Over the weekend I attended a talk by Credit Suisse’s chief economist, Neal Soss, on the structural and cyclical challenges facing the economy. The cheekily titled chart below — showing how much more dependent Americans have become on government money, including in many cases Tea Partiers — is taken from his presentation:
Source: Bureau of Economic Analysis, Credit SuisseThe red line shows what share of personal income comes from wages — that is, what Americans earn from working. The blue line shows what share comes from transfer payments, which are made to individuals, usually by the federal government, through social benefit programs like unemployment insurance, disability insurance and Social Security. (Note that the two lines use different scales, shown on the vertical axes, and that the scale for wages does not start at zero.)
As you can see, the share of income that Americans earn by working has been falling, from more than two-thirds of their income in the mid-1950s to just over half of their income today. Meanwhile, they have been growing more and more dependent on money from social benefits programs, growing from about 4 percent in the mid-’50s to about 18 percent in February 2011.
Certainly part of the reason Americans have been getting more dependent on government money is that the job market is so poor. Unable to find work, many Americans are getting most, if not all, of their income from unemployment benefits.
But the lousy job market accounts only for the spike at the end of the blue line (and likewise the steep slide at the end of the red line), where the numbers correspond with the Great Recession and its aftermath. The chart shows that the overall trends long predate the financial crisis.
These underlying trends are partly because of demographic changes; an aging populace means that an ever-smaller share of Americans are working, and so a larger share are receiving Social Security benefits and Medicare, which is also getting more expensive. Policy changes, more Americans’ going on disability and growing inequality, which in some cases may be leaving more Americans on the dole, are also likely contributing to the growing Dependence Economy.
Whatever the causes, these trends are not infinitely sustainable. The money for transfer payments has to be transferred from somewhere, after all — and if not from other people’s wages, then from China and other foreign creditors. But foreign creditors won’t foot the bill forever without an exit strategy.
E-mail This Print Share Close Linkedin Digg Facebook Mixx My Space Permalink benefits, disability, Neal Soss, social safety net, Social Security, transfers Related Posts From Economix Medicare Wasn’t Always So PopularMeasuring Dependence on Social SecurityAre We Overpaying Grandpa?A New Social Contract, but Which One?How Dependent Are Older Americans on Entitlements? Previous Post Tax Havens and Treasure Hunts NYTD.CRNR.userContent.getUserContent(25,'default'); Search This Blog Search Previous Post Tax Havens and Treasure Hunts Follow This Blog Twitter RSS Featured Economix Posts The Dependence Economy //
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The Myth of Resolution Authority // Over the weekend I attended a talk by Credit Suisse’s chief economist, Neal Soss, on the structural and cyclical challenges facing the economy. The cheekily titled chart below — showing how much more dependent Americans have become on government money, including in many cases Tea Partiers — is taken from his presentation:The red line shows what share of personal income comes from wages — that is, what Americans earn from working. The blue line shows what share comes from transfer payments, which are made to individuals, usually by the federal government, through social benefit programs like unemployment insurance, disability insurance and Social Security. (Note that the two lines use different scales, shown on the vertical axes, and that the scale for wages does not start at zero.)
As you can see, the share of income that Americans earn by working has been falling, from more than two-thirds of their income in the mid-1950s to just over half of their income today. Meanwhile, they have been growing more and more dependent on money from social benefits programs, growing from about 4 percent in the mid-’50s to about 18 percent in February 2011.
Certainly part of the reason Americans have been getting more dependent on government money is that the job market is so poor. Unable to find work, many Americans are getting most, if not all, of their income from unemployment benefits.
But the lousy job market accounts only for the spike at the end of the blue line (and likewise the steep slide at the end of the red line), where the numbers correspond with the Great Recession and its aftermath. The chart shows that the overall trends long predate the financial crisis.
These underlying trends are partly because of demographic changes; an aging populace means that an ever-smaller share of Americans are working, and so a larger share are receiving Social Security benefits and Medicare, which is also getting more expensive. Policy changes, more Americans’ going on disability and growing inequality, which in some cases may be leaving more Americans on the dole, are also likely contributing to the growing Dependence Economy.
Whatever the causes, these trends are not infinitely sustainable. The money for transfer payments has to be transferred from somewhere, after all — and if not from other people’s wages, then from China and other foreign creditors. But foreign creditors won’t foot the bill forever without an exit strategy.
A growing share of the income Americans receive comes from government social benefits like disability insurance and unemployment benefits — and not only because of the Great Recession.
Closing tax loopholes for corporations and negotiating international accords on tax collection would do wonders for the budget deficit and relieve the pressure to cut social programs, an economist writes.
Even last month’s job growth rate isn’t nearly fast enough to get the country back on the path to full employment anytime soon.
The goals and methods of the health care program based last year, derided by its critics as ObamaCare, is widely misunderstand, an economist writes.
American workers weren’t the only ones sacrificed by the Great Recession. Start-ups suffered, too.
Policy makers should acknowledge that current regulation of banks’ capital and international agreements to regulate the banks are insufficient, an economist writes.
Measures of the employment that do not include people in a family context can be misleading, an economist writes.
The history of the ever-shrinking package, a strategy many consumer goods companies adopt to avoid raising their headline prices.
Limited construction of new housing has helped restrict New York City’s population growth, the debate of Census results notwithstanding, an economist writes.
Can opponents of nuclear power overcome the lobbying of industry giants, an economist asks?
Catherine Rampell is an economics reporter for The New York Times.
David Leonhardt writes the Economic Scene column, which appears in The Times on Wednesdays.
Motoko Rich is an economics reporter for The New York Times.
Michael Powell is an economics reporter for The New York Times.
Steven Greenhouse writes about labor and workplace issues for The New York Times.
Liz Alderman writes about European economics, finance and business from Paris.
Jack Ewing writes about European economics and business from Frankfurt.
Economists offer readers insights about the dismal science.
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Multimedia Breaking Down the BailoutAn accounting of the government’s rescue package.
How the Government Dealt With Past RecessionsThree economists explain what worked and what didn't.
Geography of a RecessionA map of unemployment rates across the United States, now through January.
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Special Features The Debt TrapA series about the surge in consumer debt and the lenders who made it possible.
The ReckoningA series exploring the origins of the financial crisis, from Washington to Wall Street.
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An accounting of the government’s rescue package.
Three economists explain what worked and what didn't.
A map of unemployment rates across the United States, now through January.
Faces, numbers and stories from behind the downturn.
A series about the surge in consumer debt and the lenders who made it possible.
A series exploring the origins of the financial crisis, from Washington to Wall Street.
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