Welfare State: Handouts Make Up One-Third of U.S. Wages

[JohnSmith2007 353]

Welfare State: Handouts Make Up One-Third of U.S. Wages

Published: Tuesday, 8 Mar 2011 | 3:59 PM ET

By: John Melloy

Executive Producer, Fast Money

Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement.

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

“The U.S. economy has become alarmingly dependent on government stimulus,” said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. “Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits.”

The economist gives the country two stark choices. In order to get welfare back to its pre-recession ratio of 26 percent of pay, “either wages and salaries would have to increase $2.3 trillion, or 35 percent, to $8.8 trillion, or social welfare benefits would have to decline $500 billion, or 23 percent, to $1.7 trillion,” she said.

Last month, the Republican-led House of Representatives passed a $61 billion federal spending cut, but Senate Democratic leaders and the White House made it clear that had no chance of becoming law. Short-term resolutions passed have averted a government shutdown that could have occurred this month, as Vice President Biden leads negotiations with Republican leaders on some sort of long-term compromise.

“You’ve got to cut back government spending and the Republicans will run on this platform leading up to next year’s election,” said Joe Terranova, Chief Market Strategist for Virtus Investment Partners and a “Fast Money” trader.

Terranova noted some sort of opt out for social security or even raising the retirement age.

But the country may not be ready for these tough choices, even though economists like Schnapp say something will have to be done to avoid a significant economic crisis.

A Wall Street Journal/NBC News poll released last week showed that less than a quarter of Americans supported making cuts to Social Security or Medicare in order to reign in the mounting budget deficit.

Those poll numbers may be skewed by a demographic shift the likes of which the nation has never seen. Only this year has the first round of baby boomers begun collecting Medicare benefits—and here comes 78 million more.

Social welfare benefits have increased by $514 billion over the last two years, according to TrimTabs figures, in part because of measures implemented to fight the financial crisis. Government spending normally takes on a larger part of the spending pie during economic calamities but how can the country change this make-up with the root of the crisis (housing) still on shaky ground, benchmark interest rates already cut to zero, and a demographic shift that calls for an increase in subsidies?

At the very least, we can take solace in the fact that we’re not quite at the state welfare levels of Europe. In the U.K., social welfare benefits make up 44 percent of wages and salaries, according to TrimTabs’ Schnapp.

“No matter how bad the situation is in the US, we stand far better on these issues (debt, demographics, entrepreneurship) than other countries,” said Steve Cortes of Veracruz Research. “On a relative basis, America remains the world leader and, as such, will also remain the world's reserve currency.”

http://www.cnbc.com/id/41969508

[mawilson 2,133]

"Aside from defense and interest payments, the U.S. government is now mainly - yes, mainly -

in the business of taxing the young and giving money to the old."

-- Paul Krugman

[peejay 327]

Welfare State: Handouts Make Up One-Third of U.S. Wages

Politicians derive their power and influence by making you go through them to get what you need in life. The more you need them...the more power they have over you.

[rika60607 215]

Yeah. Social security is a handout? I would have never guessed. I've seen it deducted form my paychecks many times enough. Therefore if I ever get any payments back from SS, how is that a handout? I think it is safe to say that these days anyone receiving Social Security payments for their retirement, is not receiving a handout, but is paid back for the money they contributed to the system. Same goes for the Medicare for the old folks. They paid for it in advance.

Unemployment? That was an insurance paid for by my employer. When you go to see a doctor and pay only $20 because you have a medical insurance, you are not given a handout, are you?

Disability benefits given to those who never worked are probably the only type of wages that could be called a handout.

[one...two...tree 2,762]

Yeah. Social security is a handout? I would have never guessed. I've seen it deducted form my paychecks many times enough. Therefore if I ever get any payments back from SS, how is that a handout? I think it is safe to say that these days anyone receiving Social Security payments for their retirement, is not receiving a handout, but is paid back for the money they contributed to the system. Same goes for the Medicare for the old folks. They paid for it in advance.

Unemployment? That was an insurance paid for by my employer. When you go to see a doctor and pay only $20 because you have a medical insurance, you are not given a handout, are you?

Disability benefits given to those who never worked are probably the only type of wages that could be called a handout.

Framing such things as "handouts" demonstrates the ideological mindset of those who believe that in an ideal society, everyone only gets back what they put in. Perhaps we should add coin operated meters to everything so we are paying as we go, just ensure that no one in society is getting a handout.

