New Threats to Freedom Series

America's Entitlement Epidemic

Nicholas Eberstadt

• Publisher: Templeton Press
• Year: 2012
• ISBN:
  9781599474366
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

In A Nation of Takers: America's Entitlement Epidemic, one of our country's foremost demographers, Nicholas Eberstadt, details the exponential growth in entitlement spending over the past fifty years. As he notes, in 1960, entitlement payments accounted for well under a third of the federal government's total outlays. Today, entitlement spending accounts for a full two-thirds of the federal budget. Drawing on an impressive array of data and employing a range of easy- to- read, four color charts, Eberstadt shows the unchecked spiral of spending on a range of entitlements, everything from medicare to disability payments.  But Eberstadt does not just chart the astonishing growth of entitlement spending, he also details the enormous economic and cultural costs of this epidemic.   He powerfully argues that while this spending certainly drains our federal coffers, it also has a very real, long-lasting, negative impact on the character of our citizens.  Also included in the book is a response from one of our leading political theorists, William Galston. In his incisive response,  he questions Eberstadt's conclusions about the corrosive effect of entitlements on character and offers his own analysis of the impact of American entitlement growth.  

PART I

America’s Growing Dependency
on Government Entitlements

The Rise of Entitlements in Modern America, 1960–2010

INTRODUCTION

THE AMERICAN REPUBLIC has endured for more than two and a quarter centuries; the United States is the world’s oldest constitutional democracy. But over the past fifty years, the apparatus of American governance has undergone a fundamental and radical transformation. In some basic respects—its scale, its preoccupations, even many of its purposes—the United States government today would be scarcely recognizable to a Franklin D. Roosevelt, much less an Abraham Lincoln or a Thomas Jefferson.

What is monumentally new about the American state today is the vast and colossal empire of entitlement payments that it protects, manages, and finances. Within living memory, the government of the United States of America has become an entitlements machine. As a day-to-day operation, the U.S. government devotes more attention and resources to the public transfers of money, goods, and services to individual citizens than to any other objective; and for the federal government, more to these ends than to all other purposes combined.

Government entitlement payments are benefits to which a person holds an established right under law (i.e., to which a person is entitled). A defining feature of these payments (also sometimes officially referred to as “current transfer receipts of individuals from government,” or simply “transfers”) is that they “are benefits received for which no current service is performed.”2 Entitlements are a relatively new concept in U.S. politics and policy; according to Merriam-Webster, the first known use of the term was not until 1942.3 But entitlements have become very familiar, very fast. By the reckoning of the Bureau of Economic Analysis (BEA), the research group within the Commerce Department that prepares the U.S. government’s GNP estimates and related national accounts, income from entitlement programs in the year 2010 was transferred to Americans under a panoply of over fifty separate types of programs, and accounted for almost one-fifth (18 percent) of personal income in that year.4

The breathtaking growth of entitlement payments over the past half-century is shown in Figure 1. In 1960, U.S government transfers to individuals from all programs totaled about $24 billion. By 2010, the outlay for entitlements was almost 100 times more. Over that interim, the nominal growth in entitlement payments to Americans by their government was rising by an explosive average of 9.5 percent per annum for fifty straight years. The tempo of growth, of course, is exaggerated by concurrent inflation—but after adjusting for inflation, entitlement payments soared more than twelve-fold (1248 percent), with an implied average real annual growth rate of about 5.2 percent per annum (see Figure 2).5 Even after adjusting for inflation and population growth, entitlement transfers to individuals have more than septupled (727 percent) over the past half-century, rising at an overall average of about 4 percent per annum (see Figure 3).6

These long-term spending trends mask shorter-run tendencies, to be sure. Over the past two decades, for example, the nominal growth in these entitlement outlays has slowed to an average of “only” 7.1 percent a year (or a doubling every decade). Adjusted for inflation by the Consumer Price Index, real entitlement outlays rose by an average of “just” 4.4 percent over those years—and by a “mere” 3.2 percent a year on a per capita basis. But if the pace of entitlement growth has slowed in recent decades, so has the growth in per capita income. From 1960 to 2010 real per capita income in America grew by a measured 2.2 percent on average—but over the past twenty years, it has increased by 1.6 percent per annum.7 In other words, total entitlement payouts on a real per capita basis have been growing twice as fast as per capita income over the past twenty years; the disparity between entitlement growth on the one hand and overall income growth on the other is greater in recent times than it was in earlier decades.

The magnitude of entitlement outlays today is staggering. In 2010 alone, government at all levels oversaw a transfer of over $2.2 trillion in money, goods, and services to recipient men, women, and children in the United States. At prevailing official exchange rates, that would have been greater than the entire GDP of Italy, roughly the equivalent of Britain’s and close to the total for France—advanced economies all with populations of roughly 60 million each.8 (The U.S. transfer numbers, incidentally, do not include the cost of administering the entitlement programs.) In 2010 the burden of entitlement transfers came to slightly more than $7,200 for every man, woman, and child in America. Scaled against a notional family of four, the average entitlements burden for that year alone would have approached $29,000. And that payout required payment from others, through taxes, borrowing, or some combination of the two.

A half-century of unfettered expansion of entitlement outlays has completely inverted the priorities, structure, and functions of federal administration, as these had been understood by all previous generations of American citizens. Until 1960 the accepted purpose of the federal government, in keeping with its constitutional charge, was governing. The federal government’s spending patterns reflected that mandate. The overwhelming share of federal expenditures was allocated to defending the republic against enemies foreign and domestic (defense, justice, interest payments on the national debt) and some limited public services and infrastructural investments (the postal authority, agricultural extension, transport infrastructure, and the like). Historically, transfer payments did not figure prominently (or, sometimes, at all) in our federal ledgers. The Bureau of Economic Analysis (BEA), which prepares America’s GNP estimates and related national accounts, identifies only two calendar years before 1960 in which federal transfer payments exceeded other federal expenditures: in 1931, with President Herbert Hoover’s heretofore unprecedented public relief programs, and in 1935, under President Roosevelt. (Even then, given the limited size of the U.S. government in those years, these entitlement transfers were negligible from a contemporary perspective—totaling just over 3 percent of GDP in 1931, and under 3 percent in 1935.9) For most of FDR’s tenure, and for much of the Great Depression, the share of federal spending devoted to income transfers was a third or less of total spending.

In 1960, entitlement program transfer payments accounted for well under one-third of the federal government’s total outlays (see Figure 4)—about the same fraction as in 1940, when the Great Depression was still shaping American life, with unemployment running in the range of 15 percent. But then—in just a decade and a half—the share of entitlements in total federal spending suddenly spurted up from 28 percent to 51 percent. It did not surpass the 50 percent mark again until the early 1990s. But over the past two decades it rose almost relentlessly, until by 2010 it accounted for just about two-thirds of all federal spending, with all other responsibilities of the federal government—defense, justice, and all the other charges specified in the Constitution or undertaken in the intervening decades—making up barely one-third (see Figures 5 and 6). Thus, in a very real sense, American governance has literally turned upside-down by entitlements—and within living memory.

The story of the (im)balance between entitlement transfers and overall government activities—at the federal, state, and local levels—is none too different (see Figures 7 a...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Acknowledgments
• Part I: America’s Growing Dependency on Government Entitlements
• Part II: Dissenting Points of View
• Epilogue: Response to Levin and Galston
• About the Contributors