By Rick Newman
Posted: November 9, 2009
You know about the bailouts, the stimulus plan, cash for clunkers, and moola for mansions. But for all the anxiety they've caused, those government giveaways are just a tiny part of a mushrooming problem.
By one measure, the government already plays an outsize role in our so-called free-market economy—and it has little to do with the recession. Economist Gary Shilling has calculated that 58 percent of the population is dependent on the government for "major parts of their income," including teachers, soldiers, bureaucrats, and other government employees; welfare and Social Security recipients; government pensioners; public housing beneficiaries; and people who work for government contractors. By 2018, Shilling estimates, an astounding 67 percent of Americans could be dependent on the government for their livelihood. The implications aren't comforting.
[See 4 problems that could sink America.]
Tea-party ranters might cite this as evidence of liberal policies run amok, but the growing-government phenomenon transcends party politics. In 1950, the starting point for Shilling's analysis, just 29 percent of the nation depended on government for its income. By 1980, that had risen to 61 percent—higher than it is today—thanks to demographic factors and the needs of a changing nation. The military got larger and defense spending grew as America took up its role as a superpower. Baby boomer kids required many more schoolteachers. The number of Americans receiving payouts from Social Security, enacted in 1935, increased 10-fold. Food stamps and other safety-net programs of the 1960s and '70s began to reach millions of Americans.
From 1980 to 2000, Americans became less dependent on government. California and other states cut their budgets and reduced spending. The military got smaller after the Cold War ended. Welfare reform in the 1990s kicked many people off the dole. And the private sector boomed during those two decades, accounting for a larger share of the labor force. By 2000, the portion of the population dependent on government had drifted down to 54 percent.
But it reversed course after that, and it seems poised to keep going up. The size of government has generally held steady since 2000, but globalization, technology, and other factors have led to weak private-sector job creation over the past decade. And that was before the recession destroyed more than 8 million jobs. So the government has employed an increased share of Americans. The other big change since 2000 has been a near tripling of food-stamp recipients, as low earners got left out of the housing and stock-market booms and then suffered worse during the recession.
[See 9 signs of America in decline.]
The next big shift will come as baby boomers begin to retire, boosting the number of Social Security recipients 27 percent by 2018 and threatening the solvency of the program. Shilling has another dire prediction: Economic growth will be so weak for the next several years that without government support, the unemployment rate will rise to 23 percent in 2018. Since that's politically intolerable, government will continue to spend money to create jobs, he predicts, with nearly 25 million additional Americans employed as a direct outcome of government spending by 2018.
If that happens, more than two thirds of the nation will owe their livelihood to the government, which is unsustainable for a number of reasons. It will require federal deficits far larger than the $1.4 trillion bogy we've got now, which is already alarmingly high. If irate voters don't rein in America's debt binge, market forces will, perhaps because foreigners will stop lending us the money or the rates they demand will rise and effectively bankrupt the country. Higher taxes would help solve the problem—and are probably inevitable—but enacting them on rich people alone won't be enough. At some point not too far off, the U.S. government will have to close the vast gap between its income and its spending, and the pain will be widespread.
[See why stocks are surging as jobs disappear.]
Some economists are more optimistic than Shilling, with stronger projections for economic growth that might eliminate the government's need to create 25 million new jobs. But rosier scenarios are taking their time to materialize. The unemployment rate has soared to 10.2 percent, a 26-year high, with no indication that companies will start hiring again anytime soon. So instead of restraint by government, Congress and President Obama have extended housing subsidies and unemployment insurance, cut taxes on struggling companies, and even made plans to send a $250 check to every senior citizen, just as a nice gesture. Americans who can get in on this bonanza should get theirs while they can. Sooner or later, the door is going to slam shut.
Where are the statistics where are the facts.
These article is so wrong it makes me sick and to blame everything on liberals and democrats drives me crazy. First of all if America didn't spend most of their money on military and defense we wouldn't have these problems. Our ACTUAL money is spent on defense. Don't be confused with what the right winger say about medicare and SS. Medicare nor SS are expenses.The money comes from money put into those programsas specific P/R deduction. Both still in fact have a surplus. You pay in and your money is paid back.They are insurance programs. A problem is the money for excessive defense systems and wars is borrowed from those funds and at just 1.5% interest, much less than China gets on the monye ot loans us and then much of that money un like Medicare or Soc Sec is spent outside the U.S. just another form of trade deficit.
