Pragmatic Road to Bankruptcy

September 16, 2010

by Mario Rizzo

In the September 15th Wall Street Journal there is a chart that gives a quick view of the “pragmatic” expansion of entitlement programs that has led to where we are now. Who could have predicted the long-term consequences of case-by-case pragmatic problem solving?  I suggest Herbert Spencer, Ludwig von Mises, and Friedrich Hayek.

The article itself is perhaps one of the most important that has appeared in quite a while. I tried to reproduce the excellent graphic that illustrates the road to the entitlement but I could not do it in a way that is large enough. You may be able to see it through the Fox News link if you don’t have access to the Wall Street Journal (“An Obstacle to Deficit Cutting: A Nation on Entitlements”).

The numbers of people getting entitlement benefits is very large and growing:

“As recently as the early 1980s, about 30% of Americans lived in households in which an individual was receiving Social Security, subsidized housing, jobless benefits or other government-provided benefits. By the third quarter of 2008, 44% were, according to the most recent Census Bureau data.

That number has undoubtedly gone up, as the recession has hammered incomes. Some 41.3 million people were on food stamps as of June 2010, for instance, up 45% from June 2008. With unemployment high and federal jobless benefits now available for up to 99 weeks, 9.7 million unemployed workers were receiving checks in late August 2010, more than twice as many as the 4.2 million in August 2008.

Still more Americans—19 million by 2019, according to the Congressional Budget Office—will get federal aid to buy health insurance when legislation passed this year is implemented.”

Now the challenge will be to reverse this unsustainable situation when so many people are now dependent. My own view is that there will not be an orderly reduction. This is because the various interest groups will seek to prevent major reductions. And the tax-paying public will resist higher taxes.

This should be interesting.

11 Responses to “Pragmatic Road to Bankruptcy”

  1. Gene Callahan Says:

    Of course, the expansion of entitlement programs has been driven by ideology all along — a pragmatic approach might have noticed they weren’t working, right? — but I can see that “pragmatic” is now being used as a code word for “ideologies we don’t like.”

  2. Jerry O'Driscoll Says:

    The chart does not take account of corporate welfare.

  3. Troy Camplin Says:

    Gene’s probably right about how the term “pragmatism” gets used. Though I would modify it and argue that people also use “pragmatism” to describe what they want to do when they want to hide the fact that they are in fact ideologically driven. I personally still think it primarily means “what works to give government more power.” It’s an excuse to mask ideology.

    Jerry also makes an excellent point. Corporate welfare is also a government benefit.

  4. Mario Rizzo Says:

    My impression is that what we have seen over the years is a group who wanted expansion of the entitlement state for reasons of a “big vision” (ideology) and a more numerous group that simply thought it was solving social problems as they came up. Most people do not have explicit big visions. They are too busy working.

  5. Troy Camplin Says:

    Why go into politics if not for ideology? What other work would you have if you held elected office?

  6. Jim Henley Says:

    @Mario Rizzo: On the one hand, you’ve got a doctorate. On the other, you use the term “entitlements” extremely imprecisely. Any particular reason? NB: The chart that inspired your post does not show the percentage of households receiving entitlements.

  7. Mario Rizzo Says:

    @Jim Henley: The chart was titled, “The Entitlement State: History of Major Government Benefits Programs.”

    But it is true I have not thought much about the difference between “entitlement programs” and other benefit programs. Is it the existence of a “dedicated” tax, trust fund, or the lack of the need to refund the programs each year? All of the above?

  8. Jim Henley Says:

    I’m confused. Why would you need to have “thought much” about the distinction between entitlements and other benefits? Why not use the settled understanding of the term? e.g. and e.g..

    Also:

    The chart was titled, “The Entitlement State: History of Major Government Benefits Programs.”

    There are actually two charts in the article. The main blockquote you chose to excerpt glosses the first chart, which shows “Percentage of US population living in a household receiving some government benefits.” The text of the article makes clear that that chart includes many non-entitlement benefits including UI. I confess that I thought that was the chart you were referring to, since it’s the first chart in the article and it’s the one your blockquote speaks to directly.

    Apparently you meant the other chart? No worries. It does have a title. It also has the subtitle, “History of Major Government Benefits Programs,” and the legend, “Government spending on benefits as a percentage of total outlays.” It’s unclear what they mean by “benefits” but there’s no way to square their percentages for 2009-10 with OMB’s figures for total outlays for those fiscal years. In fact,

    But what confuses me is, you do this for a living:analyze matters of political economy. I’d assume you have better and more deeply considered resources to support your theses than poorly specified charts in the popular press.

  9. Troy Camplin Says:

    Now, you are aware that this is a blog and not a scholarly paper, and that there is a certain informality to blogs, right? Perhaps you should try reading his scholarly papers before making such ridiculous comments that detextualize his comments.

  10. Jim Henley Says:

    @Troy: Indeed, I am aware! If this were Roger Ebert’s blog and he tossed off something like, “The interplay of Downey and Paltrow in Iron Man reminds me of something out of a Kurosawa film,” as an aside in the course of discussing something else, I’m going to figure he’s got his reasons for thinking that and move on.

    But if he’s posting about how “There are too many damn jump cuts in movies since MTV became influential and Variety has a superb graph showing the trend,” and then links to a graph showing “Average Total Number of Scenes per Movie by Year Since 1920,” and then, when a reader is confused, explains that he hasn’t thought much about the difference between “jump cuts” and other kinds of scene transitions, that would seem stranger than “informality to blogs” typically covers, you know?


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