American Character Is at Stake
The American republic has endured for well over two centuries, but over the
past 50 years, the apparatus of American governance has undergone a radical
transformation. In some basic respects—its scale, its preoccupations, even many
of its purposes—the U.S. government today would be scarcely recognizable to
Franklin D. Roosevelt, much less to Abraham Lincoln or Thomas Jefferson.
Since 1960, entitlement programs have come to dominate the federal budget. Worse, says Nicholas Eberstadt in a conversation with WSJ's Gary Rosen, they have undermined our national character.
Are Entitlements Corrupting Us? No
What is monumentally new about the American state today is the vast empire of
entitlement payments that it protects, manages and finances. Within living
memory, the federal government has become an entitlements machine. As a
day-to-day operation, it devotes more attention and resources to the public
transfer of money, goods and services to individual citizens than to any other
objective, spending more than for all other ends combined.
The growth of entitlement payments over the past half-century has been
breathtaking. In 1960, U.S. government transfers to individuals totaled about
$24 billion in current dollars, according to the Bureau of Economic Analysis. By
2010 that total was almost 100 times as large. Even after adjusting for
inflation and population growth, entitlement transfers to individuals have grown
727% over the past half-century, rising at an average rate of about 4% a
year.
In 2010 alone, government at all levels oversaw a transfer of over $2.2
trillion in money, goods and services. The burden of these entitlements came to
slightly more than $7,200 for every person in America. Scaled against a notional
family of four, the average entitlements burden for that year alone approached
$29,000.
Bloomberg News
Our national character 'may be sacrificed long before the
credibility of the U.S. economy,' says Nicholas
Eberstadt
A half-century of unfettered expansion of entitlement outlays has completely
inverted the priorities, structure and functions of federal administration as
these were understood by all previous generations. Until 1960 the accepted task
of the federal government, in keeping with its constitutional charge, was
governing. The overwhelming share of federal expenditures was allocated to some
limited public services and infrastructure investments and to defending the
republic against enemies foreign and domestic.
In 1960, entitlement payments accounted for well under a third of the federal
government's total outlays—about the same fraction as in 1940, when the Great
Depression was still shaping American life. But over subsequent decades,
entitlements as a percentage of total federal spending soared. By 2010 they
accounted for just about two-thirds of all federal spending, with all other
responsibilities of the federal government making up barely one-third. In a very
real sense, entitlements have turned American governance upside-down.
Government data on public transfers can be used to divide entitlement
spending into six baskets: income maintenance, Medicaid, Medicare, Social
Security, unemployment insurance and all the others. Broadly speaking, the first
two baskets concern entitlements based on poverty or income status; the second
two, entitlements attendant on aging or old-age status; and the next,
entitlements based on employment status. These entitlements account for about
90% of total government transfers to individuals, and the first four categories
comprise about five-sixths of all such spending. These four bear closest
consideration.
Poverty- or income-related entitlements—transfers of money, goods or
services, including health-care services—accounted for over $650 billion in
government outlays in 2010. Between 1960 and 2010, inflation-adjusted transfers
for these objectives increased by over 30-fold, or by over 7% a year.
Significantly, however, income and benefit transfers associated with traditional
safety-net programs comprised only about a third of entitlements granted on
income status, with two-thirds of those allocations absorbed by the health-care
guarantees offered through the Medicaid program.
For their part, entitlements for older Americans—Medicare, Social Security
and other pension payments—worked out to even more by 2010, about $1.2 trillion.
In real terms, these transfers multiplied by a factor of about 12 over that
period—or an average growth of more than 5% a year. But in purely arithmetic
terms, the most astonishing growth of entitlements has been for health-care
guarantees based on claims of age (Medicare) or income (Medicaid). Until the
mid-1960s, no such entitlements existed; by 2010, these two programs were
absorbing more than $900 billion annually.
In current political discourse, it is common to think of the Democrats as the
party of entitlements, but long-term trends seem to tell a somewhat different
tale. From a purely statistical standpoint, the growth of entitlement spending
over the past half-century has been distinctly greater under Republican
administrations than Democratic ones. Between 1960 and 2010, the growth of
entitlement spending was exponential, but in any given year, it was on the whole
roughly 8% higher if the president happened to be a Republican rather than a
Democrat.