And you forgot the interest on national debt will shortly exceed the military budget but then Reagan said deficits dont matter
This article talks about how we are becoming socialist but I was just reading an article a couple months ago that actually had statistics and it said that government actually controls .67% of our country that is less then one percent. This article bitches about how government will control us in the future with universal healthcare and all that when we don't even have universal healthcare then they use the BS Switzerland thing when Switzerland has many socialistic things and have Universal Healthcare lots of Social spending on different programs and they haven't spent anything on defense, they haven't been in a war since the War in 1812. Then they talk about how much better Sweden and places like that are that have Universal healthcare all which is listed higher then the US.
These politicians had every chance to get rid of government programs but they kept it because it helped. The military uses and loves their government healthcare the politicians love it and many are on medicare. They bitch about getting government out of their medicare yet then they bash medicare but want it. They flip flop like crazy.
Lets see without government the disabled and elderly would suffer especially after WW2, without government slavery would still exist, it was because of government that gave workers rights and were not abused by the corporate scum thats success only happened because of the workers. because of government ourselves and our children have been able to work in good conditions get fair pay and succeed. Because of government people have more access to education. Because of government we have NASA, women's suffrage, the Civil Rights Act.
The American economy is in decline because a substantial plurality of the electorate wants "something for nothing" - and the "Progessive" elites promise to give it to them. For small and well-organized minority groups the elites have in fact delivered on that promise, by systematically looting the rest of the citizens via the financial and politcal systems.
As more and more of the people join in the looting, there is less and less to go around. At some critical point there isn't enough production left to sustain investment, and the system goes into liquidation. That's where we are now.
When all the capital has been liquidated, the system cannot sustain continued operations, and the first, smallest pressure from external sources will cause it to collapse with breathtaking swiftness. That is where we are going.
The political elites welcome this evolution. It's all about holding and wielding power over others. A declining economy actually improves the relative power of the elites over the general population.
Most European residents have a substantially lower standard of living than Americans - and their heath care systems, pension systems, and welfare systems are facing imminent bankruptcy in nearly every country. 10% unemployment has been considered "normal" in Europe for a long time now. Spain has nearly 25% unemployment right now.
There are over 750 "no-go" zones in French cities where Muslim immigrants have imposed sharia law and essentially nullified the rule of the French government. Great Britain and some of the Scandinavian countries are rapidly falling into the same decline.
European elites are absolutely unfazed by any of this. They will be the very last ones to suffer, no matter how bad the economy gets.
America is following the same destructive path that Europe has already demonstrated. We are only a few years behind them. We can look to the examples of Venezuela and Argentina to see what is coming.
The level of ignorance expressed by posters here provide more proof (as if it was needed) that government education in the USA has been our biggest failure over the last 40 years. Trillions per month on defense? We spend approx 500 billion (half trillion) annually...not 24 trillion minimum using N.G. math And what is the price of freedom? Lets meausre the cost by allowing the state of NY (where N.G. lives) to be dominated by China, Iran, Cuba...name your dictator. Then let's ask N.G.'s children how much they are willing to pay...since their parents are obviously too ignorant to even find the simplest of facts before spouting their lies and accustaions, let alone appreciate the unique freedoms and lifestyle we have here. How about unemployment in Europe, N.G.? Even higher than our growing 10% rate.
You and millions of others have bought into the anti-American, anti-capitalist, anti-freedom, kumbaya nonsense...you have nothing to back up your desires.
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The global economy is mysterious, even scary. Chief Business Correspondent Rick Newman connects the dots. In addition to his writing for U.S. News, Rick is the co-author of two books: Firefight: Inside the Battle to Save the Pentagon on 9/11, and Bury Us Upside Down: The Misty Pilots and the Secret Battle for the Ho Chi Minh Trail.
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