Romney’s 47%

During the 2012 Presidential campaign a video came out showing Romney speaking to a private group about the 47% who receive government benefits and who would therefore vote for Obama.  He was roundly criticized for this and he later apologized.  He was both right and wrong.

The percentage of people who receive a substantial portion of their income from government is at least 47% and I’ve read in some sources that it is slightly over 50%.  I am one of those people; I receive Social Security and Medicare.  The myriad programs include not only the many programs supposedly targeted for the poor, such as welfare, Medicaid and food stamps, but also huge middle class entitlement programs that mainly target the elderly, such as the ones I receive.  So he was right.

Where he was wrong was the implication that it is a bunch of low income people living off government largesse.  I don’t want to put words in his mouth, even though I’m not a fan, so I’ll say that many conservatives and Republicans, if not Romney, tend to blame the poor for government spending.  Oh, government spending is large, there should be no doubt about that; it is almost 25% of GDP, the highest peace-time spending we have ever had.  The Bush administration ramped up Federal spending from approximately 20% of GDP to 25% with the bailouts and the Obama administration has maintained almost that level with its bailouts and stimulus spending.

Does most government spending go to the poor?  The poor are at most 15% of the population.  Many economists think we seriously overstate poverty, partly because official measurements of poverty exclude income in kind, such as medical care, housing and food stamps.  Let’s accept 15% as the maximum.

Could it be the rich?  The rich can be defined as the top 1%, 2%, or even 5%.  If 47% of the people, or more, are receiving a substantial portion of income from government, then we can’t reach anywhere near 47% even if we combine rich and poor people.  Rich and poor total at most 20% of the population.  So the people receiving significant government benefits have to be mainly in the middle and upper middle classes.  People such as myself!

That is what we need to realize.  I’ve written elsewhere about how conservatives tend to scapegoat the poor and liberals the rich; we have to get over this if we are to solve our nation’s  spending problem.  And it is a problem; we have increased Federal spending from 20% of GDP to 25% in one year (2008) and have kept it there; this when we face a flood of spending from the oncoming retirement of the baby boom generation.

So who are these people receiving so many benefits if not mainly the rich and poor?  The largest special interest group by far is the elderly.  Medicare is a HUGE subsidy for people in my age group; we paid some taxes, sure, but not nearly equal to the benefits we receive.  That is one reason we tend to overuse medical care; we have no incentive to economize when someone else is paying most of the bill.  Nor do the healthcare providers have such an incentive, when the patients don’t even know or care about the cost of treatments.

This is a hard fact for people my age to face.  I recall attending a luncheon of conservatives and libertarians and began to speak to the person next to me about the huge subsidies inherent in entitlement programs.  She was adamantly against big government spending and then defended Medicare because “we paid for it.”   We, the elderly, have not paid anywhere near its full cost and we are bankrupting our children by refusing to face this.

There are other middle and upper class subsidies; certain farmers, many big corporations (GM, Chrysler, Boeing, GE and “green energy” companies), public sector employees, oil companies, bailed out financial institutions and others.  I emphasize certain farmers because lettuce and tomato farmers don’t receive subsidies, but wheat, corn, cotton and alpaca farmers do.  Go figure.  Could it be because of political clout?

Government largesse goes mainly to powerful segments of the middle class and that is true in every prosperous democracy, whether it is the U.S., Sweden, Japan or France.

It is true that means-tested programs, originally targeted for low income individuals, have expanded tremendously in the past few years and have reached well into the middle class.  The one kind of government program I would support is a means-tested program, but not when eligibility standards are loosened so much that the program expands well beyond low income people.  Nicholas Eberstadt wrote a good piece about this for the American Enterprise Institute.  He pointed out that 35% of American families are receiving government help through means-tested programs such as Social Security disability and food stamps.  We need to curtail these programs too; they have become partly subsidies for people who don’t need subsidies.  It is important to bear in mind, though, that the biggest share of government spending comes from middle and upper class entitlement programs.

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