Tuesday, May 29, 2012

Government Payments to Households Grow

The Census Bureau recently released figures that show 49.1% of the U.S. population lives in a household that received some type of government benefit or assistance in the first quarter of 2011.  This figure has ballooned since the early 1980’s when it measured 30% and since 2008 when it measured 44.4%.   
This figure is likely affected by retiring baby boomers receiving Social Security and Medicare but the staggering increases serve to underline the fiscal issues facing the country.  Where will the dollars come from to support the non-stop government spending and existing budget deficits?  Tax increases threaten to suffocate the private sector (producer class) that creates wealth to fund the government spending.  Decreasing government spending too quickly may also lead to a recession as the economy is still in a fragile state. 
Long term the best solution likely lies somewhere in between - a combination of spending decreases and tax increases phased in over time.  Many of these tough decisions will become even tougher, though, if and when the percentage of the voting population receiving government subsidies becomes the majority.  49.1% is getting awfully close.