More Americans than ever rely on government help: Report
( NewsNation ) — In the past 50 years, the percentage of Americans who depend on government programs for a significant portion of their income has mushroomed, according to a new study.
The bipartisan think tank Economic Innovation Group (EIG) says that 53% of Americans draw at least a quarter of their income from government aid (also known as "transfer income") like Social Security, Medicare, Medicaid, the earned income tax credit, Pell grants and COVID-era payments.
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In 1970, only one percent relied that heavily on government money, and most were in the country's poorest counties.
"Three main forces are fueling the 'Great Transfer-mation': an aging population, rapidly rising healthcare costs, and growth in other earnings that just hasn't kept up," the study said.
One in six Americans is age 65 or older, compared to one in ten in 1970. That translates into a huge increase in Social Security payouts.
An older population also needs more health care, so Medicare spending has significantly increased. And the study says, because personal income (wages, benefits, etc.) has grown so slowly, transfers make up a higher percentage of people's total income.
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Another big reason for the shift in income reliance is the demise of so many manufacturing jobs in the U.S. Delaware County, Indiana became more reliant on transfers as factories closed. The average annual wage in the county anchored by the city of Muncie is about $31,000, and $14,000 of that is from transfers.
On the other hand, the "knowledge economy" boomed in King County, Washington, creating an average wage of $105,000 a year. Of that, transfers account for just $8,500.
EIG said the problem is on track to worsen, as more Social Security and Medicare payouts raise the deficit, but that money also fuels a big part of the economy.
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"The country is on a collision course with politically fraught trade-offs," the report warns. "Significantly raising taxes and dramatically cutting transfer programs could choke off the very economic activity that finances transfers and (impoverish) the lives of people who depend on them."
The study says the best way out is faster economic growth and doing whatever is possible to restore America's "demographic vitality."
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It says pro-growth policies "represent the ideal way to decrease reliance on transfers – by lifting incomes earned from work and investing, raising the hopes and economic prospects of workers and their communities, and preventing the country from becoming an ever more dependent one."
