Opinion and Economic Analysis

HICKS: 'Scooby Snacks' and the great American giveaway

November 24, 2012

The great chronicler of early America, Alexis de Tocqueville, speculated that “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” Alexander Hamilton, an infantryman and economist I greatly admire, called debt a “natural disease of all governments.”

Given the long observation of these problems, it would be surprising if we could not today identify a good many folks who rely on government largesse in lieu of hard work. Presidential hopeful Mitt Romney even went so far as to claim that as a source of his electoral defeat.

I am no political strategist, so I don’t know if making these sorts of statements is wise politics, but I am afraid the folks getting the “gifts” he spoke of are not really who he thinks they are. There is adequate data on the matter, which is in need of parsing on these pages.

In mentioning “Scooby Snacks” in my column last week, I was referring to people or groups who get something from the government for nothing. These include households, businesses and unions, whom I will discuss in order.

Total direct federal spending on the poor was $927 billion last year, with states kicking in a roughly equal amount. More than half goes to health care costs (Medicaid), but there are plenty of other, smaller programs tucked away elsewhere. We’ve been winterizing homes and subsidizing poor (and rich) people’s telephone service for a long time, for example.

The patchwork of anti-poverty programs is inefficient, prone to fraud, and populated by many who are bilking the system. I don’t know how big the problem is, but if we were to end all pure welfare payments (Temporary Assistance to Needy Families, for example), we could balance the budget for six weeks each year. There is more to our problems.

The federal government also provides Scooby Snacks to business. The home-construction industry, whose customers buy their goods tax-free and deduct the cost of local taxes from their federal obligations, reaps $100 billion a year through the home mortgage deduction. Then there’s the farm subsidy of more than $35 billion a year, and more than $70 billion on all other forms of direct business subsidies. All of this was in place long before TARP and stimulus spending, which was a one-time gift of several hundred billion dollars to businesses.

Unions also receive huge subsidies, especially through federal efforts to stabilize pension funds. And state and local governments are far larger culprits, handing out tax abatements that in many communities represent half their annual budget.

There are plenty of folks who get “something for nothing” from other taxpayers—the truth is, it is ultimately most of us.

Soon, we must have a serious, honest and fact-laden talk about government distribution of taxpayer money. We cannot afford to do otherwise.•

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Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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