Entitlement Programs Now One-Third of Wages

NEWSMAX

Government entitlement programs such as Social Security, Medicare, Medicaid, and unemployment insurance now equal 35 percent of all wages — up from 26 percent as recently as 2002 — pushing the United States toward “European territory.”

The recent increase in government assistance is due largely to the recession’s high unemployment, according to Madeline Schnapp, director of macroeconomic research at the investment research firm TrimTabs.

But she believes that even when unemployment declines, the 35 percent mark is not likely to drop very much.

“What would it take to bring the ratio of social welfare benefits to wages and salaries back to its pre-recession level of 26 percent?” she writes.

“Either wages and salaries would have to increase $2.3 trillion, or 35 percent, to $8.8 trillion, or social welfare benefits would have to decline $500 billion, or 23 percent, to $1.7 trillion.

“Neither of these scenarios seems likely. The economy is not growing rapidly enough to generate extraordinary growth in wages and salaries, and the oldest of the 78 million Baby Boomers turn 65 this year and are eligible for Medicare.”

Commenting on Schnapp’s research, Daniel Indiviglio, associate editor of The Atlantic, notes that as baby boomers age they increasingly rely on government payments through programs like Social Security and Medicare. So even when the millions of jobless Americans do find work, the government unemployment insurance they no longer receive might go to increased benefits to seniors.

He writes: “At 35 percent, the U.S. is entering European territory. Schnapp says that transfer payments in the U.K. are currently around 44 percent of wages and salaries — but that's up from 36 percent in 2007, before the global recession hit.

“So if this ratio remains around 35 percent in the U.S. even after the unemployment rate declines, then the U.S. government's transfer payment burden will, indeed, begin to resemble that of a European welfare state.”