What Fresh Hell Is This?

May 9, 2011

The Trib For A Monday Morning

Take a look at this from today's editorial page at the Tribune-Review:
For the first time since the Great Depression, U.S. households today are receiving more income from government sources than they're paying in taxes.

The Fiscal Times, an online financial research and news organization, reports that government aid accounts for 79 percent of household income growth since 2007. The estimated tab for all government aid received by households in 2010 -- $2.3 trillion.

And since 2007, household tax payments have dropped by $312 billion, according to The Fiscal Times' James C. Cooper.

But extending recipients' dependency on government "lifelines" inevitably ends in a noose, writes Bill Bonner for Forbes.

"Haven't the middle classes been bamboozled by phony money, ruined by a rigged economy, or have they benefited from all those government payments? Yes, like a man benefits from a hanging."

Neither do the poor benefit from government's "anti-poverty" handouts because poverty's cause isn't merely monetary. It's the result of other factors, such as single parenthood and fatherless homes, notes Ryan Messmore of The Heritage Foundation.

Rather than funding dependency, government's role should be to foster better social conditions -- such as public safety and individual freedom -- that allow all to thrive and prosper.
Seems a pretty straightforward fiscal conservative argument.

Until you go to the Fiscal Times source. As always, it's interesting what Scaife's braintrust doesn't say. And there's a lot of interesting stuff in Cooper's piece. First an explanation of the crossover:
For the first time since the Great Depression, households are receiving more income from the government than they are paying the government in taxes. The combination of more cash from various programs, called transfer payments, and lower taxes has been a double-barreled boost to consumers’ buying power, while also blowing a hole in the deficit. The 1930s offer a cautionary tale: The only other time government income support exceeded taxes paid was from 1931 to 1936. That trend reversed in 1936, after a recovery was underway, and the economy fell back into a second leg of recession during 1937 and 1938.

As then, the pattern now reflects two factors: the severe depth of the 2007-09 recession and the massive fiscal policy response to it. The recession cut deeply into tax payments as more people lost their jobs, and it boosted payments for so-called automatic stabilizers, such as unemployment insurance, that ramp up payments as the economy turns down. Plus, policy actions, including the Recovery Act, boosted payments to households by expanding and extending jobless benefits and creating other income subsidies while extending the Bush-era tax cuts and adding new reductions in income and payroll taxes.
If I am reading this correctly, Cooper is saying that part of the problem is the low taxes and the Bush Tax Cuts.

Funny how the braintrust didn't quote that.

Then there's this at the end of Cooper's piece:
All this should be a yellow flag for the White House and Congress as they work toward reducing the deficit. Until the labor markets are strong enough to power consumer spending without the outsized income support from the government, withdrawing that support too quickly could put spending and the economy at risk to some unexpected shock. [emphasis added.]
Funny that the braintrust didn't quote that, either. They, instead, call it "funding dependency."

Funny what you'll find when you do a little digging.

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