The Welfare Question

Author

Bubba
16 Sep

Are deficit hawks barking up the wrong tree by focusing on Medicare and Social Security? (WSJ)

A new Wall Street Journal op-ed from American Enterprise Institute fellow Phil Gramm and Rep. Jodey Arrington:

Ask any budget expert in Washington to explain the ballooning deficit and debt, and Social Security and Medicare will be high on the list of causes. That’s wrong. The real driver, the elephant in the room, is means-tested social-welfare spending—Medicaid, food stamps, refundable tax credits, Supplemental Security Income, Temporary Assistance for Needy Families, federal housing subsidies and almost 100 other programs whose eligibility is limited to those below an income threshold.

Topline: In 2023, means-tested social welfare programs (like Medicaid and food stamps) totaled $1.6 trillion, which consumed 72.6% of the government's available general revenue (basically, the money left over after the government has fulfilled its mandatory spending obligations).

Welfare payments skyrocket: Since 1967, average welfare payments to working-age households in the bottom 20% rose from $7,352 (inflation-adjusted) to $64,700 by 2022.

  • That’s a 780% increase.

  • Welfare payments have grown 9.2 times faster than the income of the average U.S. household during this period.

Workforce participation: In the bottom 20% income bracket, only 36% of working-age individuals are employed, down from 68% in previous years.

Wealth transfers: The U.S. redistributes 29.4% of its GDP through taxes and transfers, second only to France, which redistributes 30.1%.

An eye-popping statistic: After accounting for welfare benefits and taxes, households in the bottom three income quintiles (including low, lower-middle, and middle-income) have roughly the same income, despite large differences in employment and work hours.

Context: Donald Trump’s 2016 campaign pledge to leave Medicare and Social Security alone is widely seen as one of the keys to his success.

  • 8 in 10 Americans oppose cuts to Social Security and roughly 70% are against raising monthly Medicare premiums.

Bubba’s Two Cents

Reforming Social Security or Medicare is a third rail in politics (as Nikki Haley learned in the GOP presidential primary). Is it time for Republicans to abandon that approach, as Trump has done, and focus on other pathways to reducing the deficit? While cutting benefits is always a tough sell, there is data to suggest that Americans support mandatory work requirements for welfare recipients.