The welfare state threatens to fiscally weaken and morally undermine the United States. In the Federal government’s fiscal year that ended on September 30, 2015, Social Security, Medicare and Medicaid expenditures, alone, made up over 48 percent of all of Uncle Sam’s spending. And it will only get worse.
According to the Congressional Budget Office, in fiscal year 2015, Social Security, Medicare and Medicaid expenditures equaled around $1.8 trillion out of the Federal governments total spending of nearly $3.7 trillion.
This compares to $563 billion on defense-related spending and $260 billion in interest payments on the Federal government’s accumulated debt. For the fiscal year that has recently ended, the Federal budget deficit was $435 billion.
This means, for example, that for Uncle Sam’s budget to have been in balance in fiscal 2015 either the defense budget would have had to be almost zero, or “entitlement” spending on Social Security, Medicare and Medicaid could have been reduced by 25 percent compared to the actual level of spending.
Growing Entitlement Costs as Far as the Eye Can See
In the Congressional Budget Office’s “Budget Outlook, 2015-2025,” which was released August 2015, it is projected that as a percentage of total government spending by 2020 Social Security, Medicare and Medicaid will have increased to 52 percent of government outlays, and by 2025 they will be absorbing 55.5 percent of total government expenditures.
Over the next ten years, the Federal government will end up spending over $14.6 trillion on the major “entitlement” health care programs, and an additional $12 trillion on Society Security payments over this period, for a total of $26.6 trillion on these primary components of America’s welfare state. This will be out of a total Federal government outlay during this period of an estimated $48.6 trillion between 2016-2025.
The Congressional Budget office also estimates that between 2016-2015, Gross Domestic Product will expand by about 53 percent, while Federal mandatory “entitlement” spending over this same ten-year period will increase by 68 percent.
That is, government “entitlement” spending will increase over 28 percent faster than the U.S. economy is projected to grow. However, this may underestimate the rate of growth in welfare state spending relative to the American economy as a whole because the Congressional Budget Office assumes that Gross Domestic Product will increase, on average, at around a three percent annual rate.
Given that the U.S. economy has been growing at a much slower rate for most of the time during the recovery from the 2009-2010 recession, it is not necessarily the case that general economic growth will pick up and be sustained at its longer-run historical trend over the next decade.
The Magnitude of Government’s Unfunded Liabilities
And the cost and magnitude of the redistributive state gets only much worse looking further out into the future. The government trust funds for Social Security and Medicare use 75-year actuarial time horizons to estimate future tax revenues into these programs compared to future expected payouts based on current legislation in terms of eligibility and demographic trends.
The trust funds make a series of projection scenarios, but the bottom line is that the unfunded liabilities for Social Security and Medicare – that is, the dollar amounts that the government will be legally obligated to pay out over and above any projected tax revenues expected to come in – amounts to anywhere between $95 trillion to more than $150 trillion between now and near the end of the twenty-first century.
Even using the lower figure for the unfunded liabilities for Social Security and Medicare of $95 trillion, this would still be equivalent to more than five times over this year’s estimated Gross Domestic Product of about $17.8 trillion.
Or another way of looking at it, if the necessary tax revenue was to be collected to cover these future unfunded liabilities of $95 trillion, everyone of the 320 million Americans would, today, have to pay nearly $300,000 into the coffers of Uncle Sam.
The fiscal burden of the welfare state is serious enough, but a strong case can be made that its ethical implications have been and continue to be even more serious for the economic and cultural health and well being of the country.
America’s Individualist Spirit of Self-Responsibility
Historically, the mark of a free man or woman was being a self-responsible individual. In the old pre-Civil War American South, a slave could be given his freedom if he performed some extraordinary service or act of courage on behalf of his master or his master’s family.
Known as “manumission,” the former slave was not only no longer obligated to obey the orders of a slave-master under the threat of violence and personal harm, he could no longer expect a master to provide him with the basic necessities of life, including food, shelter, clothing, or medical care if he or his family became ill.
For these things, and all other requirements, comforts and desires of everyday life, the former slave was now expected to earn his own way and provide for them by himself.
While voluntary charity and philanthropy were considered the appropriate ways to assist those in society who may have fallen on “hard times” not of their own making, for most Americans in the nineteenth and early decades of the twentieth centuries, there was often a reluctance or embarrassment to accept such benevolent and well-intentioned “helping-hands.”
The spirit and culture of “Americanism” was self-reliance, and personal independence. Acceptance of such voluntary charity was taken to mean an inability to be self-supporting and being a real “man” (or “woman”) who could stand on their own two feet. (See my article: “A World Without the Welfare State.”)
Even during the Great Depression of the 1930s, when the U.S. government under the Franklin Roosevelt Administration began implementing many of the redistributive programs that marked the shift toward the American welfare state, many of the unemployed were hesitant to take a handout “for free.”
People who lived during that time have told stories of how an unemployed man might knock on the backdoor of a house and offer to mow a lawn, or chop firewood, or do some odd-job repairs in exchange for a meal or a place to sleep overnight in a shed or a garage.
This was a way for a person to maintain his sense of personal dignity and self-respect that he was not so “down and out” that he had to accept “charity” from someone.
The New Age of the Entitlement Mentality
Compare this with the personal attitudes and social psychology of today. It is captured in the word, “entitlements.” Taking from others through government redistributive transfers – even demanding that others pay – for their food, living arrangements, personal needs, retirement, healthcare, entertainments and pleasures is now considered by too many Americans as both legitimate and as ethical as earning an income to financially cover the expenses of everyday life.
