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The Public Policy
Red Ink and Upward Redistribution
How “caring” Democrats have gamed the system the rest of us pay for.
After doing nothing during his first two years in office to deal with the debt tsunami that’s clearly visible on the horizon and heading our way, President Obama delivered a 2012 budget plan that, as Investor’s Business Daily accurately editorialized, “proposed spending $252 billion more in 2012 than the feds spent in 2010 — at the height of the stimulus spending spree.”
Longer run, worse than doing nothing, Obama’s projected budgets over the next decade add enough trillions in red ink to double the size of the incoming tsunami.
The federal government’s current $14 trillion debt averages out to approximately $50,000 per American, $200,000 for a family of four. For the half of U.S. households who still pay federal income taxes, that averages out to $400,000 per family for those are getting stuck with the tab.
Add to that the next decade’s proposed red ink and each of those taxpaying household ends up, on average, $800,000 in the hole. That could become an unworkable $80,000 a year in interest payments per taxpaying household, on average, if the U.S. credit rating drops and lenders require 10 percent interest payments.
Unfortunately, even this $800,000 per family scenario is based on some very rough and overly optimistic guesswork. Politicians projecting out a decade and more have every incentive to paint a rosy scenario, plus a clear incentive at every election cycle to buy more votes via additional trillions in red ink.
So what’s the solution? Tax hikes to bring in more money? Tax cuts to expand the economy and bring in more federal revenue? Spending cuts? Or some combination of all three?
“Federal spending is growing faster than federal revenues,” editorializes the New Republic in its April 28 issue. “Absent changes in the law, future generations of Americans will likely have to raise taxes to unprecedented levels; dramatically reduce the reach of government programs, risk the macroeconomic consequences of uncontrolled debt, or some combination of all three. At best, these options are unappealing. At worst, they are a threat to prosperity.”
The editorial quotes Nobel Prize-winning economist Joseph Stiglitz: “Just like it may pay for a business to borrow (run a deficit) in order to increase long-run profitability, so too for government.”
That’s true, just as it’s true for a college student borrowing to increase long-run earnings. But the borrowing can’t go on forever. A 60-year-old college student owing $600,000 in tuition debt and still jobless isn’t a prime example of economic rationality.
“Balancing the budget is important; but so is creating a fair society in which all Americans have basic economic security,” advises the New Republic. “The fact is that much of the moral purpose of government spending is to redistribute income downward — to provide for the least successful and least fortunate members of society. It’s easy for that general principle to be lost in the detailed debates over which programs will be cut. But liberals shouldn’t run away from talking about this overarching commitment.”
But regarding this “commitment,” this “moral purpose” of government to “redistribute income downward,” doesn’t the federal government itself do the exact opposite when it cuts the checks each month for its own payroll?
“Average wages in the federal civilian workforce — $74,311 in 2010 — far eclipse the $49,977 median wages in private industry,” states a recent House budget report. Add benefit packages and the average compensation per year of federal civilian workers jumps to $101,628.
On top of that, the federal government has added 155,000 new workers to its payroll since President Obama has taken office.
With people earning $49,977 picking up the tab for the added workers and the $101,628 paychecks, isn’t this the opposite of the “moral purpose” to “redistribute income downward”?
About the Author
Ralph R. Reiland is the B. Kenneth Simon professor of free enterprise and an associate professor of economics at Robert Morris University in Pittsburgh.
Letter to the Editor View all comments (36) | Leave a comment
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Bill Hussein O'Stalin| 5.3.11 @ 6:44AM
Excellent article.
In fact, if you really want to redistribute wealth efficiently, then cut out the middlemen, i.e., the government.
Although I'm not for the redistribution of wealth, I'm convinced things would have been moved further and faster if TARP and the Obama stimulus had never passed and a check for $10,000 simply sent to every TAX paying American. Those who don't pay taxes have already gotten years of credits and rebates. It really didn't do much good did it?
Michael Tomlinson| 5.3.11 @ 8:08AM
Bill ditto. The fairest government would be a much smaller and less intrusive Federal government that respects state's rights.
Alan Brooks| 5.3.11 @ 9:45AM
"Bill ditto. The fairest government would be a much smaller and less intrusive Federal government that respects state's rights."
