One third of Americans living on Government Handouts

March 8, 2011

Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement.

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

“The U.S. economy has become alarmingly dependent on government stimulus,” said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. “Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits.”

The economist gives the country two stark choices. In order to get welfare back to its pre-recession ratio of 26 percent of pay, “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,” she said.

Last month, the Republican-led House of Representatives passed a $61 billion federal spending cut, but Senate Democratic leaders and the White House made it clear that had no chance of becoming law. Short-term resolutions passed have averted a government shutdown that could have occurred this month, as Vice President Biden leads negotiations with Republican leaders on some sort of long-term compromise.

“You’ve got to cut back government spending and the Republicans will run on this platform leading up to next year’s election,” said Joe Terranova, Chief Market Strategist for Virtus Investment Partners and a “Fast Money” trader.

Terranova noted some sort of opt out for social security or even raising the retirement age.

But the country may not be ready for these tough choices, even though economists like Schnapp say something will have to be done to avoid a significant economic crisis.

A Wall Street Journal/NBC News poll released last week showed that  less than a quarter of Americans supported making cuts to Social Security or Medicare in order to reign in the mounting budget deficit.

Those poll numbers may be skewed by a demographic shift the likes of which the nation has never seen. Only this year has the first round of baby boomers begun collecting Medicare benefits—and here comes 78 million more.

Social welfare benefits have increased by $514 billion over the last two years, according to TrimTabs figures, in part because of measures implemented to fight the financial crisis. Government spending normally takes on a larger part of the spending pie during economic calamities but how can the country change this make-up with the root of the crisis (housing) still on shaky ground, benchmark interest rates already cut to zero, and a demographic shift that calls for an increase in subsidies?

At the very least, we can take solace in the fact that we’re not quite at the state welfare levels of Europe. In the U.K., social welfare benefits make up 44 percent of wages and salaries, according to TrimTabs’ Schnapp.

“No matter how bad the situation is in the US, we stand far better on these issues (debt, demographics, entrepreneurship) than other countries,” said Steve Cortes of Veracruz Research. “On a relative basis, America remains the world leader and, as such, will also remain the world’s reserve currency.”

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2 Responses to One third of Americans living on Government Handouts

  1. MadeleineT says:

    Is everything being censored now? why post a horrible post like this and not expect someone to reply to it in kind, its enough to curl anyones hair, if you want to censor someone, you should have censored Trimtabs. I’m just glad this is in writing and not face to face or I would be in jail right now. It would have been a lemme attem moment.

  2. MadeleineT says:

    TrimTabs Investment Research using Bureau of Economic Analysis data.

    I don’t know who these people are, I’ve never heard of them but they have a super nerve to call Social Security and even Medicare a “handout”. I have to call this the most uninformed , mean spirited, untrue report I have ever read. How do you equate paying into a system every week, and its mandatory, as a contract the Government made with the Americn workers in the 1930′s, we kept our part of the bargain, now they call it welfare? For them its welfare , no tfor us, we aren’t taking their money, they are taking ours.

    Every month the Government takes half of that SS money and puts it in a genral fund, for their use, of course, now thats welfare, they didn’t work for it we did, where I come from we call that stealing. When Social Security first started it was automatically taken out of your paycheck, whether you wanted it or not, if you don’t have a social security card you can’t work, so how is that a handout? Its a handout for our Government who uses it as much as we do and has had an IOU in the SS Account for years. It was a safety net for American workers and it worked, not everyone gets a pension, not everyone who raises a family can afford to save enough to retire on, Social security saved a lot of seniors from starvation and homelessness, but we paid for it, the more money you made the more you paid and the more you received. It was not welfare. Welfare is when you get money for nothing and Amerian workers pay for that too.We also pay taxes on pensions.

    Now social security cards are given to newborn babies, , are they going to work as soon as they get out of the Hospital? no , so why the card? A Social Security card was never meant to be an ID card,it says so right on the older cards, that changed and now you can’t get a bank account or a supermarket discount card without a SS card. My husband worked for 34 years at the same job and paid top dollar into Social security, now he is getting a handout? I wouldn’t even mention this to him,but on his behalf I will say you are full of poop.