This is in keeping with the basic facts of the time: Notwithstanding the
criticisms of "big government" that emanated from their Oval Offices from time
to time, the administrations of Richard Nixon, Gerald Ford and George W. Bush
presided over especially lavish expansions of the American entitlement state.
Irrespective of the reputations and the rhetoric of the Democratic and
Republican parties today, the empirical correspondence between Republican
presidencies and turbocharged entitlement expenditures should underscore the
unsettling truth that both political parties have, on the whole, been working
together in an often unspoken consensus to fuel the explosion of entitlement
spending.
From the founding of our nation until quite recently, the U.S. and its
citizens were regarded, at home and abroad, as exceptional in a number of deep
and important respects. One of these was their fierce and principled
independence, which informed not only the design of the political experiment
that is the U.S. Constitution but also their approach to everyday affairs.
The proud self-reliance that struck Alexis de Tocqueville in his visit to the
U.S. in the early 1830s extended to personal finances. The American
"individualism" about which he wrote did not exclude social cooperation—the
young nation was a hotbed of civic associations and voluntary organizations. But
in an environment bursting with opportunity, American men and women viewed
themselves as accountable for their own situation through their own
achievements—a novel outlook at that time, markedly different from the
prevailing attitudes of the Old World (or at least the Continent).
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The corollaries of this American ethos were, on the one hand, an affinity for
personal enterprise and industry and, on the other, a horror of dependency and
contempt for anything that smacked of a mendicant mentality. Although many
Americans in earlier times were poor, even people in fairly desperate
circumstances were known to refuse help or handouts as an affront to their
dignity and independence. People who subsisted on public resources were known as
"paupers," and provision for them was a local undertaking. Neither beneficiaries
nor recipients held the condition of pauperism in high regard.
Overcoming America's historic cultural resistance to government entitlements
has been a long and formidable endeavor. But as we know today, this resistance
did not ultimately prove an insurmountable obstacle to establishing mass public
entitlements and normalizing the entitlement lifestyle. The U.S. is now on the
verge of a symbolic threshold: the point at which more than half of all American
households receive and accept transfer benefits from the government. From cradle
to grave, a treasure chest of government-supplied benefits is there for the
taking for every American citizen—and exercising one's legal rights to these
many blandishments is now part of the American way of life.
As Americans opt to reward themselves ever more lavishly with entitlement
benefits, the question of how to pay for these government transfers inescapably
comes to the fore. Citizens have become ever more broad-minded about the
propriety of tapping new sources of finance for supporting their appetite for
more entitlements. The taker mentality has thus ineluctably gravitated toward
taking from a pool of citizens who can offer no resistance to such schemes: the
unborn descendants of today's entitlement-seeking population.
More From Review
Among policy makers in Washington today, it is very close to received wisdom
that America's national hunger for entitlement benefits has placed the country
on a financially untenable trajectory, with the federal budget generating
ultimately unbearable expenditures and levels of public debt. The bipartisan
2010 Bowles/Simpson Commission put this view plainly: "Our nation is on an
unsustainable fiscal path."
The prospect of careening along an unsustainable economic road is deeply
disturbing. But another possibility is even more frightening—namely, that the
present course may in fact be sustainable for far longer than most people today
might imagine.
The U.S. is a very wealthy society. If it so chooses, it has vast resources
to squander. And internationally, the dollar is still the world's reserve
currency; there remains great scope for financial abuse of that privilege.
Such devices might well postpone the day of fiscal judgment: not so the day
of reckoning for American character, which may be sacrificed long before the
credibility of the U.S. economy. Some would argue that it is an asset already
wasting away before our very eyes.
—Mr. Eberstadt holds
the Henry Wendt Chair in Political Economy at the American Enterprise Institute.
Excerpted from "A Nation of Takers: America's Entitlement Epidemic," forthcoming
from the Templeton Press. To read the complete essay, go to www.templetonpress.org.
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