We now have 4 straight years with a Federal deficit in excess of $1 trillion. The estimated deficit for FY2012, which ended on 30 September 2012, is $1.1 trillion. Official figures are expected to be released in mid-October.
The Federal government is now borrowing roughly 31 cents of each dollar it spends. That’s nearly 1 out of every 3 dollars.
We’ve all got our opinions about Federal entitlements. But I think it’s safe to say that, without question, some of them desperately need overhauling.
Take unemployment compensation, for example. After all, what could be better justified than providing temporary help to folks who just lost their job?
Well, you might want to take another, more in-depth look. The devil is sometimes in the details.
Like this detail: Federally-funded unemployment compensation is not means tested. And that means that 2,362 Americans living in households with taxable household incomes in excess of $1,000,000 received unemployment compensation. Dig a little more, and you find out that over 956,000 people living in households with taxable income in excess of $100,000 in 2009 did the same.
Where does that money come from? It comes from payroll taxes levied on employers – who cover the cost by raising their prices, and pass the cost along to us. These payroll taxes go into specified unemployment funds; compensation is paid from these funds. And when these various funds set up to pay unemployment compensation runs short, Uncle Sam generally ponies up more to make up the shortfall – from Federal revenues.
In short: the money for unemployment compensation comes out of our pockets, one way or another. We pay for it.
Hey, I’m OK with helping out folks when they need a little temporary help for events outside their control. But let’s not check common sense at the door when we do that, either.
Someone getting unemployment compensation – or any other form of public “assistance” – while living in a household having a taxable income of $100,000 or more just doesn’t pass the common sense test. At least in my book, it doesn’t. IMO this program absolutely screams for a bona fide, no joke means test.
More to follow on this subject in the future, as time allows.
I’ve written recently about how Social Security is now poised to become the largest single expense of the Federal government next year, spending more than DoD. I’ve also written about how Social Security is apparently being abused to provide de facto welfare for many. Well, now let’s look at another problematic Federal program. Specifically, we’ll look at the Supplemental Nutritional Assistance Program, or SNAP – formerly known as “food stamps”. Below, I’ll refer to it by the older name as that’s how it’s still more commonly known.
In theory, food stamps seem like a good idea. The idea is simple: help the truly needy feed themselves by giving them public assistance that they can only use to buy food. This lets them and use what little money they have on other essentials.
That’s the theory, anyway. In practice, things have turned out a bit differently.
The food stamp program is rife with fraud. Costs have risen hugely over the last decade plus, in both good times and bad, with no reductions in sight for at least another two years – if then. And the program very obviously supports far more than those who are truly needy.
You might want to grab a barf bag before you read any further.
Yesterday, I wrote about Social Security’s impact on wage earners. But as I said yesterday: that’s not all that’s problematic about Social Security. It gets even “better”. Fair warning: unless you’re a bleeding-heart libidiot who believes the primary function of government is to create a cradle-to-grave welfare state through income redistribution, what follows will probably piss you off.
Of those receiving Social Security benefits, a record number – nearly 8.8 million, around 15.6% of the total and approaching 1 in 6 Social Security recipients – are currently receiving Social Security disability benefit payments. Since there are about 142.1 million people in the US working, that’s one person receiving disability benefits for each 16.2 persons gainfully employed. In 1967, that ratio was about 65 to 1.
By law (42 USC 423) Social Security disability benefits may only be awarded to those who can hold no gainful employment of any type (and in some cases, to their dependents). I simply do not believe that nearly 9 million people of working age in the US – or the equivalent of about 1 out of every 17.5 persons in the US civilian labor force – are so medically or mentally “Bravo Delta” that they cannot perform any type of gainful work whatsoever under any circumstances. (You’ve really got to be in bad shape to be physically/mentally unable to sit at a reception desk or work as a janitor.) And information recently made public confirms that belief
What’s caused this? Well, there has recently been a huge expansion in the number of persons receiving Social Security disability benefits. And at the same time, the Social Security disability program also appears to have become “Easy Money Street” when it comes to awarding disability benefits. According to a recent Senate report, about 1/4 of recent Social Security disability benefits appear to have been awarded improperly.
Here are the specifics: since January 2009, roughly 5.7 million have been awarded Social Security disability benefits. I’ll let you do the math yourself to figure out how many of those were likely awarded improperly.
Now, for the bottom line: as of July 2012, the average Social Security disability check was a bit over $1100 a month – or around $13,300 a year. Multiply that by 8.8 million recipients, and that’s somewhere around $117 billion a year – or about 18% of Social Security costs today. And based on what’s been made public, it looks like around 1/4 of those disability benefits – or about $29.3 billion this year – were very likely awarded improperly and should not be paid.
“Not pretty”? Hell, that’s absolutely butt-ugly!
Like the rest of Social Security, I doubt this part of Social Security will shrink much any time soon – frankly, I personally doubt it will shrink at all. But it certainly looks like the DoD budget will. I guess continuing to pay improperly-awarded disability benefits is more important than defending the country.
That’s all for today. But yes – there’s more to come. In a future article, I’ll next discuss another problematic Federal income transfer program: the Supplemental Nutrition Assistance Program (SNAP), formerly known as “foodstamps”.
Oh, and if this article pissed you off – I think you’re gonna love the next one.
I wrote the other day about the ridiculous economic cost of Federal regulation – which is estimated by two different credible sources to exceed 10% of the US GDP by 2014 if it hasn’t already done so. Well, today I’ll be continuing that theme.
