By Morton Marcus
My friends have differing views about the money governments give to individuals. Some think it is immoral for any government to give money to people; it weakens individual responsibility and the effort to care for oneself. Others believe such transfers are necessary to keep the underclass from revolting against established authority.
Still others foresee economic collapse if low income consumers do not spend enough to sustain a vigorous business environment. On the high ground stand those affirming governments are our agents, fulfilling our moral responsibility to care for the poor, the infirm and the disadvantaged.
Every federal, state and local transfer program has both its supporters, who feel the warmth of social benefits, and its detractors, who detect the evil whiff of social decay. The following facts will not change the fixed perceptions of my friends.
Government transfers to individuals exceeded $2.6 trillion in 2015. Hoosiers had $53 billion or two percent of that total. Nationally, transfers from governments accounted for 16.8 percent of personal income, while in Indiana the figure was 19.1 percent.
That’s nearly one in every five dollars of Hoosier income came in the form of government assistance. Indiana ranked 21st in the nation in percent of personal income derived from transfers.
Of course, many folks don’t consider Social Security retirement payments to be government assistance. They think those funds are from money we paid in and to which we are entitled. Believe what you will, but Social Security payments amounted to $20.7 billion or 39 percent of total transfers to Hoosiers.
Even larger were the $23 billion (43 percent of transfers) providing medical benefits to Hoosiers. These were divided as $12.7 billion for Medicare and $10 billion for Medicaid. These dollars do not go into the pockets of Hershel & Harriet Hoosier.
They go to medical service and product providers on behalf of Hershel and Harriet. Cutbacks in these health maintenance programs will hurt not only Hershel and Harriet, but also the people (doctors, nurses, attendants, clerks, factory workers, sales persons and others) who attempt to keep them healthy.
These two categories (retirement/disability and medical benefits) account for more than 82 percent of all government transfers. Ten of the remaining 18 percent is income maintenance and unemployment compensation combined. These include the Earned Income Tax Credit, the food/nutrition programs (WIC and SNAP) programs, foster home care and adoption assistance. The balance of these monies provides veteran benefits, education and training, plus a small miscellaneous category.
Cutting back or enlarging these programs raises questions of who benefits and who loses from such policies. The national discussion focuses on income (the rich vs the poor), but other factors are worth considering. Many of our transfer dollars go to older Americans from taxes on younger citizens. Workers in medical and related companies benefit at the expense of other worthwhile persons and establishments.
My friends have strong views on these matters. I’ll bet you do too.
Morton Marcus is an economist, formerly with the Indiana University Kelley School of Business. Send comments to firstname.lastname@example.org.