Carpe Diem

Entitlement Nation: What Does Government Do? Mostly Cut Checks to Beneficiaries, $2.3T in 2010

AOL Opinion Editor John Merline asks a great question (via Instapundit with h/t to Pete Friedlander): “What’s the biggest single job the federal government undertakes?” and here’s his answer:

“National defense? Nope.

Homeland security? Wrong.
Transportation? Not even close.
Law enforcement? No way.
Education? Getting colder.
Foreign aid? Are you kidding?
Nope, the biggest single thing the federal government does these days is … cut checks.
Lots and lots and lots and lots of checks that go to individual citizens — $2.3 trillion worth last year alone. In fact, according to a table buried deep inside the little-noticed Historical Tables volume of the White House’s 2012 budget, these “direct payments to individuals” accounted for more than two-thirds of federal spending in 2010 (see chart above). That’s a post-war high.
And that share has been steadily climbing. Payments to individuals accounted for 2.4 percent of all federal spending in 1945. By 1980 it has risen to 47 percent, and in 1992 it crossed the 50 percent mark. (See  chart above.)
Where does all this money go? More than half goes to seniors through Social Security and Medicare. Only about 38 percent goes to the poor. And the rest of the payments end up with farmers, students, the unemployed, those looking for retraining help, veterans and other select groups.”
And the biggest of these direct payment programs — Social Security, Medicare and Medicaid — are also the fastest growing in the federal budget.”

MP:  The chart below displays a breakdown of the $2.3 trillion in payments to individuals in 2010 (from Table 11.3), and shows that more than 68% of payment are for Social Security and Medicare/Medicaid.  

In John’s article, he points out that at the same time that payments to individuals are rising, both in absolute terms and a share of total federal outlays, “the federal government increasingly relies on fewer and fewer taxpayers to cover its costs.”

His conclusion:
“When you put these two trends together, what you find is that the federal government has over the years essentially turned into a gigantic wealth-transfer machine — taking money from a shrinking pool of taxpayers and giving it out to a growing list of favored groups.

Now, depending on your political perspective, you could view this is a good thing or a bad thing.

But whatever your view, this situation will make getting the federal budget under control increasingly difficult, since it will invariably involve pitting those writing checks against those cashing them.”

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