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The alluring fraud of free stuff

The 2016 election cycle is underway, and the contrast between the candidates is stark.  Some have concentrated on the growing dangers from issues such as America’s unmanageable national debt, excessive taxes, the rise of international terrorism, Russia’s increased aggressiveness, China’s actions in the Pacific, or the challenges arising from illegal immigration.

Others have promised free stuff.

The allure of free stuff is seductive for a voting population suffering from continued long-term unemployment, stagnant wages, increasing prices in many key essentials, and heavy student debt from unjustifiably high college tuition. Politicians promising giveaways, particularly in an era when many in the media are inclined to agree with the practice of more entitlements and disinclined to examine how to pay for them, have a distinct edge.  It calls to mind Benjamin Franklin’s warning that “When the people find that they can vote themselves money that will herald the end of the republic.”

A list of the give-away ideas floated by several of the presidential hopefuls includes budget-breakers such as, to take two prominent examples, free college tuition and more subsidized or free health care. They also continue to favor more leniency on illegal immigration, which increases the population dependent on government largess.  It’s not just illegal immigration that presents an increased dependency problem.  U.S. consulates abroad feature helpful pamphlets on how to apply for benefits upon arrival in America. The United States cannot afford to function as the welfare agency for planet Earth.

Interestingly enough, those advocating for free stuff have not expressed equal concern for the fact that non-entitlement benefits already paid for by workers such as Social Security face bankruptcy, or that America’s military personnel and veterans continue to be underpaid or receive inadequate post-service care.

Prudent voters should ask how candidates promising free stuff intend to pay for their generous plans. The concept of taxing the rich is unconvincing.  It would not reduce “inequality,” another idea floated by candidates who favor increased entitlements. A Money.com review noted that “researchers …looked at what would happen if all the extra money raised from the tax hike on the rich were given to America’s poorest. Lower-income families would receive about $2,650 a year, they found. The country would still remain far more unequal than it was in the 1970s.”

John Stossel, writing in Forbes, notes “it’s a fantasy to imagine that raising taxes on the rich will solve our deficit problem. If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion. That’s only a third of this year’s deficit. Our national debt would continue to explode.” Add to that fact the reality that increased taxes serves as a disincentive to hire and invest.  A shrinking economy does not help pay for increased entitlements.  Margaret Thatcher, the late British Prime Minister, perhaps stated the problem most succinctly: “The problem with socialism is that you eventually run out of other people’s money.”
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Details such as how to pay for giveaway plans fail to get airtime during televised debates, in the breathless press releases of campaigns promising more and greater entitlements, or in reviews by a generally left-leaning media. That lack of specificity tends to assist candidates proposing free stuff, and works to the detriment of candidates who focus on looming threats or fiscal reality.

It’s not just candidates that endure harsh criticism when entitlements are involved. In Maine, reports the Daily Signal, Governor LePage has enforced stricter requirements for food stamps, and has taken considerable press criticism for the effort.

“Since LePage assumed the governorship, Maine has reduced enrollment in the state’s food stamp program by over 58,000; currently… there are 197,000 people on food stamps, down from a high of 255,663 in February 2012…the decline is due to eliminating the waiver of the work requirement previously attached to food stamps, as also witnessed in Kansas. Under the new legislation, recipients would need to work 20 hours per week, volunteer for about an hour a day, or attend a class to receive food stamps past three months.”

Mary Mayhew is the commissioner of Maine’s Department of Health and Human Services, responsible for administering Maine’s food stamp program. She has taken considerable criticism, she notes in a Daily Signal interview. “I can’t stress enough what an attack campaign it has been from the media for four and a half years…Mayhew claims that detractors—who mostly take issue with welfare reforms enacted by Gov. Paul LePage, a Republican, since his election in 2011—have gone so far as to call her ‘Commissioner Evil,’ and her and LePage’s policies a ‘War on the Poor.”

The 24 hour news cycle may be broad, but far too often it is also shallow. Voters enduring America’s weak economy are targeted by candidates who promise free stuff and are confident there will be little follow-up on how to pay for their proposals. On the other hand, candidates with more realistic platforms are seen as miserly and uncaring.

When Winston Churchill became Prime Minister of the United Kingdom in 1940, he famously said “I have nothing to offer but blood, toil, tears and sweat.” His blunt honesty in the darkest days of World War 2 helped rally his nation to victory. One wonders how an American version of Churchill would fare in a campaign against a candidate who simply offered more free stuff.

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U.S. economy hampered by wrong priorities

While U.S. taxes soar, the American taxpayer is enduring a weakened economy and neglected national needs.

