From the Wall Street Journal Blog,
Families were more dependent on government programs than ever last year.
Nearly half, 48.5%, of the population lived in a household that received some type of government benefit in the first quarter of 2010, according to Census data. Those numbers have risen since the middle of the recession when 44.4% lived households receiving benefits in the third quarter of 2008.
The share of people relying on government benefits has reached a historic high, in large part from the deep recession and meager recovery, but also because of the expansion of government programs over the years. (See a timeline on the history of government benefits programs here.)
Means-tested programs, designed to help the needy, accounted for the largest share of recipients last year. Some 34.2% of Americans lived in a household that received benefits such as food stamps, subsidized housing, cash welfare or Medicaid (the federal-state health care program for the poor).
Another 14.5% lived in homes where someone was on Medicare (the health care program for the elderly). Nearly 16% lived in households receiving Social Security.
Aside from the bailout policies, this serves as one significant reason why prospective US economic growth, as manifested by the current elevated rate of unemployment and low output, will progressively become lethargic as scarce resources are diverted towards more non-productive, capital consuming activities.
Importantly, US politics will increasingly be sensitive to the maintenance and the advancement of the unsustainable system of the welfare state.
To wean away dependants from this system, which has become more entrenched, will be considerably difficult and destabilizing.
Perhaps it may come to a point where the markets will force a tragic resolution, partly similar to what’s been happening to Greece.
Moreover, the US political spectrum will likely be dominated by class divisions, where welfare beneficiaries and their political patrons will call for more taxation in support of the pocket picking welfare policies.
The result of a recent poll exudes this political climate
From another Wall Street Blog,
Poll after poll shows that a majority of Americans support higher taxes on the wealthy, even when “wealthy” is defined as those making more than $250,000 a year.
Presumably, most of those polled don’t make the income cut-off, so it’s easy for them to demand that someone else pay for the nation’s debt.
Political divisions, from such class warfare, would only encourage instability and abet on violence.
In addition, the welfare state will continually be funded by debt that will ultimately lead to an outright default or will be inflated upon.
Ludwig Wilhelm Erhard, former economic minister and Chancellor, architect of Germany’s postwar economic reform and economic recovery popularly known as "Wirtschaftswunder" or "economic miracle", in his book Prosperity through Competition wrote a very apropos admonition on the dangers of the welfare state (p.187) [emphasis added]
if this mania increases we shall slide into a social order under which everyone has one hand in the pocket of another. The principle would then be: I provide for someone else and someone else provides for me.
The blindness and the intellectual inertia which are pushing us towards a Welfare State can only bring disaster. This, more than any other tendency, will serve slowly but surely to kill the real human virtues—joy in assuming responsibility, love for one’s fellow being, an urge to prove oneself, a readiness for oneself—and in the end there will probably ensue not a classless but a soulless mechanical society.
