Dependency

Let’s review some Federal government policy history.

During the Great Depression, the Roosevelt administration instituted wage floors on labor and price floors on farm produce, which priced men out of an already depressed labor market and priced food out of reach of much of that unemployed population.  As a result, the same administration instituted food stamps to “help” the disadvantaged to obtain food.  This combination of policies made millions of Americans dependent on government for food help.  It also reduced farmers’ independence from government farm supports.

During the same Depression, the same administration instituted Social Security.  The Social Security Act was intended provide supplemental income for America’s retired, who were expected to continue to rely on their own resources and family for the rest of their income, and all Americans were (and are) required to participate.  The Act also  “encouraged” the states to institute unemployment insurance programs, which would be partially funded by the Federal government.

The Social Security side was quickly morphed by subsequent administrations into full income payments to our retired, and for increasingly longer periods of retirement.  An effect of this was to reduce the reliance of millions of Americans on their family for their retired life and to make them dependent instead on government for their subsistence.

The unemployment insurance programs increased state dependence on government for state funding, and it increased individual Americans’ dependence on government for subsistence while between jobs, at the same time commensurately reducing the ties to family local community for support.  Today, unemployment insurance is payable for 99 weeks of being unemployed, greatly extending the dependency of both individual Americans and the states.

The Johnson administration instituted Medicare and Medicaid programs to “help” Americans obtain health care services.  The effect, though, was to contribute sharply to inflation in the cost of health care by artificially expanding demand for the services: Americans are required to participate in the programs, whether we wish to or not.  From this, Medicare and Medicaid transfer payments—the former directly to participants, and the latter to the states, who are strongly “encouraged” to have Medicaid programs—were greatly increased, at taxpayer cost—and at increased dependency of individual Americans and the states on the Federal government for our health needs.

In this context, it’s useful to think about Health Savings Accounts.  HSAs were instituted during the Bush the Younger administration, ostensibly to help Americans to save before-tax money for medical expenses—those rapidly rising expenses just mentioned.  However, HSAs have annual contribution limits, so Americans cannot save overmuch, and Americans must have high deductible insurance policies in order to be eligible for the HSAs.  But those deductibles are out-of-pocket payments, so disadvantaged Americans are priced out of the accounts—they’re still dependent on government for their health care support.

The Obama administration has passed Dodd-Frank (I’ll elide Obamacare in this post; enough has been written elsewhere that the dependency created here is well understood).  This Act creates businesses as dependents on the Federal government for support should they run into market trouble and as dependents on the Federal government for management decisions they will be permitted to make.

Oil and gas company subsidies have been paid by the Federal government since shortly after WWI.  I include them here because of the oil and gas companies’ perceived dependence on them; in fact, the dependence is purely management psychology: these companies do not need the subsidies.  Green energy subsidies have been paid by the Federal government since the early ’80s for biofuels and since the mid -90s for renewables generally and for wind and solar energy in particular.  These companies truly are dependent on the government supports, since they do not have a marketable product and cannot survive in the energy industry without them.

Some illustrations of Americans’ growing dependency on government for their own welfare are these.  Nicholas Eberstadt has noted that the percentage of US households receiving means tested public benefits in general has risen from 7% in 1979 to slightly more than 30% in 2009.  It’s important to note that from 1979 until 1992, the percentage of households receiving means tested public benefits generally paralleled the unemployment rate (except the recession of 1982-83 when the unemployment rate was the slightly higher of the two).  However, by 2003 the percentage of households receiving means tested benefits had jumped to 24%, compared to the then 6% unemployment rate.  This ratio is essentially unchanged today, with the unemployment rate now above 8%.

Moreover, according to Eberstadt, the actual poverty rate fluctuated in the 9%-12+% range during the period to ’92, and since then the mismatch between means tested benefit recipients rates and poverty rates have mirrored the mismatch with unemployment rates.

Moreover, the number of people receiving federal disability benefits (vis., under the Social Security program) grew from 0.05 per person in the 18-64 age band in 1960 (pre-Medicare/Medicaid), to 0.17 in 1970, to 4.6 in 2006. This occurred despite an ever-healthier American workforce over those same 46 years—two generations of Americans.

These are clear indications of Americans’ growing dependency on government and increasing loss of personal responsibility, self-reliance, and reliance on local community resources.

Yet, the politicians in the Federal government are enormously smart people, entirely capable of clear, rational thought.  They were 80 years ago, and are today, fully capable of foreseeing the outcomes of their policies.  What are we to make of the motives of politicians who push them anyway?

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