    Medicare is also mandatory, we didn’t ask for it, we were forced to take it, and here is how the Government pulled that off, when you retire, if you have insurance, we did, it paid 80% of our medical bill and we paid the rest, the minute my husband retired he received a medicaid card, the first time he went to the Hospital he found that Medicare paid 80% of the bill and our insurance company paid the 20%,we didn’t ask for that and we wondered how they could do it, now we know, they couldn’t. They did this without asking us or giving us any options. My husband pays for my insurance, 340.00 a month, now i have medicare, I have never been sick, but if I were they would pay 80% for me and my insurance would pay the 20%, I didn’t ask for that either so we pay the 340.00 for my insurance, 90.00 to medicare each, 180.00 so how is that a big handout or entitlement? It isn’t for us, but we got used to it and it worked for us, now we are forced to give up everything and go along with this Obama care, which will cost us even more and we will get less care and have to discuss the happy subject of dying every year with strangers , meanwhile everything is an entitlement and now they have the nerve to call it welfare. Thye are the deadbeats, not us.

    Medicaid is another one, that is an entitlement and welfare, that is given out to every legal and illegal immigrant who steps off the plane, my son is a college student and living alone and he is sick and can’t get a medicaid card and he doesn’t make very much money, but all of the immigrants have medicaid cards, are given stores with 5 years of free taxes, and free medical for the whole family.

    What is the first thing Obama took, on his quest to kill off seniors? Medicare, knowing that a senior will not get any normal coverage for 3 or 4 more years , if ever, he took their Medicare money which cut a lot of services for them. If this is a handout it sucks. We are still paying the same thing though, when he cut medicare and some of its services he did not lower the price you pay every month. nice work. We are not the UK or any European country, they are already gone, don’t any of the immigrants being thrown into those countries work and pay into the system? or do they just go around burning cars?

    The fact that this group, TrimTabs Investment Research using Bureau of Economic Analysis data, has an
    analysis of our spending habits going on is very telling, they are wrong but its interesting, who is paying for that bogus research, me? They haven’t got a clue of how much I spend, its a lot, not only on my kids and grand kids but in General, we also get a private Union pension which is iffy right now,thanks to my Republians who have been trying to get rid of Unions for years for political reasons and the hell with us. if we lose everything we spend nothing and then old trimtabs will find out how much seniors spend, they would be shocked and if they think the money is different coming from seniors on SS than it is from working people, they are wrong, its the same money. Its all going back into the ecomnomy isn’t it? What they want is for workers to pay into the economy and give that money back to the banks via credit cards and they can keep tabs on what you spend and how much you owe. I use credit cards but i paid them up. Seniors know enough not to get into debt, maybe thats what they don’t like about us.

    I don’t care how many research papers they come up with, they have no idea how Americans think, obviously, or what they want, so far everything an American wants has been taken away from them,including home ownership and freedom of choice, this is no longer a free country and shame on us for not seeing this coming. We have Fema camps in every state like Auschwitz complete with coffin liners waiting for Lord knows who, they should not allow anything like that in this country, remember Nazi Germany, well its here now, we didn’t learn from that.

    They need to learn the difference between welfare and an entitlement and a contract with America, they hate America and Americans so much then they should leave so we can slam the door on their butts.

    Between Bush and Omama we are lucky we are still standing at all. That will change too.The only one in this country who is getting a handout is our Government, every dime they spend is ours, when Obama sends money to help a revolution in Kenya,illegal by the way, that is our money, when he bails out banks and auto industries he is doing it with our money, maybe trim tabs ought to look into that and what it does for us, Also check on all the jobs the new muslims have , meat packing plants auto factories and even Disneyland, why do new immgrants have those jobs and not the Americans who have been out of work since Obama took office, 500 million to 100 million more muslims coming in here soon, probably have jobs waiting for them, aren’t they paying into social security? give me a break with trim tabs and their make believe research. What nerve.Welfare, you better go back to school if you think Social security in welfare, how dare you.

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