Watch out

The Welfare Tipping Point

By Jeff Harding

This article from the Wall Street Journal is something to worry about:

Nearly half, 48.5%, of the population lived in a household that received some type of government benefit in the first quarter of 2010, according to Census data. Those numbers have risen since the middle of the recession when 44.4% lived households receiving benefits in the third quarter of 2008.

We are quickly approaching a tipping point where the have not are equal to the haves. That is bad for a democracy where voters can vote themselves benefits from the government. This is something that Mises and Hayek warned us about, rightly so. What we are seeing is the result of Keynesian economics and the welfare state. As the Fed and the government continue to destroy capital and destroy incentive through foolish regulations, we all become poorer, especially those on the bottom quintiles. 

The share of people relying on government benefits has reached a historic high, in large part from the deep recession and meager recovery, but also because of the expansion of government programs over the years. (See a timeline on the history of government benefits programs here.)
Means-tested programs, designed to help the needy, accounted for the largest share of recipients last year. Some 34.2% of Americans lived in a household that received benefits such as food stamps, subsidized housing, cash welfare or Medicaid (the federal-state health care program for the poor).Another 14.5% lived in homes where someone was on Medicare (the health care program for the elderly). Nearly 16% lived in households receiving Social Security.High unemployment and increased reliance on government programs has also shrunk the nation’s share of taxpayers. Some 46.4% of households will pay no federal income tax this year, according to the nonpartisan Tax Policy Center. That’s up from 39.9% in 2007, the year the recession began.

What is really happening is a redistribution of wealth brought about the by the poverty inflicted on Americans as the result of bad economic policy.