The United States stands at a tipping point in 2012. Our out of control spending, lack of job creating policies and rising government assistance claims have pushed the country to a point where there may be no return. Below are the troubling charts showing some disturbing trends that unless we start reversing now, we may be too late to stop.
49.1% of the population lives in a household that receives at least one government benefit, and many likely received more than one, according to the U.S. Census Bureau. That’s up from 30% in the early 1980s.
So what exactly makes up that 49.1%? As of early 2011, 15% of people lived in a household that received food stamps, 26% had someone enrolled in Medicaid and 2% had a member receiving unemployment benefits. The Census data show that 16% of the population lives in a household where at least one member receives Social Security and 15% receive or live with someone who gets Medicare. There is likely a lot of overlap, since Social Security and Medicare tend to go hand in hand, but those percentages also are likely to increase as the Baby Boomer generation ages.
More than 55 million retirees, disabled workers, spouses and children receive Social Security. In 2011, Social Security paid $596.2 billion in retirement benefits to 44.8 million Americans and $128.9 billion in disability benefits to 10.6 million recipients. About 50 million people are covered by Medicare, which spent another $572 billion in 2011. The largest welfare program is Medicaid, which provides benefits to 49 million Americans and cost more than $228 billion last year. The second runner up is the food stamp program, reached a record 46.7 million people, more than doubling under Obama’s term to a record $75.7 billion.
That’s a total of over 150 million Americans – or nearly half the entire population (49.1%) – receiving Social Security, Medicare, Medicaid or food stamps, at a price tag of about $1.6 trillion in 2011. Entitlements now eat up 65.1% of our tax dollars, skyrocketing up from 25.4% just 50 years ago, and now take up an all-time high of spending as a percentage of GDP, according to the Office of Management and Budget.
If you take out Social Security and Medicare recipients and leave in only those who are receiving means-tested welfare, over 100 million Americans – or more than one-third of the entire population (34.5%) – are now receiving some form of federal welfare through Medicaid, food stamps, unemployment or disability claims, according to the U.S. Census Bureau. That’s more than double the 17.1% from the early 1980s.
49.5% of Americans aren’t paying any income taxes, according to the Internal Revenue Service. That means 151.7 million Americans. By comparison, 34.8 million tax filers paid no income taxes in 1984, a huge rise from 14.8%.
Yes, I’m fully aware that many Americans pay many other taxes as well and that they’re also taking advantage of many of the deductions that are available to claim. That’s not my point. My point is that while spending and debt are only going up, overall there is less and less taxpayer revenue going into the system. Instead, we’re relying more and more on foreign creditors for our out of control spending habits, which brings us to our final chart.
48% of our public debt is now held by foreign creditors, according to the Department of Treasury. That’s up from 6% in 1970 and 19% in 1990.
That is the most sobering chart of them all.
What happens when that number hits 51%? The United States then falls to the mercy of its foreign creditors as they start calling the shots. Think German euro bonds and what it’s done to their relationship with Greece, Spain and Portugal. No, it’s not ludicrous. We’re nearly halfway there.
Fundamentally, this is clearly a spending problem, not a taxing problem. While I support pro-growth tax reform as much as many lawmakers on both sides of the aisle, the progressive elites of academia, mainstream media, and Washington, D.C., would have you believe that simply raising taxes on the wealthiest Americans will solve all our economic troubles. They claim that the rich “aren’t paying their fair share.” Yet according to the non-partisan Congressional Budget Office (CBO), the actual amount paid in taxes by the wealthy is higher than it was before the recession while the effective income tax rate of the richest 1% is 29.5% when including all federal taxes, or about twice the 15.1% paid by middle class families.
So what’s “fair?” Fifty percent? Seventy-five percent? Even if we seized 100% of America’s 400 richest billionaires’ combined net worth of $1.5 trillion in assets and income, it wouldn’t even cover 2011’s federal budget deficit of $1.6 trillion.
The liberal Center on Budget and Policy Priorities (CBPP) claims that returning tax rates to the Clinton levels on only the rich would bring in $829 billion extra revenue during the next decade.
Fine. But according to the CBO, the Obama administration’s budgets are projected to incur $9.5 trillion worth of deficits over that same time period. In other words, raising tax rates on the rich will only cover 8.7% of deficit spending over the next 10 years. So then how do we cover the 91.3% of the rest of the deficit spending? Whose taxes will be raised after we soak the rich?
That’s right. Ours.
If you still can’t wrap your head around these figures, Bill Whittle does an excellent job of illustrating what it would take to make up just one year’s worth of U.S. spending.
The sad thing is Whittle even double counts in his scenario just to make it to the end of the year (taking incomes of those making over $250K already fall on the Forbes 400 list).
The bottom line is America is at the tipping point today. When will we finally get serious about solving Washington’s reckless spending habits? Must we get to the crisis level of Greece before the majority finally gets it? By then it’s too late.
Today, I see only one ticket that even has a plan to address the problem. The other ticket simply maintains the status quo long enough till we finally tip over.