Welfare State: Handouts Make Up One-Third of U.S. Wages

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This should be an intersting debate.

CNBC: Welfare State: Handouts Make Up One-Third of U.S. Wages

"Government payouts--including Social Security, Medicare and unemployment insurance--make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn't taken before the majority of Baby Boomers enter retirement.

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

"The U.S. economy has become alarmingly dependent on government stimulus," said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. "Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits."

The economist gives the country two stark choices. In order to get welfare back to its pre-recession ratio of 26 percent of pay, "either wages and salaries would have to increase $2.3 trillion, or 35 percent, to $8.8 trillion, or social welfare benefits would have to decline $500 billion, or 23 percent, to $1.7 trillion," she said.

Last month, the Republican-led House of Representatives passed a $61 billion federal spending cut, but Senate Democratic leaders and the White House made it clear that had no chance of becoming law. Short-term resolutions passed have averted a government shutdown that could have occurred this month, as Vice President Biden leads negotiations with Republican leaders on some sort of long-term compromise.

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"You've got to cut back government spending and the Republicans will run on this platform leading up to next year's election," said Joe Terranova, Chief Market Strategist for Virtus Investment Partners and a "Fast Money" trader.

Terranova noted some sort of opt out for social security or even raising the retirement age.

But the country may not be ready for these tough choices, even though economists like Schnapp say something will have to be done to avoid a significant economic crisis.

A Wall Street Journal/NBC News poll released last week showed that less than a quarter of Americans supported making cuts to Social Security or Medicare in order to reign in the mounting budget deficit.

Those poll numbers may be skewed by a demographic shift the likes of which the nation has never seen. Only this year has the first round of baby boomers begun collecting Medicare benefits--and here comes 78 million more.

Social welfare benefits have increased by $514 billion over the last two years, according to TrimTabs figures, in part because of measures implemented to fight the financial crisis. Government spending normally takes on a larger part of the spending pie during economic calamities but how can the country change this make-up with the root of the crisis (housing) still on shaky ground, benchmark interest rates already cut to zero, and a demographic shift that calls for an increase in subsidies?

At the very least, we can take solace in the fact that we're not quite at the state welfare levels of Europe. In the U.K., social welfare benefits make up 44 percent of wages and salaries, according to TrimTabs' Schnapp.

"No matter how bad the situation is in the US, we stand far better on these issues (debt, demographics, entrepreneurship) than other countries," said Steve Cortes of Veracruz Research. "On a relative basis, America remains the world leader and, as such, will also remain the world's reserve currency."

Comments (26)

Mar 8, 2011

Good find, this is depressing.

Mar 8, 2011

I sure am glad I shouldn't have to retire for another 45+ years.

Mar 8, 2011
GoodBread:

I sure am glad I shouldn't have to retire for another 45+ years.

during those 45 years, have fun paying increasing sums of money to fund someone else's retirement

Mar 8, 2011
cartman:
GoodBread:

I sure am glad I shouldn't have to retire for another 45+ years.

during those 45 years, have fun paying increasing sums of money to fund someone else's retirement

What am I going to do about it, move to India? That's life.

Mar 8, 2011

I was just going to post this haha.

The reality is items like Social Security have been paid into by working people and they SHOULD receive the money back that they put into it. Unfortunately, this is what happens when we allow our govt to run a ponsi scheme under the pretense of taking care of us.

Why the hell do we need a system like SS? Cant Americans save their own money? Oh yeah.... I forgot, 80% of Americans dont know what a 401K is. But 80% of Americans know who 'Snookie" is.

Give people the money they paid into the system, and cut this Ponzi scheme off. Let people save there own damn money, or let them starve. I dont give a shit. I am sick of the me me me me me mentality that America has become.

I think I was supposed to be born in the Greatest Generation. Im a few years late. They really were the greatest generation. Now we have become a nanny state where everyone is owed something and if they do not get it its racist or some other bull.

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Mar 8, 2011

This is also contraindicative of the fall in salaries as a percent of the wealth in the country - much of the gains in wealth over the past decade have been nonwage investment and stock growth. As a falling share of GDP gains go to the middle class and more CEOs get paid in stock options then the welfare/wages rate is going to rise even holding welfare payments constant. Of course welfare is increasing as well, but probably not as much as this implies.

Mar 8, 2011

I'm actually very interested in seeing what happens in India over the next 50 years. The demographics, location and fairly low rate of urbanization set the tone for a secular shift to an absolutely massive economy rivaling China's, but they are very, very far from that at the current time.

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Mar 8, 2011

India's biggest problem is infrastructure. Without the transportation services necessary to get produce to market they are extremely beholden to inflation spikes.

That and they have crazy corruption.

Ok, India's two biggest problems are infrastructure and corruption.

Don't forget the lack of sanitation.

Or the rural poor!

Ok, ok! India's four biggest problems are....

