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The U.S. Government Exists Primarily To Write Checks And Redistribute Wealth

It turns out that the primary business of the Federal Government these days is writing checks:

The biggest single thing the federal government does these days is … cut checks.

Lots and lots and lots and lots of checks that go to individual citizens — $2.3 trillion worth last year alone.

In fact, according to a table buried deep inside the little-noticed Historical Tables volume of the White House’s 2012 budget, these “direct payments to individuals” accounted for more than two-thirds of federal spending in 2010. That’s a post-war high.

And that share has been steadily climbing. Payments to individuals accounted for 2.4 percent of all federal spending in 1945. By 1980 it has risen to 47 percent, and in 1992 it crossed the 50 percent mark. (See first chart.)

Where does all this money go? More than half goes to seniors through Social Security and Medicare. Only about 38 percent goes to the poor. And the rest of the payments end up with farmers, students, the unemployed, those looking for retraining help, veterans and other select groups.

Added to this is the fact that, increasingly the tax burden disproportionally falls on the highest income earners:

All of this has implications for the budget battles to come:

When you put these two trends together, what you find is that the federal government has over the years essentially turned into a gigantic wealth-transfer machine — taking money from a shrinking pool of taxpayers and giving it out to a growing list of favored groups.

Now, depending on your political perspective, you could view this is a good thing or a bad thing.

But whatever your view, this situation will make getting the federal budget under control increasingly difficult, since it will invariably involve pitting those writing checks against those cashing them.

This is partly what we’re seeing in Wisconsin. The people who live off the public dole are going to be highly motivated to protect their sources of income, even to the point where taxpayers themselves are likely to be divided. We’ve already seen that the American public is not exactly enthusiastic about the idea of budget austerity, this is just one of the reasons why.

H/T: Insty

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About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May, 2010 and also writes at Below The Beltway. Follow Doug on Twitter | Facebook

Comments

  1. Alex Knapp says:

    This is partly what we’re seeing in Wisconsin. The people who live off the public dole

    Did you really just imply that teachers, who do work in exchange for compensation, are “living off the public dole”? Really?

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  2. Alex Knapp says:

    And, I might add, that your spending vs. tax charts are QUITE misleading, since on the spending side you include social security and Medicare, but on the TAX side you only show income taxes and not FICA!

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  3. When what they are complaining about is that the taxpayers will no longer be paying 100% of their health insurance premiums and funding, without any employee contributions, their pension plan, yea I consider that living off the public dole.

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  4. Alex Knapp says:

    When what they are complaining about is that the taxpayers will no longer be paying 100% of their health insurance premiums and funding, without any employee contributions, their pension plan, yea I consider that living off the public dole.

    (a) That’s not what they’re complaining about. (b) Even if it was, that’s income in exchange for services rendered, not “living off the dole.”

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  5. I’m not arguing it isn’t “income.” I am arguing it needs to be renegotiated and that the taxpayers take priority over the public employee unions.

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  6. Dave Schuler says:

    Well, as G. B. Shaw pointed out when you rob Peter to pay Paul you can always expect the support of Paul.

    IMO Doug goes too far here. I think that when conditions are different from those that were expected when the contract was negotiated renegotiating the contract isn’t that outrageous but I’m also not too sympathetic with the plight of the highest income earners, far too many are where they are as a result of rent-seeking.

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  7. Herb says:

    “This is partly what we’re seeing in Wisconsin. The people who live off the public dole…”

    Um…no. What we’re seeing is action against working people, not people “who live off the public dole.”

    Just a personal example to illustrate the difference: Both my mother and my step-mother gets regular paychecks from the federal government.

    My mom gets one because she’s an accountant for the NBC, a fee-for-service organization that does the accounting for several different alphabet-soup agencies.

    My step-mom gets one because she’s morbidly obese, unemployable, and “disabled.”

    What we’re seeing in Wisconsin is a concerted effort against public workers. Not a concerted effort against people on the government dole.

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  8. Yes, the situation in Wisconsin is different, but if you read what I wrote you’ll see that I was using those protests as an example of what we can expect to happen if the government ever tried to make cuts in the redistribution programs that now comprise 2/3 of its business.

    That said, my sympathies in Wisconsin are largely with Governor Walker here.

    We live in a redistributionist state. At least as long as we can afford it.

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  9. Brummagem Joe says:

    Doug: the reason the top 5% are paying around 59% of income taxes is because they’re the ones earning the income. You may find illuminating these simplistic definitions of modern western societies who all share similar fiscal characteristics, but at bottom they’re deeply silly. Since the middle ages the rulers have collected taxes from the ruled. They used to spend it on conducting dynastic wars or building magnificient palaces like Versailles. Today it’s spent on protecting the lives and welfare of citizens and the myriad other demands on govt in a modern industrial society. Those not happy with this state of affairs can always go and live up a tree in the Amazon jungle. And public employees are not living off the public dole they’re providing services from education to snow clearance that society deems important to their welfare. And the elderly who are the recipients of SS and Medicare are not as a group particularly wealthy since for 80% of them SS represents over 50% of their income and for 50% it’s 100% of their income. Before the creation of these programs most of the elderly in this country lived in varying degrees of penury, dependant on the largess of their kids etc. The goal of Republicans like yourself is to return to this happy state of affairs. You may find the idea of return to the pre modern age attractive but I don’t think you’ll find many takers when they realiize the implications.

