Mitt’s “Entitlement Society” is a Myth
As I wrote earlier this week, the idea that the United States has become an “Entitlement Society,” as Mitt Romney recently put it, is a myth unsupported by the most basic facts. Although the former Massachusetts governor has written that government benefits engender “passivity and sloth,” the truth is that over 90 percent of benefit dollars are spent on the elderly, the seriously disabled, and members of working households—hardly the “welfare queens” that Republican rhetoric evokes.
But the misinformation extends beyond the welfare queen trope. As Lawrence Mishel points out, the argument that the welfare state has significantly expanded under President Obama only works if you calculate that growth by dividing mandatory spending by government revenues. That trick allows you to use as your denominator revenues that are at their lowest levels in 60 years, in addition to a numerator distorted by an unemployment figure more than double the rate a decade ago.
A better way to evaluate the expansion of government benefits is to look at total mandatory human resource expenditures as a share of government outlays. By that standard, entitlements as a share of federal expenditures barely changed between the 1990s and 2007, before the financial crisis. After the recession hit, mandatory spending did rise slightly, to 55 percent in 2010 and 56 percent in 2011—but that is exactly what we would expect from the social safety net during a severe economic downturn. The picture is even rosier if you take the size of the economy as your denominator: mandatory spending as a share of GDP remains essentially unchanged in two decades, and is actually down slightly in 2012.
Source: U.S. Office of Management and Budget Historical Tables
Who Benefits From Our “Entitlement Society”?
“Even Critics of Safety Net Increasingly Depend on it,” read a recent New York Times headline, capturing in a sentence the uncertain and contradictory sentiment of millions of middle class Americans who say they want the government out of their lives, but admit they count on Social Security, Medicare, and other benefits to stay afloat. Chisago, Minnesota—the archetypal heartland county in which much of the article takes place—is illustrative: a former Democratic stronghold, now with a declining middle class and a decidedly conservative outlook, whose residents struggle to reconcile their resentment with reliance on entitlement programs.
The remaining Republican presidential candidates have seized upon that resentment to construct an alternative narrative to the one President Obama favors. While the administration talks about helping hard-working Americans to get back on their feet after the worst economic downturn since the Great Depression, Mitt Romney has warned that the United States is becoming an “Entitlement Society,” with dependence on government fostering “passivity and sloth.” Rick Santorum talks of social insurance “systematically destroying the work ethic.” And Newt Gingrich has called Mr. Obama a “food-stamp president,” suggesting that “the African-American community should demand paychecks and not be satisfied with food stamps.”
But this racially-charged 
narrative—able-bodied young people collecting government benefits instead of finding honest work—couldn’t be farther from the truth. According to a new report from the Center on Budget and Policy Priorities, more than 90 percent of government benefits went to the elderly, the seriously disabled, and members of working households in 2010. The majority of the remaining 9 percent went to medical care, unemployment insurance (which requires previous work experience), Social Security survivor benefits (for children and spouses of deceased workers), and early Social Security benefits. The CBPP analysis also finds that among entitlement programs that target only low-income households, five out of every six dollars were spent on the elderly or disabled (probably a low estimate, as the data comes from 2010, when the national unemployment rate averaged a historic 9.6 percent).
The CBPP data should also quash the Republicans implication that the poor benefit from entitlement programs at the expense of the middle class. In fact, the graph below shows that the middle class receives a proportionate share of benefits, while only the top 20 percent of the population receives less. Compare that to the distribution of tax credits, write-offs and deductions that are available to the rich: the top fifth of the population received 66 percent of the $1.1 trillion “tax entitlements” in 2010, compared to just 2.8 percent for the poorest fifth.
Unfortunately, the deterioration of the middle class has made many Americans susceptible to the politics of resentment that drive Republican misperceptions. In Chisago County, per capita income has fallen 13 percent in the last decade; nationally, median income remains little changed in over thirty years. But instead of questioning the vast upward redistribution of wealth to the top one percent, or why the 400 richest Americans—who control as much wealth as 150 million people—pay an average tax rate of just 18%, many of Minnesotans quoted in the Times article speak stoically of suffering to reduce the national debt and their own reliance on government:
“How do you tell someone that you deserve to have heart surgery and you can’t?” Mr. Gulbranson said.
He paused.
“You have to help and have compassion as a people, because otherwise you have no society, but financially you can’t destroy yourself. And that is what we’re doing.”
He paused again, unable to resolve the dilemma.
So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong). Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality and reduces final demand.
Recent popular demonstrations, from the Middle East to Israel to the UK, and rising popular anger in China – and soon enough in other advanced economies and emerging markets – are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.
To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of laissez-faire and voodoo economics and the continental European model of deficit-driven welfare states. Both are broken.
Americans Pay More, Get Less for Health Care
By Benjamin Landy
The United States spends more money on health care as a percentage of GDP than any other nation on Earth. A staggering 16.2% of our economy is tied up in health expenditures.
And yet, the United States had the worst life expectancy of any of its peer nations, behind even Cuba, which surpassed the US in 2007. By some measurements, life expectancy in America actually dipped slightly from 2007 to 2008, declining from 77.9 to 77.8 years.
According to a new study by the Institute for Health Metrics and Evaluation (IHME) at the University of Washington, most counties within the United States are falling significantly behind Japan, Canada, and other peer nations, which have been enjoying substantial gains in life expectancy every year. Specifically, the researchers found that between 2000 and 2007, more than 80 percent of counties in the United States dropped in their health standing compared to the average of the ten nations with the highest life expectancies. Several poor counties in Mississippi were found to have lower life expectancies than Honduras and El Salvador.
“We are finally able to answer the question of how the US fares in comparison to its peers globally,” said Dr. Christopher Murray, the Director of the IHME and co-author of the study. “Despite the fact that the US spends more per capita than any other nation on health, eight out of every 10 counties are not keeping pace in terms of health outcomes. That’s a staggering statistic.”
Reposted from my Graph of the Day Series at Taking Note.