You are dreaming, whenever it is to their advantage states will lobby for fed handouts. Intrusion cuts both ways-- there are 50 different states who are on the lookout 24/7 to see where their interests lie. Considering your conservative toughmindedness, you are all-- most of you--surprisingly gullible.
Wayne | 5.3.11 @ 11:17AM
Ever hear of the Tea Party? They bring moral integrity into the equation. Something you obviously do not understand.
Purpleguy| 5.3.11 @ 4:30PM
The Tea Party is dying ... Republicans are killing it - ever hear of polling?
Moral Integrity? - "Keep your government-run healthcare off my Medicare" ring a bell? Seems there's quite a few that don't understand a LOT. Have a nice day.
Albert| 5.3.11 @ 11:25AM
You're missing something. FEDERAL largesse is illegal. What the States do is their business, but the US Government has absolutely zero legal authority to run things like welfare, food stamps, schools and school lunches, farm subsidies, TARP, "Stimulus" package, electric car subsidies, Medicare/Medicaid, Social Security, etc... Lobbying the US Government for handouts is one thing. That the government actually hands these things out is illegal. The US Constitution was deliberately and specifically written and ratified to prohibit these things that have become standard operating procedure in our society and government of corruption, built by your local Democrat Party.
txn4ever| 5.5.11 @ 1:08PM
The states go to the Feds because the way the Feds have gamed the system. They take the states money then make them beg to get it back. The states only get it back if they accept and play by the Feds rules. Of course the Feds a take significant chunk off the top before returning it to the states.
As an example, one stat I read a while back was that before returning the highway gas tax dollars to the states the Feds take some where in the neighborhood of 30% off the top.
John Navratil| 5.3.11 @ 8:53AM
Bill Hussein O'Stalin,
How about a new concept - redistribution of jobs? Fire the guys handing out the checks and get them into the productive sector.
Michael Tomlinson| 5.3.11 @ 8:11AM
The current problem was created solely by Barack Obama and the Democrat Congress. Not surprisingly the only ones to benefit from this insanity were vulture capitalists like George Soros and GE. In his visit to Brazil, where he personally declared war on Libya without consulting Congress, Obama cavalierly promised Brazil billions of US taxpayer’s dollars for their oil industry. Interestingly, one of its largest investors is Democrat George Soros.
Redstateboy| 5.3.11 @ 8:56AM
Mr. Reiland?!!? How Dare You confuse Liber-uls with Facts!?
Alert1201| 5.3.11 @ 9:36AM
The problem with our current welfare system is that it is unfair because it gives to people who do not deserve or need it. Here in Dallas I know a family who lives in a $350K home that is already paid for in a gated community who sends their kids to $2K tennis summer camps who also live on food stamps. I can remember when my wife and I first got married and were just barely scrapping by (about 16 years ago). We would be in line at Wal-Mart with our cheap modest diet consisting of mostly beans, rice, cheap cuts of meat and store brand generic canned goods. While in line there would be families with expensive cuts of meat, name brand orange juice, scallops, shrimp, salmon and a host of other delicacies we could only imagine being able to afford. They ring up there bill and pay for everything they could with food stamps. Then they would pull out a big wad of cash to pay for such things like cigs and booze that the foods stamps would not cover. I worked my butt of every day, scrimped on every penny, wore second hand cloths and drove 10-15 year old cars that I fixed myself and I could not live like these people did. Seeing this can really rankle ones chains. It is unfair when I am taxed so people can buy things with my money that I cannot afford.
PolishKnight| 5.3.11 @ 10:04AM
Question, Alert1201, does that family have a father?
The modern definition of "family" is a parent (usually a mother) and children. Ronald Reagan, of all people, that the welfare state could be fixed by forcing fathers in welfare families to work. Very bad idea since the left had an answer for that: They would prefer the father be ejected in the first place since women and children are ideal big government supporters.
In their minds, you're a sap and oppressor simultaneously. You'll work to pay your taxes for them to hire government officials to rob you. Your politicians will only half criticize them because they'll hold up a child and say: "Give us the money or the BRAT gets it!" and these moderate republicans, and even most republican voters, will cave in.
Hmmm, kind of reminds me of the Osama Bin Laden execution. It's been said that he or one of his underlings used tried to use a woman as a shield and it didn't work. That's because the state didn't care about capturing him alive. When the state doesn't have a use for all these excess kids... look out!