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  10. Rick DeMent says:

    Saying that people who work for the government are somehow on the public dole is an interesting take. I guess that means that the Department of defense and every soldier on the field of battle and else ware are also “on the public dole”. Yeah I wish we could get those troops back from whatever third world hell hole they are in so they can stop sucking off the public teet.

    My god Doug you’re getting more unhinged every day. If anything workers in private companies should be screaming about the substandard benefits they get from their tight-fisted, cheep so and so employers who are making huge profits off the fear and anxiety they themselves created.

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  11. Brummagem Joe says:

    “That said, my sympathies in Wisconsin are largely with Governor Walker here.”

    What a surprise. Unfortunately what you and he are losing sight of is that the practise of democracy is based on compromise. Without it the extremes take over. State workers in WI are quite prepared to negotiate about wages and condiitons even if under duress but what they’re not going to surrrender the freedom to bargain collectively and are willing to go to the stake over it . You spend a lot of time talking about freedom but it’s a higly selective freedom. Once it comes in contact with your ideology, freedom is strictly optional.

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  12. wr says:

    Paying people to do work for the good of the nation is now “redistribution of income”? So all those guys repairing highways and healing sick people in public hospitals and, yes, teaching our children are just parasites in some Communist system? The only moral good is for rich people to keep as much of their money as possible?

    What a sad way to look at what some have seen as the pinnacle of human achievement. I truly feel sorry for you.

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  13. Axel Edgren says:

    “I am arguing it needs to be renegotiated and that the taxpayers take priority over the public employee unions.”

    Except the tax-payers who Walker are concerned about while trying to subjugate unions are corporations. It’s not “Tax cuts for Dick and Ellen if only those unions give up their benefits”, it’s more like “Tax cuts for Wal-Mart, oh and we ALSO want to put the leash on unions so they can’t legally work and organize in order to get any benefits in the future”.

    Walker was offered an agreement where he got everything he wanted except castrated unions. But he rejected it, because he thinks a deadlocked state is preferable to having to run back to his masters and admit he couldn’t put his heel on the neck of the unions.

    *But all of those tax cuts will of course go immediately towards more hiring anyway so LULZ I guess the unions should just surrender collective bargaining to show solidarity*.

    Doug, you are serving us credulous piffle here.

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  14. [...] to my colleague Doug’s description of the Federal government as existing primarily to redistribute wealth, there is actually very little wealth re-distribution in the United States. The chart above uses [...]

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  15. Stan says:

    At the university from which I am now happily retired, the faculty senate struck a bargain with the administration in the 50’s. Both sides agreed on comparatively low faculty salaries and very generous retirement and health benefits. The state of Wisconsin and its public employees’ unions have taken the same tack. I’ve read that Wisconsin ranks below Mississippi in terms of teachers’ salaries, but well above it, of course, in terms of total compensation. People like Mataconis like to leave the first part out, apparently because they have an instinctive sympathy with the powerful.

    I’d also like to point out that the principal public employees’ unions have already agreed to head in the direction of Mississippi by giving in on their health and retirement benefits, but are holding out on bargaining rights. Of course that’s the main sticking point. The Walkers of this world and their admirers like to deal with serfs, not employees with some clout. I think the Walkers will win, but I’m not sure that everybody who writes for this blog will like the result. You’re a lawyer, Doug, so I suggest you bone up on bankruptcy law. It’s really turning out to be a good field.

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  16. Michael Reynolds says:

    This is another desperate reach by Doug to try and bolster his conservative cred. And it comes apart like papier mâché in a monsoon.

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  17. Brummagem Joe says:

    “The Walkers of this world and their admirers like to deal with serfs, not employees with some clout. I think the Walkers will win,”

    Actually I don’t think they will in WI both because of the nature of the political landscape in the state and the leverage the public employees exercise. Even if Walker gets his bill through it’s like to be a pyrrhic victory because the employeees will mount a campaign of passive resistance which will bring chaos to the state and not exactly redound to Walkers credit. Utlimatley I supsect the Republicans in the legislature will crack under the strain.

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  18. Brummagem Joe says:

    Some of the comments seem to be disappearing????

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  19. @Doug:

    In terms of the federal government and its direct payments to individual, not all of the funds for those payment come out of income taxes–rather there are also payroll taxes (specific taxes, in fact, to accomplish those payments) to take into consideration here. It is misleading to show only the income tax shares in this context.

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  20. Michael,

    I am not a conservative and yet,. just as you seem obsessed with calling me a Republican, you know are calling me something I’m not.

    Your binary world must be very convenient to live in. but its also very wrong

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  21. reid says:

    Doug, I hope this isn’t considered “better things to do today”. I would have understood going outside or hanging out with family.