[rika60607 215]

It seems that instead of calling handouts any "extra" funds received that represent the money which was never put into the system by a particular individual, any government originated payment is lumped under the "handout" label.

So then it follows, that the whole government, including the president receives handouts. Are you a Mayor of a city? You receive a handout. You work in SS office processing SS cards? You receive a handout, shame on you. Scientist working at NASA, NIH or NSF? Give those handouts back. Oh and if you are in the Army... ultimate handout!

Framing such things as "handouts" demonstrates the ideological mindset of those who believe that in an ideal society, everyone only gets back what they put in. Perhaps we should add coin operated meters to everything so we are paying as we go, just ensure that no one in society is getting a handout.

[I AM NOT THAT GUY 5,715]

Hi kids! Guess what? When I get my government money next decade, government redistributions will exceed 50% of individual incomes. Good luck ever getting any of that for yourselves in twenty, thirty, forty, fifty, sixty years. Keep working hard and paying all them taxes, until you turn seventy, seventy-five, or maybe eighty, because us old hippies like all that free money. What a gas, man!

[one...two...tree 2,762]

It seems that instead of calling handouts any "extra" funds received that represent the money which was never put into the system by a particular individual, any government originated payment is lumped under the "handout" label.

So then it follows, that the whole government, including the president receives handouts. Are you a Mayor of a city? You receive a handout. You work in SS office processing SS cards? You receive a handout, shame on you. Scientist working at NASA, NIH or NSF? Give those handouts back. Oh and if you are in the Army... ultimate handout!

Yep. When you draw out their logic farther than about two feet, it goes limp. It would be interesting to see everyone's "capital footprint" to actually see who is getting more than what they put in.

Edited March 9, 2011 by 8TBVBN

[I AM NOT THAT GUY 5,715]

It seems that instead of calling handouts any "extra" funds received that represent the money which was never put into the system by a particular individual, any government originated payment is lumped under the "handout" label.

So then it follows, that the whole government, including the president receives handouts. Are you a Mayor of a city? You receive a handout. You work in SS office processing SS cards? You receive a handout, shame on you. Scientist working at NASA, NIH or NSF? Give those handouts back. Oh and if you are in the Army... ultimate handout!

Good idea. Get rid of them public service unions, bring home the military, open the borders, and lay off about 90% of government workers.

[one...two...tree 2,762]

Good idea. Get rid of them public service unions, bring home the military, open the borders, and lay off about 90% of government workers.

How about not and instead offer a one way ticket to all the anarcho-libertarian fanboys to some remote island in the Pacific where they can fully realize their ideological fantasies?

Edited March 9, 2011 by 8TBVBN

[I AM NOT THAT GUY 5,715]

How about not and instead offer a one way ticket to all the anarcho-libertarian fanboys to some remote island in the Pacific where they can fully realize their ideological fantasies?

I suppose that would be better than sending us to work camps in Barrow, Alaska, or simply taking us into a rice field and putting bullets in the back of our heads.

[rika60607 215]

Well now, would you stop being so liberal?

Hi kids! Guess what? When I get my government money next decade, government redistributions will exceed 50% of individual incomes. Good luck ever getting any of that for yourselves in twenty, thirty, forty, fifty, sixty years. Keep working hard and paying all them taxes, until you turn seventy, seventy-five, or maybe eighty, because us old hippies like all that free money. What a gas, man!

[rika60607 215]

Nah, why? I could run a private SS office.

You'll just have to pay me and I will process your social security cards. How much will I charge? Um, free market price of course. One day I will start my own USCIS office: extra quick I-129! Processed in a week! only $25K! Commercials on every TV channel Hehe

Good idea. Get rid of them public service unions, bring home the military, open the borders, and lay off about 90% of government workers.

[one...two...tree 2,762]

Nah, why? I could run a private SS office.

You'll just have to pay me and I will process your social security cards. How much will I charge? Um, free market price of course. One day I will start my own USCIS office: extra quick I-129! Processed in a week! only $25K! Commercials on every TV channel Hehe

You just gave an anarcho-libertarian fanboy a happy ending.

[mawilson 2,133]

Yeah. Social security is a handout?

No, it's redistribution of wealth from the young and productive workers to the unproductive wealthy retirees.