I’ve written previously about Federal entitlement programs – Social Security in particular. We now have more hard data showing exactly how such programs are slowly bankrupting the US. Figures for this year’s Social Security payments through the end of August 2012 are now available.
They’re not pretty.
For those who didn’t know or who’d forgotten: the Federal government’s financial (fiscal) year runs from 1 October to 30 September. That means we’re nearing the end of the current Federal fiscal year.
August data showed that the Federal government has already paid more than $594.64 billion to Social Security beneficiaries – with one month remaining in the current Federal fiscal year. Assuming Social Security payments for September are the average of the previous 11 months, that means the Federal government will transfer nearly $650 billion from wage earners to Social Security beneficiaries this fiscal year. That will be close to a 10% increase from last year’s nearly $591.5 billion in Social Security payments – which was the previous record high.
To put this in perspective: the DoD Base Budget request for fiscal 2012 was about $553 billion. Another $118 billion was requested by DoD to support overseas contingency operations. Yes, you read that right – this year, the Federal government will spend nearly as much on Social Security alone as it did on DoD. Given upcoming near-certain cuts to DoD’s budget next year and demographics, I’d guess we’ll probably see “crossover” next year.
August 2012 also marks the all-time high for the number of people receiving Social Security benefits – 56,291,797. Based on the current US population estimate of a bit under 317.5 million, this means close to 18% of the US population – or approaching 1 out of every 5 US residents – is currently receiving income transfer payments from Social Security alone. And remember: that percentage does not include those receiving income transfers from other Federal entitlement programs like AFDC, Medicare, Medicaid, subsidized housing, or other welfare programs.
And today I’m not even going to discuss all of the issues with Social Security. More to follow on that score – tomorrow.
But let’s take a moment to recap what we have so far. Government regulation costs the US economy around $1.8 trillion annually. Let’s assume 2/3 of that regulatory cost is unnecessary. Social Security takes roughly another $650 billion out of wage earner’s pockets. So that means between waste due to compliance with unnecessary Federal regulation and Social Security, the Federal government has is responsible for taking close to $2 trillion from those who earned it.
And that nearly $2 trillion total doesn’t include income taxes, sales taxes, property taxes, excise taxes, employer payroll taxes besides Social Security OASDI – or any other taxes. That’s only the income lost to wage earners due to Social Security plus the waste caused by unnecessary governmental regulation.
H. Ross Perot was wrong. That “giant sucking sound” you hear isn’t jobs going South. It’s the sound of the Federal government siphoning off 12.3% of the GDP between government-mandated waste and support for Social Security.
And the truly scary part? That’ nowhere near all that’s being siphoned away from those who earn it.
Ever wondered just how much Federal regulations cost the US economy? Well, we now have a couple of reasonable estimates of that cost under “Obamacare”.
It ain’t pretty.
The libertarian-leaning Competitive Enterprise Institute estimates the cost will be approximately $1.8 trillion annually when “Obamacare” is fully implemented in 2014. That’s in relatively good agreement with a similar estimate from the Small Business Administration of $1.7 trillion annually.
For comparison, the current US GDP is approximately $15 trillion. It’s currently growing at a rate of less than 2% annually.
Yes, your mental math is correct. That means the cost of complying with governmental regulations in 2014 will consume well over 10% of the value of all goods and services produced in the USA.
Some amount of governmental regulation is necessary. But the cost of compliance with necessary regulations shouldn’t consume anywhere near 10% of the total output of the domestic economy.
No wonder the US economy is in trouble. We’re slowly strangling ourselves with red tape.
Author note: the title of this article was edited to make it apparent that this article was the first in a series. No other changes were made to the article other than adding this note.
Some years ago a famous American asked: “Are you better off than you were four years ago?” And from what I can gather, lots of folks are asking that same question today.
Well, now we have the answer to that question. Unless you received a major promotion at work – and maybe not even then – in general, you are not. Nor are you better off than you were when the recession “ended” three years ago, either.
In fact, you’re relatively worse off when today is compared to three years ago than you were comparing three years ago to the beginning of the current recession.
Here’s the background. The current economic hard times began with an 18-month recession: from Dec 2007 to June 2009. But the “recovery” (yes, in technical terms there has been one, though it’s been essentially a jobless recovery) has actually hit people much harder than did the recession. From the cited article:
Median household income fell 4.8 percent on an inflation- adjusted basis since the recession ended in June 2009, more than the 2.6 percent drop during the 18-month contraction, the research firm’s Gordon Green and John Coder wrote in a report today. Household income is 7.2 percent below the December 2007 level, the former Census Bureau economic statisticians wrote. (emphasis added)
Let that sink in for a minute. During the 18-month recession, in real terms the average household lost 2.6% of of their income. But during the 36-month “recovery” since, in real terms the average household lost 4.8% of their income – close to twice as much.
I’m no economist, so I can’t offer an expert’s perspective on how to fix things. But it doesn’t take a rocket scientist to figure out that whatever we’re doing today is making things worse vice better; the raw numbers show that very clearly. Other recessions in our history have shown a clear economic recovery – well, whenever sane economic policy was used, that is. Here, not so much.
However, as a layman I’ll offer two observations. First, it seems that if the government is soaking up much of the available capital through deficit spending, that just might be a drag on the economy. If the government is borrowing that much, that same capital isn’t available for businesses to use in creating new jobs.
And second: I’m pretty sure this isn’t exactly the “change” most people were hoping for in late 2008. I think they wanted things to get better, not worse.