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
Graph of the Day: Busting the Myths About Food Stamps
Last week I commented on a terrific graph published by the Center on Budget and Policy Priorities, which refuted presidential candidate Mitt Romney’s false claim that the majority of federal funding for poverty prevention programs like Medicaid and food stamps (now called the Supplemental Nutrition Assistance Program, or SNAP) is wasted on “massive overhead,” leaving few dollars for the intended beneficiaries. In fact, the CBPP found that the administrative expenses for these and other social programs range from less than 1 percent to just 8 percent of total costs, hardly the bureaucratic bloodsucking Romney claimed.
But Romney is far from alone in his grandiose and off the mark allegations; just last week rival presidential candidate Newt Gingrich doubled down on his controversial comments tarring President Obama as a “food stamp president,” who, the former House speaker proclaimed, has put more people on food stamps “than any president in American history.” A recent USA Today fact check corrects that mistake: while the percentage of Americans on food stamps is at historic highs, fewer people have applied for SNAP under Obama than during George W. Bush’s tenure, when 14.7 million joined the rolls. What’s more, the current growth rate has been declining since the end of the recession in 2009, when there is a clear inflection point in the graph below.
Of course, there shouldn’t be anything alarming about the SNAP participation rate rising during the most severe economic downturn since the Great Depression. That the number of Americans receiving food stamps has increased demonstrates only that the program, designed to combat hunger and even starvation, is working. A quick comparison with the more accurate U6 unemployment rate shows that the percentage of SNAP beneficiaries has moved predictably with unemployment. If that trend continues, the food stamp rolls ought to begin falling this year as the economy continues to recover.
Getting the Numbers Right on Social Assistance
The 2012 campaign cycle has felt extraordinary for the sheer volume of lies and distortions that have been allowed to filter, unchallenged, through the mainstream media and into the national debate. So I was happy to see presidential hopeful Mitt Romney receive a harsh rebuttal yesterday from the Center on Budget and Policy Priorities for claiming, during Sunday’s GOP debate, that the majority of federal funding for assistance programs for the poor—like Medicaid and food stamps—is wasted on administrative costs:
“What unfortunately happens is with all the multiplicity of federal programs, you have massive overhead, with government bureaucrats in Washington administering all these programs, very little of the money that’s actually needed by those that really need help, those that can’t care for themselves, actually reaches them.”
This is categorically untrue. Thankfully, Robert Greenstein and his staff at CBPP took the time to rebut Romney’s claim—the latest in a series of misleading attacks intended to persuade Americans to eliminate federal assistance for low-income families.
The fact is, these administrative expenses range from less than 1 percent to just 8 percent of total program costs, a far cry from the “massive overhead” that Romney believes is being siphoned off by government bureaucrats. In 2010, the last year in which full data are available, 90 to 99 percent of combined federal and state spending went straight to program beneficiaries.
Still, all evidence to the contrary, the conviction behind Romney’s comment is widely-held among conservatives. Last night, Senator Jim DeMint stopped by The Daily Show with Jon Stewart to discuss his new book, “Now or Never: Saving America from Economic Collapse.” When Stewart pressed him to differentiate “between money that is squandered and invested,” DeMint replied,
“The problem we have is from the federal level, it’s very hard to do things well. I mean, you don’t find too many federal programs that are working. When we politically manage the programs, the money is not distributed well.”
Unfortunately, until Democrats become better at promoting the incredible success (and low overhead) of these programs, such misconceptions will continue to hold sway with the electorate. With more than 15 percent, or 46.2 million Americans, below the poverty line in 2010, proud support for Medicaid, food stamps, and other federal assistance ought to be a winning strategy.
It’s almost hard to believe how tone-deaf this candidate really is. And then he says this:
“You know, I think it’s fine to talk about those things in quiet rooms,” but the President ought not to be taking such a “divisive,” “envy-oriented” approach.
Because you never apologize for America, right Mitt? Congratulations, GOP. You get the candidate you deserve.
Via Andrew Sullivan, Dan Amira expects this message to flop:
This is not a gaffe, really, just a particularly stark reflection of Romney’s true beliefs as he’s repeatedly expressed them. Still, it’s a ballsy way to handle issues of income–power inequality, particularly when he’s already being portrayed as an unfeeling, opulently wealthy corporate monster by Democrats and Republicans alike. And Romney might soon find that the 77 percent of Americans (including 80 percent of independents) who believe there is “too much power in the hands of a few rich people and large corporations” and the 61 percent (including 61 percent of independents) who say that “the economic system in this country unfairly favors the wealthy” don’t find his ideology very relatable.
Graph of the Day: Capital Gains Drive Income Inequality
As the mainstream Republican establishment begins to coalesce around Mitt Romney following his caucus victory in Iowa, the former Massachusetts governor should also come under increased scrutiny for his hardline conservative positions on tax policy, which many Americans rightly perceive as out of touch with both fiscal reality and growing economic inequality. Romney’s stated opposition to any new income taxes, his promise to lower capital gains tax rates and eliminate the estate tax look particularly out of touch in light of a new report from the Congressional Research Service, which concludes that capital gains—the primary source of income for Mitt Romney and others in the top 1 percent—are now the single greatest driver of income inequality today.
According to the report, GDP grew a healthy 38 percent in the decade between 1996 and 2006 (the last year before the boom-bust cycle of 2007-2008), with average inflation-adjusted after-tax income increasing about 25 percent. But that average conceals an astounding divergence in outcomes between the nation’s richest and poorest citizens: while income of the wealtheist 1 percent nearly doubled, the bottom 20 percent actually saw their income decrease by 6 percent. And because the CRS analysis only used data from active tax filers, those numbers may even underestimate the true width of the income gap.
The CRS data confirms earlier reports from the likes of the Congressional Budget Office that suggest that the tax code has become less progressive over time, decreasing inequality by less than 4 percent in 2006. Still, the inequality encouraged by the Bush tax cuts—which provided enormous savings at the top of the income distribution—pales in comparison to the incredible shift from labor income to capital income among the wealthiest 5 percent, which, Jared Bernstein muses, “seems endemic of a society that devalues work while providing outsized rewards for speculation and asset accumulation.”
The graph below, culled from the CRS data, illustrates the growing rift between the top 1 percent—who now take the majority of their income from cheaply taxed capital gains and dividends—and the bottom 99 percent, who continue to derive nearly all of their income from wages. It is a troubling paradigm shift in the way our society values labor and rewards risk-taking, but perhaps a natural evolution for the “you’re on your own” culture of today’s Republican party.
For more, check out Greg Anrig’s 10 Reasons to Eliminate the Tax Break for Capital Gains.