U.S. citizens and their businesses are paying increased amounts of taxes. Over the past year, reports the Wall Street Journal, corporate taxes rose 10%, individual income taxes 15%, and payroll taxes, 6%.  Despite that, Washington still runs vast annual deficits. Government spending overall increased 5% in fiscal year 2015, commanding a higher level of gross domestic product “than at any level seen between 1993 and 2008.”

The federal government has a debt of $18 and a half trillion, Social Security is heading towards insolvency, the nation’s infrastructure remains in poor condition, and the military is significantly underfunded.

While Washington’s spending concentrates on failed poverty programs, (spending on poverty programs has reached its highest level under President Obama) real median income of working Americans has declined. The Heritage Foundation notes that Eighty-five percent of the projected growth in spending over the next decade is due to entitlement spending and interest on the debt.

The Washington Times reported in 2014:  “Last year, government spent $943 billion providing cash, food, housing and medical care to poor and low-income Americans. (That figure doesn’t include Social Security or Medicare.) More than 100 million people, or one third of Americans, received some type of welfare aid, at an average cost of $9,000 per recipient. If converted into cash, this spending was five times what was needed to eliminate all poverty in the United States. [in 2014] The U.S. Census Bureau … released its annual poverty report. The report claims that in 2013, 14.5 percent of Americans were poor. Remarkably, that’s almost the same poverty rate as in 1967, three years after the War on Poverty started. How can that be? How can government spend $9,000 per recipient and have no effect on poverty?”

The U.S. Census Bureau reveals that “In 2014, real median household income was 6.5 percent lower than in 2007, the year before the most recent recession. The real median income of non-Hispanic White households declined 1.7 percent between 2013 and 2014. For Black, Asian, and Hispanic-origin households, the 2013-2014 percentage changes in real median income were not statistically significant.”

A 2014 report by the Washington Post  notes that Median inflation-adjusted income in 2013 was still $2,100 lower than when President Obama took office in 2009 — and $3,600 lower than when President George W. Bush took office in 2001. …  “In 2013, most Americans had a good bit less money, after adjusting for taxes, than the year before. That’s because in 2013, a huge tax increase affecting ordinary workers took effect, raising the employee payroll tax from 4.2 percent to 6.2 percent. A worker earning $50,000 a year saw disposable income decline by $1,000.It was the first time the payroll tax had increased since 1990, and previous payroll tax hikes had been smaller.”

Those increased taxes provided  a significant boost in funds to the federal government. A CNS study  discloses “that taxes in fiscal 2015 (which ended on Sept. 30), according to the Monthly Treasury Statement, equaled approximately $21,833 for every person in the country who had either a full-time or part-time job in September. It is also up about $212,927,100,000 in constant 2015 dollars from the $3,035,795,900,000 in revenue (in 2015 dollars) that the Treasury raked in during fiscal 2014. Even as the Treasury was hauling in a record $3,248,723,000,000 in tax revenues in fiscal 2015, the federal government was spending $3,687,622,000,000. So, the federal government ran a deficit of $438,899,000,000 for the fiscal year. According to the Bureau of Labor Statistics, total seasonally adjusted employment in the United States in September (including both full and part-time workers) was 148,800,000. That means that the federal tax haul for fiscal 2015 equaled about $21,832.82 for every person in the United States with a job.”

According to the Office of Management and Budget, in 2014, 24% of federal dollars went to Social Security, 24% went to Medicare, Medicaid, CHIP, and related subsidies, 18% went to defense, 11% to safety net programs, 8% went to government retirees, 7% paid for interest on the national debt, 3% for transportation infrastructure, 2% for education, 2% for science and medical research, 1% for foreign aid, and 2% distributed for miscellaneous purposes.

The problems facing the U.S. have become structural.  To win elections, candidates continue to promise “free stuff,” which the economy cannot possibly provide. (This election year cycle’s big giveaway promise is free college tuition.) To then fulfill the unaffordable campaign promise, vital needs—keeping Social Security solvent, keeping the armed forces adequately equipped, maintaining infrastructure, are stripped of resources to pay for the latest set of “vote for me” promises.

A more rational approach to budgeting must include:

  • a level of taxes that keep U.S. enterprises competitive with global competition (America has the highest corporate tax rate of any of its trading partners) and reduces the tax burden on the middle class;
  • The funding of essential needs, such as providing a powerful defense, maintaining the solvency of Social Security, and keeping the national infrastructure intact, before commiting dollars to entitlements;
  • A commitment to providing a regulatory environment that encourages, rather than inhibits, the development of more job-producing activities;
  • A firm resolve to end deficit spending.

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