You are entitled to what others have produced by the mere fact that you “need” or “desire” it, and it is justified simply on the fact that you have “too little” and those others have, in comparison, “too much.”
In the early years of the American Republic, social philosophers in their books and clergymen from their church pulpits often emphasized the morality and character building of “self-help.” Today, the vast majority of self-appointed intellectual “leaders” and social “experts” insist that most people are not only not responsible in any meaningful way for their circumstances or improvements in them, but that their situation is due to the injustices of other people’s actions or inactions.
Those in less fortunate material or social circumstances are implicitly and often explicitly told that they legitimately have a “right” to be indignant, angry, resentful, and demanding of others who, by the mere fact that they have “more” of the desired things of life, demonstrate that they have oppressed, exploited or discriminated against them.
It is also argued that the only way that these injustices maybe remedied is through the government taking from the wealthier “Peters” and transferring it to the underprivileged “Pauls” of society.
The Welfare State Redistributes Power to Government
Now, of course, what this really entails is a transfer of income and wealth from those who may have earned it through the productive activities and transactions of the marketplace to those in government who, now, have control over that taxed financial wherewithal.
Those in political power – politicians and bureaucrats – and those with sufficient political influence – special interest and ideological groups – transfer to themselves the authority and governmental power to determine how much some will be allowed to keep out of what they may have honestly earned and how much of what has been taken will be redistributed to others deemed deserving by those ladling out the government largess.
More and more, all in society are returning to a new slave-dependency existence. On the one hand, the political “masters” make the productive members of society work for them in the form of the tax burdens imposed on these remaining industrious segments of the social order.
And on the other hand, the recipients of what the government hands out in various forms and amounts are dependent for their standard of living and life-opportunities on the basis of what the political redistributors decide is that “just,” “fair” and “rightful” portion they are to receive out of the national economic pie over which welfare state paternalists and power-lusters have increasing control.
All become, in one role or another, wards of the state. This goes far beyond the obvious “entitlement” programs of Social Security, Medicare or Medicaid. It includes taxing and funding for public housing, food stamps, unemployment insurance, subsidized education and even government supplied cellphones and electronic tablets and computers.
It also includes what often goes on under the phrase “crony capitalism,” through which significant segments of the business community receive corporate subsidies, anti-competitive regulations, trade protections, lucrative government contracts, and special earmarked tax breaks.
Indeed, government becomes what the famous nineteenth century French free market economist, Frederic Bastiat, called “the great fiction” through which everybody tries to live at everyone else’s expense.
Weakening Individual Liberty and Responsibility
Undermined and threatened by all of this is the original principle upon which the great “American experiment” in self-government was founded: the right of the individual to his own life and liberty; to live his life as he peacefully and productively chooses, being neither a “master” nor a “servant” in a compulsory social relationship.
The societal contradiction that persisted in that earlier America due to human slavery in a portion of the country highlighted the contrast between the “old world” of bondage versus the “new world” of individual freedom, voluntary association and self-responsibility. It was also revealed in the less than equal legal status of women in that earlier American society.
But this contrast between the practices of liberty and slavery side-by-side reflected the transition through which increasing parts of the world were passing from the master-servant relationship in human affairs that had dominated from the beginning of recorded history to the new individualist philosophy that spoke of and reasoned for human liberty, personal responsibility and free association among the members of any society.
But for more than a hundred years, now, under the guise of a “higher freedom,” and a “fairer” notion of a “social justice,” the world has been slowly but surely reverting back to a paternalistic dependency state. (See my article, “The Menace and Immorality of the Welfare State.”)
Perverting the Meaning of “Economic Freedom”
It is reflected in a new use of the phrase, “economic freedom.” For well more than two centuries, economic freedom has meant the right of the individual to guide his own life in the choice and selection of a career, occupation or profession; the liberty to invest in, open and run a business in peaceful competition with market rivals for consumer business; the right of people to enter into voluntary and mutually agreed-upon transactions of all sorts including in the labor market; and to keep the income and wealth that one has earned through productive and profitable activities in the arena of market exchange.
In recent protests in South Africa, university students have objected to a planned increase in tuitions at government-run institutions of higher learning. One student activist group called themselves the “Economic Freedom Movement,” by which they mean that anything they may want, including a university education, should be provided to them for “free.”
“Economic freedom,” in other words, is now to be understood as the freedom from having to personally pay for anything that one wants. This, of course, means that someone else is to do the paying and to be made the tax-slave to provide them with the goods and services they don’t want to work for to obtain.
But once someone else is to be compelled to pay through taxes for what you want, then you are as much a dependent slave as the one working to cover it’s expense. Once the State is the primary or monopoly supplier of what you want, what it is that you get is out of your hands – since you have “demanded” not to have to pay for what you want yourself – with the decision-making transferred to the political and bureaucrat paternalistic providers who decide what each in society should receive as their “just desserts.”
This is the future that more and more faces all of us and our children and grandchildren, unless we successfully restore the idea and ideal of the free individual with his inalienable right to his life, liberty and honestly acquired property.
It is a daunting task given the current trends in society. But it is not impossible with determined friends of freedom who devise ways to effectively articulate the principle of liberty, and show why it offers an ethically and fiscally better future for all of us, rather than continue down the road to the new slavery of the welfare state.