Americans Are More Reliant Than Ever on Government Aid
An aging population and economic distress raise dependence on federal and state support.
By Aaron Zitner, Jon Kamp and Brian McGill, The Wall Street Journal
Americans’ reliance on government support is soaring, driven by programs such as Social Security, Medicare and Medicaid. Neither party has much incentive to dial back the spending.
In 1970, government safety-net money accounted for significant income in fewer than 1% of America’s counties, new research by the bipartisan think tank Economic Innovation Group finds. As America’s population aged, more counties came to count on this government backing for a significant share of their total income. That is defined by EIG, the think tank, as those in which government safety-net and social programs account for 25% or more of personal income in the county…The analysis also includes unemployment insurance, food stamps, the earned income tax credit, veterans benefits, Pell grants, Covid-era payments and other income support. States help pay for some of these programs, such as Medicaid, but the federal government covers roughly 70% of the total cost.
By 2022, 53%—more than half of all U.S counties—drew at least a quarter of their income from government aid… [end quote]
Here is the link to the study:
In 2022, Americans received $3.8 trillion in transfer income from the government. If that were split evenly across the entire US population, it would be about $11,500 per person. Transfers now account for almost 18% of total personal income in the United States, up from 8% in 1970.
With an aging population, rapidly increasing medical costs and stagnating wages the trend of increasing reliance on government support will continue. This will drive increasing government deficits unless the economy grows faster than the increase in support needs.
The nonpartisan Congressional Budget Office predicts that debt held by the public, boosted by the large deficits, reaches its highest level ever in 2029 (measured as a percentage of GDP) and then continues to grow, reaching 166 percent of GDP in 2054 and remaining on track to increase thereafter. That mounting debt would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook. [end quote]
Although Treasury yields are falling now it’s only a matter of time before the buyers force the yields back up due to increasing supply and waning demand.
Wendy