On the Way to becoming Greece
On Tuesday, we learned from USA Today that “private pay shrinks to historic lows as government payouts rise.” More specifically, USA Today reported:
“Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds.
“At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010.
“Those records reflect a long-term trend accelerated by the recession and the federal stimulus program to counteract the downturn. The result is a major shift in the source of personal income from private wages to government programs.
“The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. "This is really important," Grimes says.” (emphasis added)
The newspaper concluded the story with the following quotes:
“Economist Veronique de Rugy of the free-market Mercatus Center at George Mason University says the riots in Greece over cutting benefits to close a huge budget deficit are a warning about unsustainable income programs. (emphasis added)
“Economist David Henderson of the conservative Hoover Institution says a shift from private wages to government benefits saps the economy of dynamism. "People are paid for being rather than for producing," he says.” (emphasis added)
Update (5/26/10): Ross Kaminsky, blogging at the National Taxpayers Union's blog, Government Bytes, wrote today, "And this brings us to the political ramifications of the trend: When a majority of people are net receivers of money and/or services from the government, and in the unfortunate circumstance in which we live now in which people who don't pay income taxes are nevertheless allowed to vote themselves money from people who do, we reach a tipping point where a majority of voters have incentive to vote for maximum redistribution."