Mar 8, 2011

It's hard to call social security a "handout."

Mar 8, 2011

Social security is not a handout since the amount of your benefit is related to how much you pay into it. In addition, unemployment compensation is a form of INSURANCE. You and your employer both pay a percentage of your salary (how this works out exactly depends on the state) into an employment insurance system. Your benefits are directly related to your earnings in the past.

It's incredible the lengths people will go to to distort an issue.

Mar 8, 2011
prinmemo:

Social security is not a handout since the amount of your benefit is related to how much you pay into it.

Unfortunately, that might end one day. In that sense, SS is more like a Ponzi scheme than a handout. I'll let everyone judge for themselves what they personally think is worse...

Mar 8, 2011

What's the counter argument to this, something along the lines of "half the wealth is inherited or married into, not earned"?

Mar 8, 2011

How is SS and Medicare a handout? People paid for it. Keep in mind that there was a huge jump between 60's and 80's in the number of beneficiaries ( 14.9 to 35.6 mln), and that the jump between 80's and 2000 hasn't been quite as large (35.6 to 45.4 mln). I think the system is just now reaching the inflow-outflow equilibrium and may have to be readjusted and tweaked, which doesn't mean that it's a failure.

More is good, all is better

Mar 8, 2011

Is it just me, or has this forum gotten mad political lately? Hey Patrick, hit me up if you want an intern for PoliticsOasis.com, lol.

Mar 8, 2011

Well, this what happens when the wealthiest 10 percent of households hold nearly 90 percent of the total financial wealth in the country.

http://sociology.ucsc.edu/whorulesamerica/power/we...

Mar 8, 2011
WegmansTuna:

Well, this what happens when the wealthiest 10 percent of households hold nearly 90 percent of the total financial wealth in the country.

http://sociology.ucsc.edu/whorulesamerica/power/we...

Wealth is nothing more than assets > liabilities. Rich or wealthy individuals buy more assets than quickly depreciating goods. They invest, but property, etc.

Mar 8, 2011
ANT:
WegmansTuna:

Well, this what happens when the wealthiest 10 percent of households hold nearly 90 percent of the total financial wealth in the country.

http://sociology.ucsc.edu/whorulesamerica/power/we...

Wealth is nothing more than assets > liabilities. Rich or wealthy individuals buy more assets than quickly depreciating goods. They invest, but property, etc.

If you'd read the article then you might have known they extensively talk about income, wealth, the definitions of wage income versus interest income, wealth that is illiquid (invested in property), wealth that is immeasurable (the price of a car that has significantly depreciated), et cetera.

But I'm sure your knee-jerk denialism is contributing positively to the conversation. Please, carry on.

Mar 8, 2011
WegmansTuna:

Well, this what happens when the wealthiest 10 percent of households hold nearly 90 percent of the total financial wealth in the country.

http://sociology.ucsc.edu/whorulesamerica/power/we...

Actually, the net worth split is roughly 1/3-1/3-1/3. It's actually pretty sensible and roughly follows the 80-20 rule.

My biggest concern is that the top 10% less the top 1% are the real bedrock of Democracy. They're the traditional middle-class. The rich tend to like putocracy; the poor like socialism; the top 10% understand that economic and political freedoms work well for everyone. And when the rich get too powerful relative to the rest of the top 10%, we risk veering off in the direction of plutocracy, which is just as bad as Socialism- perhaps worse (since most socialist countries these days at least honor civil liberties.)

Mar 8, 2011

Yeah, I saw this article. While I agree that unemployment is insurance, two years of it is a little beyond the insurance stage. Without getting into the pros and cons argument, I don't think unemployment should be extended beyond the two year mark.

While the article is aiming for a certain political viewer, I do think it is telling. A large amount of the population is living off money coming from the government. Yes, people have paid in, but it is still a check and an entitlement from uncle Sam.

Our goal should be to reduce this figure.

Mar 8, 2011

I am mother fucking exhausted from work and absolutely not getting into this cunt fest argument with you.

Long story short, go cry about whatever and dream a dream about a time when you can take from people who are more lucky or successful than you. In the mean time I am going to try and get 4 measly fucking hours sleep.

This thread is fucking locked.

Mar 8, 2011
ANT:

I am mother fucking exhausted from work and absolutely not getting into this cunt fest argument with you.

Long story short, go cry about whatever and dream a dream about a time when you can take from people who are more lucky or successful than you. In the mean time I am going to try and get 4 measly fucking hours sleep.

This thread is fucking locked.

Sorry ANT. Rough day for me too. My mother always told me to find out what I'm good at and try and excel at that in life, but it turns out what I'm good at is being an asshole.

Ah well.

Mar 8, 2011

bI unlocked it since I do not want to hinder the discussion.

Mar 8, 2011
Comment

More is good, all is better

Mar 9, 2011
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