Alert1201| 5.3.11 @ 10:39AM
Yes these familes did have fathers. I have seen some who did not, but most of the ones I have dealt with are familes with fathers and mothers. In fact the family with the $350K home was an intact family and the father was a public school teacher. Your view of welfare recipients being unwed mothers with children is true but somewhat dated. Many of the families recieving welfare are complete familes with a father at the head.
Another form of welfare that you are missing is section 8 housing. Many familes (father and mother) and have multi-generations living under the same roof having the govt paying the rent and giving food stamps to the elderly parents/grand parents while the kids live there with their families for free. I know of instances where the kids drive $70K cars with well paying jobs living with elderly grandparents who are on the dole. So yes, the single welfare mother pumping out puppes to get more handouts is stil there but it goes way beyond that.
Redstateboy| 5.3.11 @ 11:26AM
your vignette is Legion. What? No comment Alan Brooks??
youfamissim | 5.3.11 @ 10:15AM
Affirmative Action, in fact, the entirety of EEOC programs were created to indemnify the Progressive's Objects of Affection from scrutiny and criticism, AND, to better enable paying them for their votes. Vote buying is the only purpose for Progressive policy making. If Progressives ever achieve their grand ambition to end Federalism, vote buying policies will be the first ended. And, if history is accurate, all the policy wonks who created and enabled the vote buying policies (thinking their actions would increase their value and incomes) will be sacrificed, literally. Progressive policies sold under the Compassion label and Class Warfare trademark have a single purpose - divide to conquer. Secular humanism and moral relativism are much easier paths for the common man. The demands of religion and its morality are difficult and tough. So much so, few will succeed. Once, that success was lauded and held high - as an inspiration - an example of excellence and sacrifice. Sacrifice is now a dirty word. If all cannot succeed equally, then NONE should succeed. Since a majority of Progressive dependents are incapable, or unwilling, to negotiate life without gov't assistance, Progressives sought to protect them from evaluation - insuring their votes.
Tax payers have always resisted paying for sloth, incompetence, and institutionalized dependency. It had to be sold using unassailable "Facts" and conditions. Race, Sex, Sexual Behaviors, Nationality, Ethnicity, were framed as such. The sanction groups could never get a break without government intervention, AND, they were unable to change their light, skin color, etc.... As one group was rewarded, the others complained, until they received similar compensation. The costs to tax payers mounted. Other groups that from the confederation of splinter groups who currently define Democrat supporters demanded their share - Greens, unions, environmentalists, et al. Costs increased again. Servicing the chirping mouths of Progressive dependents is A Priori. It trumps all other considerations, because without the votes, Progressivism fails. Achieving a majority of voters addicted to a State stipend is the only goal. Once that is accomplished, the outcome is axiomatic. Conservatives MUST end the programs and dismantle the agency - brick and mortar assets - literally.
Johnny| 5.3.11 @ 2:16PM
Youfamissim, My God, how on the mark. That is very accurate and very, very scary. Excellent post.
sTAN rEDMOND| 5.3.11 @ 10:16AM
Whoa. Talk about redistribution from the bottom up. Can we say "General Motors" "SEIU" "GE" bank bailouts, stimulus, QE1 QE2 QE3 . As useless as 90% of all government employees are in the federal level at least they go to work. All a big bank has to do is get big, lose billions of dollars, and uncle Sam will cut you a check the next day.
Wayne | 5.3.11 @ 11:27AM
Some do, some don't. Almost impossible to fire a government "worker". But you are right, no more quantitative easing, too big to fail bailouts and business scams that allow them to pay no insurance. Multi-national businesses are no friends of the US citizens.
Walking Horse| 5.3.11 @ 11:01AM
I'm willing to redistribute a portion of my income, to be determined by me, on my terms, at my discretion. Politicos and do-gooders need not apply.
PattyMor| 5.3.11 @ 11:14AM
Besides the overpaid federal workers, we have the overpaid school administrators, overpaid non-governmental CEO's (who live for gov'ment grants), overpaid university heads, deans, and professors, overpaid bankers (who had to be bailed out) and overpaid just about anybody who live for prying money from the federal gov'ment (meaning you).
