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