Dependency Index Surges 23% Under President Obama
By JOHN MERLINE, INVESTOR’S BUSINESS DAILY Posted 08:02 AM ET
The American public’s dependence on the federal government shot up 23% in just two years under President Obama, with 67 million now relying on some federal program, according to a newly released study by the Heritage Foundation.
The conservative think tank’s annual Index of Dependence on Government tracks money spent on housing, health, welfare, education subsidies and other federal programs that were “traditionally provided to needy people by local organizations and families.”
The increase under Obama is the biggest two-year jump since Jimmy Carter was president, the data show.
The rise was driven mainly by increases in housing subsidies, an expansion in Medicaid and changes to the welfare system, along with a sharp rise in food stamps, the study found.
“You can’t get around the fact that policy decisions made over the past two years, on top of those made over the past several decades, are having a large effect on the pace of growth of the index,” said William Beach, who authored the Heritage study.
Dependence on the government has climbed steadily since 1962, when the index stood at 19. By 1980, the index had risen to 100. It stood at 294 in 2010, the last year for which the data are available. The D.C.-based Heritage Foundation has produced the index for nine years.
The report also found that spending on “dependence programs” accounts for more than 70% of the federal budget. That, too, is up dramatically. In 1990, for example, the figure stood at 48.5%, and in 1962 just over a quarter of federal spending went to dependence programs.
At the same time, fewer Americans pay income taxes, the report notes. Almost half (49.5%) didn’t pay income taxes in 2009, the latest year for which the researchers have data. Back in the late 1960s, only 12% of Americans escaped the income tax burden.
The number of people dependent on the federal government shot up 7.5% over the past two years.
In 2010, for the first time ever, average spending on dependence programs per recipient exceeded the country’s per-capita disposable income.
The dependency index has dipped only seven times in the past 49 years, three of which were under President Reagan and two under President Clinton.
Some observers say the rise in dependence under Obama is merely a reflection of the deep and long recession.
But Beach says his team’s research shows that economic effects account for only one-fifth of the change in the index.
In addition, the index shot up 8% in 2010, a year when the economy grew by 3%.
Also, in the wake of the 1981-82 recession — which lasted nearly as long as the so-called Great Recession (16 months vs 18 months), and saw unemployment rise higher (peaking at 10.8% vs. 10%) — the dependence index climbed only 6%, then fell the very next year.
The lingering high unemployment rate during the slow economic recovery under Obama could also explain the dependency rise. It’s also possible that the growth in federal dependency programs is partly to blame for the ongoing jobs recession, not just the result of it.
As the nearby chart shows, the time it’s taken for employment to reach its prerecession peak has climbed the past four decades, right along with the growth in federal dependency. The current jobs recession hit a post-World War II record of 48 months in January, with payrolls still 5.6 million below their January 2008 high.
Research seems to validate this connection. Various studies have shown that extending unemployment benefits can keep unemployment rates higher than they would otherwise have been.
Obama’s own former economic adviser, Larry Summers, noted in the 1999 Concise Encyclopedia of Economics that “government assistance programs contribute to long-term unemployment … by providing an incentive, and the means, not to work.”