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  22. reid says:

    It’s partially offset by your using “comprise” correctly, though.

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  23. john personna says:

    I believe that Social Security and Medicare were 43% of 2010 spending, and not “more than half.” (wikipedia)

    I’m suspicious of this kind of claim in general.

    For example : “veterans and other select groups” Yeah right, we pay those veterans as wealth redistribution right, and not say because “defense” is something else entirely?

    Lies, damn lies, and politically motivated groupings of expenditures. Is defense pay also “payment to individuals” in this crazy thing?

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  24. Wiley Stoner says:

    Read what FDR said about public unions and the ability to organize against public interest. Where else can you be forced to pay for something you did not agree to and pay a price you did not agree upon? Alex, where else beside the public sector can a person get paid the amount of money they get paid (reportedly the average pay for Madison Wisconsin teachers is around $100K) have little chance of losing their jobs and not be held responsible for the product?

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  25. michael reynolds says:

    Doug:

    In a two party system and if we’re talking politics of course it’s binary. And since you say you’ve never voted Democrat and can’t imagine ever doing so, and you attend CPAC, and you hold Reagan to be the best president in your lifetime, and for a long list of other reasons, you place yourself on the GOP side of the two party system.

    Of course I get that you’re a libertarian. But what matters is not what you call yourself, but where you put your X on election day. By your own statements you either vote GOP or LP. In practical effect then you’re either a Republican or abstaining.

    I didn’t invent the system.

    I did a better job of talking about this in the other thread. And I’m loathe to repeat myself. But I think there’s a disconnect between your clearly sharp critical intelligence and what seems to me to be your libertarian faith.

    And I think faith is what it is. Unexamined assumptions probably adopted earlier in life and never examined critically since. If the only considerations were social issues, you’d vote Democrat. So you vote GOP because you consider economic issues primary, and you find the GOP’s economic theories more in line with libertarianism.

    Two problems with that: 1) Libertarianism is beneath you intellectually, and 2) The GOP has no economic theory aside from, “we loves us some rich folks.” So you elevate a silly set of pseudo-principles to primacy and then choose the party that panders (albeit dishonesty) to same.

    Which still gets us back to this: if it votes like a duck, it’s a duck. Even if it claims to be a goose.

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  26. Alex Knapp says:

    @Wiley –

    Cut that salary figure in half:

    http://www.teacher-world.com/teacher-salary/wisconsin.html

    Wisconsin schools produce outcomes that are above the national average.

    http://www.jsonline.com/news/education/81407112.html

    As for FDR – of course he opposed public sector unions. Management always opposes unionization.

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  27. Jay says:

    Alex, the $100K figure is correct as it includes benefits.

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  28. TG Chicago says:

    I wish this was a Disqus comments section so I could “Like” reid’s comment. :-)

    To Doug: you say that Michael is mistaken about your views. However, he is a very regular reader here. Why do you suppose he is mistaken about your views even though he reads a great deal of your writing? Perhaps it is because you consistently avoid discussing what your views are.

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  29. [...] The U.S. Government Exists Primarily To Write Checks And … [...]

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  30. Rick Almeida says:

    In what universe is every dime any government spends NOT redistribution?

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  31. george says:

    >In what universe is every dime any government spends NOT redistribution?

    In the universe where every soldier, policeman, fireman is a volunteer, where defense companies just give jets and tanks to their country’s army out of patriotism, where citizens band together to build roads and bridges out of civic pride.

    Unfortunately, in our universe soldiers, police, defense companies, bridge and road constructors, teachers, and just about everyone else wants to be paid for their efforts, so the gov’t has to raise taxes (ie redistribute wealth).

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  32. anjin-san says:

    > The people who live off the public dole are going to be highly motivated to protect their sources of income

    This is a remarkably stupid statement. Immature tripe. I am in absolute agreement that we need serious reform in public pay/pensions. The city manager of the next town over, pop, about 50k, makes more than Jerry Brown does for being gov of California. It’s a frigging joke, and a bad one.

    Your a bright guy Doug. How about making a contribution to the discussion instead of serving up warmed over right wing boilerplate? If I want that crap, I will watch Fox.

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  33. deathcar2000 says:

    the only solution to this budget problem is right in front of everyones nose…

    no more taxes for the rich!!!!(a proven winner every time) sarq>

    oh yeah,

    and eat the poor.

    you’re welcome. -high fives all around-

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  34. [...] Doug Mataconis, as he and I very often disagree about politics. But Doug’s post, “The U.S. Government Exists Primarily To Write Checks And Redistribute Wealth,” based on an analysis of Office of Management and Budget data by John Merline, was perfectly [...]

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  35. I would change the title of this post: Government exists to protect rights (see Declaration of Independence); it perverts this raison d’etre by violating rights as it redistributes wealth. But as to the substance of the post, Doug is absolutely correct. The federal government has become a too-powerful wealth-redistribution machine. And among the moral hazards of this perversion of its function is the sense of entitlement that we see on display in Wisconsin.

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