If we want to cut back on the size of government then we have to cut our spending and not grow our spending

Does Government Have a Revenue or Spending Problem?

People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too much spending, or too little tax revenue? Economics professor Antony Davies examines the data and concludes that the root cause of the debt is too much government spending.

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If we want to cut back on the size of government then we have to cut our spending and not  grow our spending. Look at what is happening right now in the federal government with the foodstamp program.

April 30, 2013 at 12:45 pm

Joseph Sohm/Visions of America/Newscom

Joseph Sohm/Visions of America/Newscom

Across the country, states are courting participants for food stamps (now known as the Supplemental Nutrition Assistance Program, or SNAP). The U.S. Department of Agriculture (USDA) even has a webpage dedicated to helping states create “SNAP Outreach Plans.”

The argument from the USDA is that “Food Stamps Make America Stronger” by stimulating states’ economies. States are responding to the call. According to The Washington Post: “Rhode Island hosts SNAP-themed bingo games for the elderly. Alabama hands out fliers that read: ‘Be a patriot. Bring your food stamp money home.’ Three states in the Midwest throw food-stamp parties where new recipients sign up en masse.” And Florida even employs recruiters.

The recruiter profiled in the Post’s story, Dillie Nerios, is required to get “at least 150 seniors” to enroll in “food stamps each month, a quota she usually exceeds.”

“Help is available. You deserve it. So, yes or no?” she tells prospective food stamp recipients. “State-issued training manuals” even provides responses she can use when individuals protest.

Not surprisingly, food stamp enrollment in Florida has swelled in the past four years, rising from 1.45 million in 2008 to 3.35 million in 2012.

Policy changes over the years have also helped swell the numbers. For example, in 2000, the Clinton Administration broadened food stamp eligibility by allowing states to weaken income limits and waive asset limits. Then, in 2009, President Obama suspended food stamp work requirements for able-bodied adults. This was to be a temporary change, but he’s continued to allow states to waive work requirements.

The underlying mentality of all of this is one that completely overlooks helping individuals achieve self-sufficiency, instead promoting government dependence.

The U.S. welfare system—which today includes roughly 80 means-tested welfare programs that provide food, housing, cash, medical care, and social services—has operated under this mentality since the War on Poverty began in the 1960s. For decades now, welfare has failed to promote individual independence through addressing the causes of poverty, instead growing ever larger to merely band-aid the symptoms.

Americans are a generous people and want to help their neighbors—but they also know that work is the best way out of poverty. And helping individuals out of poverty should be the goal.

Said Senator Jeff Sessions (R–AL) in February of this year, “No longer can we measure compassion by how much we spend on poverty, but [instead we should measure it by] how many people we help to lift out of poverty.”

In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often warn that the welfare state reaches a point-of-no-return when the number of people riding in the wagon begins to outnumber the number of people pulling the wagon.

To be more specific, if more than 50 percent of the population is dependent on government (employed in the bureaucracy, living off welfare, receiving pensions, etc), it becomes rather difficult to form a coalition to fix the mess. This may explain why Greek politicians have resisted significant reforms, even though the nation faces a fiscal death spiral.

But you don’t need me to explain this relationship. One of our Cato interns, Silvia Morandotti, used her artistic skills to create two images (click pictures for better resolution) that show what a welfare state looks like when it first begins and what it eventually becomes.

These images are remarkably accurate. The welfare state starts with small programs targeted at a handful of genuinely needy people. But as  politicians figure out the electoral benefits of expanding programs and people figure out the that they can let others work on their behalf, the ratio of producers to consumers begins to worsen.

Eventually, even though the moochers and looters should realize that it is not in their interest to over-burden the people pulling the wagon, the entire system breaks down.

Then things get really interesting. Small nations such as Greece can rely on permanent bailouts from bigger countries and the IMF, but sooner or later, as larger nations begin to go bankrupt, that approach won’t be feasible.

I often conclude my speeches by joking with the audience that it’s time to stock up on canned goods, bottled water, and ammo. Many people, I’m finding, don’t think that line very funny.

If you spend too much then people won’t want to work anymore.

Economists often do a crummy job of teaching people about the impact of fiscal policy on the labor force, largely because we put people to sleep with boring discussions about “labor supply” decisions (my blog post from last year perhaps being an example of this tendency).

From now on, I will try to remember to use this cartoon. It’s a parody of Obama’s policies, but the last slide (or is it a panel?) is a great teaching tool about what happens when politicians turn the safety net into a hammock.

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Bipartisan cliff cartoon

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