Wayne | 5.3.11 @ 11:23AM
You must understand the Chicago way. It is reward your friends (who get you elected) and punish your enemies (who try to prevent you from rewarding your friends). What the GOP must do is punish Obama's friends. They have started the process by going after ACORN and Planned Parenthood. Now it must be the unions. Eliminate unions from the government, since they are just a tool for getting Dems elected. Also have tough immigration policies, so as not to create more Democrats. Go after the special interest groups like AARP and AMA who collaborated on ObamaCare.
Time to reverse the process.
Anthony M| 5.3.11 @ 11:24AM
The problem is we may have crossed the line as far as the demographics of the electorate. Over 50% voted for the extremely inexperienced Obama in 2008. Admittedly, a lot of it was the affirmative action vote, but now with so many people permanently out of the work force, official unemployment still high, more potential voters will be seeking not cuts in handouts, but more. If Obama manages some kind of amnesty for illegal aliens, the left will have a permanent majority and we better be prepared to become Brazil north.
Wayne | 5.3.11 @ 11:28AM
The pendulum is swinging in the other direction. It still needs a little push however.
air max on sale | 5.4.11 @ 3:52AM
was the affirmative action vote, but now with so many people permanently out of the work force, official unemployment still high, more potential voters will be seeking not cuts
darcy| 5.3.11 @ 11:31AM
"Balancing the budget is important; but so is creating a fair society in which all Americans have basic economic security," advises the New Republic. "The fact is that much of the moral purpose of government spending is to redistribute income downward -- to provide for the least successful and least fortunate members of society."
I reject utterly the notion that a "moral purpose of government" is to redistribute (steal) my money and give it to the "least fortunate members of society."
Number One:
Why should any rational human being work his fingers to the bone to support the 8 out of 10 recipients of government largesse who are slackers?
Number Two:
Why would any humane taxpayer permit himself to be used as a conduit by which the government's redistributive apparatus creates a mass of dependents, shorn of dignity, and tempted to sloth and non-productive lives?
Number Three:
Why would any honest taxpayer permit the government to use him in its scheme to buy votes among the multitude of rent-seekers and hangers-on who game the system to keep the party in power who dispenses the most favors?
I reject the notion that any of this is a legitimate purpose of government. Therefore, our government is engaged in illegitimate activity designed to siphon off from the productive members of society the product of their labor by employing cloying and sophistical language to justify massive theft and the entrenchment of a permanent ruling class that strips citizens of their self-respect and the proper motivations to be self-reliant.
Johnny| 5.3.11 @ 2:23PM
Plainly stated, if the dems are successful in their scheme, they will garner more than fifty percent of the vote from now on, remaining in power forever. Which, turns out, will not be that long because the people that they feed off will soon quit suppling the money to feed their voters.
John II| 5.3.11 @ 2:39PM
Question: Do trolls such as Twitty and Purpie EVER respond to articles of this sort?
Maybe they're just not up yet. After all, it's still early afternoon here in the heart of the American wilderness.
And now back to "The Mole People" (1956), in which the B-flick actor John Agar continues his descent into Hollywood oblivion, encountering along the way a race of subterranean albino liberals so sensitive to the light of the sun as to be scorched to death by its revealing rays.
Volare| 5.4.11 @ 8:12PM
Dick Cheney to Bush cabinet, 2002: "Deficits DON'T matter, Ronald Reagan proved that".
But keep shouting out for trickle-down fantasies.
John II| 5.5.11 @ 12:49AM
Well, that answers my question. The trolls just weren't up yet. Purp arrived a few hours later, and Volare stumbled in to deliver a final belch--not only late in the day, but more than a day later, when no one was left to listen.
And now back to the 1951 version of "The Day the Earth Stood Still," in which Drew Pearson has a cameo role as a smug kneejerk liberal.
Rick Blaine| 5.5.11 @ 8:22AM
The author "forgot" to mention that Bush decided to make the Afghanistan, Iraq wars and the Medicare Part D program as "unfunded", which means they are added to the deficit, which they spiked big-time.
I remember that neocon Paul Wolfowitz claimed that the War in Iraq would pay for itself.
Uhh, what was it GWB once said-- oh yeah: "Fool me once, shame on you; Fool me twice, uh, won`t get fooled again!"
george kimball| 5.5.11 @ 9:58PM
This notion that redistributing wealth downward is more important than the deficit is like saying clean air is more important than whether people can breathe.
Rick Blaine| 5.6.11 @ 8:07PM
Lies. All of it.