Reality bites

The takers weigh down the makers


Former British Prime Minister Margaret Thatcher once said, “The problem with socialism is that sooner or later you run out of other peoples’ money to spend.” (Lefteris Pitarakis/AP file)
Here's a question of vastly more than theoretical importance to current and coming generations of Americans: How much longer can the U.S. economy continue to produce enough wealth to sustain a growing class of people who depend on government for some or all of their daily necessities? To pose the question another way: Are we nearing a point when there are no longer enough taxpayers to support all of the tax consumers in America?
Such questions become increasingly important as Social Security, Medicare, Medicaid, federal civil service retirement, and legions of state and local pension funds approach their days of reckoning as millions of retiring baby boomers demand far more benefits than those programs have been prepared to pay out. And don't forget the growing share of personal income that is derived from government transfer payments such as unemployment, veterans benefits, and the like.
If these ruminations sound ominous, they should. Consider this analysis by former Washington Post reporter Thomas Edsall, which appeared recently in the Atlantic: "According to the Federal Bureau of Economic Analysis, the share of total personal income in the United States that comes from government transfer programs -- Social Security, Medicare, veterans' benefits, unemployment compensation, etc. -- has grown rapidly over the past six decades, from 5.9 cents of every dollar in 1950 ... to 17.3 cents in 2009. In addition, according to BEA, another 9.8 cents of every dollar went, in 2009, to salaries for state, local and federal government employees, a figure that does not include costs of fringe benefits. In other words, more than a quarter of all personal income in the United States is paid for with tax dollars."
As it happens, the Heritage Foundation's Index of Dependency on Government measures the relationship between net taxpayers and tax consumers, using 1980 as its baseline year with a value of 100 and reaching back to 1962. Heritage noted last month that the Dependency Index now stands at 240, up three points from 2007. It has grown 31.2 percent since 2001 when it stood at 183. Most worrisome, Heritage says, "the rapid growth of the index has been accompanied by a rapid increase in the percentage of tax filers who pay no taxes. That percentage jumped from 21.3 percent in 1980 to 34 percent in 2008." These trend lines remind us of former British Prime Minister Margaret Thatcher's trenchant observation: "The problem with socialism is that sooner or later you run out of other peoples' money to spend."