The United States government has manufactured a welfare state that mirrors the military-industrial complex. As federal and state budgets spiral out of control, it should be unsurprising that politicians have used these egregious spending levels to produce dependency. Reducing government transfer payments could trigger a personal financial crisis for many Americans. But how bad is the situation?
Government Welfare
The Economic Innovation Group (EIG) published a new report titled "The Great Transfer-mation." Researchers identified how Americans have become addicted to government assistance, making able-bodied individuals reliant on the nanny state. The report noted that most US counties depend on government transfer income "once reserved only for the most distressed places."
The study's authors said fewer than 1% of counties in 1970 registered 25% or more of their total personal income from government transfers. This figure topped 10% in 2000. By 2022, more than half (53%) of counties were deriving a quarter or more of their income from government transfer payments. These include various schemes, including food stamps, Social Security, Medicare, Medicaid, and a plethora of other programs.
"In 2022, Americans received $3.8 trillion in transfer income from the government. If that were split evenly across the entire US population, it would be about $11,500 per person," the report stated. "Transfers now account for almost 18% of total personal income in the United States, up from 8% in 1970."
How did this happen? According to EIG experts, an aging population, rocketing health-care costs, and lackluster earnings gains have been the chief causes for the growth in government transfer payments. Indeed, Social Security, Medicare, and Medicaid represent around two-thirds of federal spending. Real (inflation-adjusted) earnings have been in negative territory for three-plus years.
The EIG's report comes around the same time that the Bureau of Economic Analysis (BEA) published its annual benchmark data revisions. The changes showed that personal current transfer receipts were higher than first reported, increasing more than $250 billion in 2022 and 2023.
The wisdom of Milton Friedman, coming from his 1977 lecture in Sweden, may be appropriate: "What happened is that the emphasis of the intellectuals has shifted away from traditional socialism toward a welfare state directed at promoting egalitarian goals, at achieving a state of affairs in which there are no wide differences in levels of living or economic and social status."
How About That Jobs Report, Huh?
The US economy wowed experts in September. According to the Bureau of Labor Statistics, the country added 254,000 new jobs, much higher than the 140,000 that economists had expected. Though the labor force participation rate was unchanged, the average weekly hours slipped to 34.2, but the average hourly earnings rose 0.4% monthly. And the unemployment rate dipped to 4.1%.
A bulk of the job creation was concentrated in the sustenance economy and government or government-dependent sectors. Here is a breakdown: food services and drinking places (69,000), health care (45,000), government (31,000), social assistance (27,000), and construction (25,000). The manufacturing sector shed 7,000 jobs, adding to its year-to-date total of negative 49,000 positions.
The July and August employment figures were also revised – higher! After what seems like an eternity, the statistics agency finally reported that "the change in total nonfarm payroll employment for July was revised up by 55,000, from +89,000 to +144,000, and the change for August was revised up by 17,000, from +142,000 to +159,000." After two years of lower adjustments, it's about time.
Other notable findings from the Bureau of Labor Statistics:
Full-time employment surged by 400,000.
Part-time jobs fell by 95,000.
The number of people working two or more jobs rocketed to a record high of 8.659 million.
Foreign-born employment levels spiked by 1.2 million to 31.414 million.
Number of employed US-born workers plunged by 825,000 to 130.632 million.
Fiscal Year 2025
Washington flipped the calendar to fiscal year 2025 on Oct. 1 and kicked off the festivities by getting drunk on red ink. Based on the Treasury Department's Debt to the Penny dashboard, the US government borrowed approximately $213 billion in the first two days of the new fiscal year. Put simply, the national debt stands close to $35.7 trillion. It's been only three months since Uncle Sam reached the $35 trillion milestone. The next round of Treasury borrowing estimates, scheduled for release later this month, should be a fascinating read.
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