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SCHWARZWALDER: Are we all dependents now?
Growth of entitlements attacks self-reliance
Question of the Day
Terms such as self-reliance, rugged individualism and risk-taking are embedded in the American lexicon. We identify as a people who turned a continental wilderness into the world’s most productive nation. We claim to honor successful entrepreneurs and esteem profitable innovators.
Yet, not only are the wealthy often vilified and their firms dismissed as predatory (e.g., President Obama’s recent riffs against Bain Capital), but a quiet and rather hidden reliance on government undermines our claim to be quite as economically brave as we might wish to believe.
According to George Mason University’s Mercatus Center, nearly 150 million Americans receive some form of federal assistance. Medicare, Medicaid, Social Security, unemployment benefits, food stamps, various tax credits, business deductions, agriculture subsidies and many other federal payments land silently in our eager hands on a regular basis.
There is no reason why, given how burdensome and complex our tax code is, ordinary Americans should not be able to claim deductions for such things as charitable giving, raising and adopting children, or the cost of a home mortgage.
Similarly, many businesses need all the tax help they can get. Rules — local, state and federal — and large, encroaching government levies make deductions, credits and other incentives quite necessary.
Yet many who receive federal benefits see them less as a necessary offset to federal penalties than as their just due. For example, if you work 40 years and pay into the Social Security system the entire time, you’re only getting back what you put in, right? It’s called an “entitlement” for a reason.
First, let’s acknowledge the simple reality that we can no longer afford such programs as we have known them. As political analyst Yuval Levin wrote recently, “Sustaining existing programs of social insurance, let alone continuing to build new ones on the social-democratic model, has become increasingly difficult in recent years, and projections for the coming decades paint an impossibly grim and baleful picture.”
Even someone as far to the left as former Labor Secretary Robert Reich concedes, “America has a long-term budget deficit that’s scary.”
With all of that acknowledged, what too often is ignored in the contests over entitlement reform, streamlining the tax code, closing the deficit and related battles is the effect of federal benefits on the psyche of those not only enjoying but, increasingly, depending on them. That dependence is both financial and psychological. It is also dangerous.
We are becoming what historian Niall Ferguson calls an “anti-risk culture.” The regulatory, supervisory and tax regimes of federal, state and local governments on the one hand, and the soothing assurance that should one fail, government aid almost invariably will be on the way on the other provide wonderful disincentives for the uncertain ventures needed to keep our economy vibrant.
Guaranteed benefits incentivize mediocrity. Knowing that one will receive health insurance, no matter what, income and other goodies will cause at least a significant part of the population to coast rather than thrive.
This is not to suggest we do away with every federal benefits program. We should modernize the various programs such that greater personal choice and comprehensive market-based reforms are implemented. The assurance, however, that Uncle Sam will always be there erodes, at least for some, the desire to achieve that has driven America’s historic and unparalleled growth.
In his 1935 State of the Union message, Franklin D. Roosevelt said,”The lessons of history show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit.”
Although the “relief” of which FDR spoke rightly was designed to curtail starvation during the Great Depression, more broadly and contemporarily defined, “relief” now encompasses so much of American entrepreneurial life that the productivity necessary to pay for the many types of federal support itself is dissipating.
Reliance on government deters growth not just because it drains money from the private sector but because it suffocates aspiration. Many who are quick to asperse recipients of food stamps are guiltless about taking Social Security — even though what they take out of that shell game of a system far exceeds what they ever put into it.
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