The United States is in a “death spiral” in which more and more people are becoming dependent on the federal government and which is stifling the private sector.
That’s the view of George Will, columnist, author and Fox News Channel contributor, who spoke recently in Salt Lake City.
“I believe, ladies and gentlemen, there is an agenda in Washington to change social norms, to de-stigmatize dependency, and by so doing, change the national character, to reconcile Americans to being wards of the government,” Will said as part of the Zions Bank Premier Wealth Management speaker series. “We’re reaching the tipping point at which an ever-larger majority of Americans are related to the central government either as its employees or as its clients.
“This, to me, presages a death spiral of the welfare state. As the weight of the government becomes more and more suppressive of the energy of the private sector, which alone, by its growth, can throw off the revenues to pay the bills. It suppresses the energy of the private sector. It tries to make up for the shortfall by increasing taxes, which increases the weight of the government, and the death spiral continues.”
Government dependency, he said, comes in many forms, including paying for healthcare, more people relying on food stamps, and involving even the energy sector, which he said is “full of political and government dependency.”
It also is evident in the growth of Social Security disability.
“The public is healthier than ever before, the workplace is safer than ever before, work is less stressful than ever before, and disability rolls are exploding,” Will said. “The only explanation for that is, it’s more rational to go on dependency of the government than it is, often, to work.”
In a presentation sprinkled with humor and several references to baseball, Will spoke about demographics, healthcare costs, politics, Social Security costs, government dependency and income inequality.
Regarding the current state of the U.S. economy, Will noted that it is in the sixth year of recovery after the recession but has just now reached the job levels of 2008. However, the U.S. now has 15 million more people.
In comparison, he said, President Reagan had a worse recession, which Will said Reagan caused in order to “get inflation out of the system.” Unemployment at the time reached 10.8 percent, but the recovery featured five quarters of 7 percent economic growth and a six-year average of 4.6 percent growth.
“Today, we’re scooting along on the bottom, struggling to get to 2 percent growth. Small wonder then that 40 percent of recent college graduates are either unemployed or in jobs that do not require college degrees and one in three of them are at home, living with their parents,” he said.
What’s more, median family income today is only at the 1989 level, and net worth is below what it was then.
“If the recent recovery had been as good as the post-war average, we’d have 14 million more Americans working and a $1.1 trillion larger economy,” he said, referring to World War II. “If this recovery had been as good as the Reagan recovery, we’d have a $2.2 trillion increase in our gross national product, and if the workforce participation rate were as high today as it was just in 2007, the real unemployment rate would be 9.7 percent,” he said.
Will also spoke about the U.S. tax code, which he said “increasingly looks like codified envy” and which he described as “absurd” because a bigger government is relying on a shrinking tax base.
Corporations do not pay taxes but instead collect taxes because their tax costs are shifted to customers. But he noted that the top 1 percent of American earners pay 37 percent of income taxes, while the bottom 50 percent pay only 3 percent. About 60 percent of households pay either no income taxes or less than 5 percent of their income.
“This is what economists call a situation of moral hazard, where the incentives are for perverse behavior,” he said. “You have a large, growing majority who have no incentive to restrain the growth of a government that they’re not paying for.”
As for inequality of incomes, he acknowledged that the gap is widening. “That’s not altogether a bad thing,” he said.
Several factors are causing the schism, including American freedom, which allows people to explore their interests. “Some people want to run hedge funds, some people want to write poetry. Bless ’em all, but there are going to be different income outcomes,” he said.
Another factor is “family disintegration,” in part because 40 percent of first births are to unmarried women. “This has consequences, and [income] inequality is one of them,” he said.
Will also spoke about “the most predictable crisis” in U.S. history, which is a crisis of more people becoming eligible for Social Security and Medicare benefits as America’s demographics change and the welfare state works to “transfer wealth from the working young and middle aged, to the retired elderly.” Every day, about 10,000 people become eligible for those benefits, a situation that will be in place until 2030. At that point, the average age of an American will be higher than that of today’s Floridians.
With “competent medicine,” people are living longer, meaning they will have higher healthcare costs in the future. In 1940, there were 42 workers for every retiree. Now the figure is three. When baby boomers all retire, it will shrink to two. Will suggested Social Security could be fixed by raising the retirement age index to 74.
“Simple to fix,” he surmised. “Politically impossible, but simple to fix.”