country with higher taxes, high unemployment and uncontrolled spending. He hasn't accomplished anything since coming into office. He has made things worse not better. He promised change and has changed things for the worse. He is the worst president in U.S. history. Obama and democrats only care about themselves and not the american people. Actions are stronger they words because their actions show they don't give a damn about the american people. Obama and the democrats must go in 2012.
I get Social Security and Medicare: they aren't "Government Handouts"
I paid into Social Security for 50 years; I pay every month into Medicare even now at 74.
They are not "charity" or "welfare": they are a return on the investments I made and continue to make monthly. Only Farmers and Oil Companies and Ethanol and Pharma and other big corporations get "government handouts" for nothing, except the congressmen they have bought and paid for, and the Supreme Court "Justices" who work for them now, thanks to the Regan / Bushies.
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