Government payment larger share of nation's income than ever

9:32 PM, Apr 25, 2011   |    comments
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WASHINGTON, D.C. - Americans depended more on government assistance in 2010 than at any other time in the nation's history, a USA TODAY analysis of federal data finds. The trend shows few signs of easing, even though the economic recovery is nearly 2 years old.

A record 18.3% of the nation's total personal income was a payment from the government for Social Security, Medicare, food stamps, unemployment benefits and other programs in 2010. Wages accounted for the lowest share of income -- 51.0% -- since the government began keeping track in 1929.

The income data show how fragile and government-dependent the recovery is after a recession that officially ended in June 2009.

The wage decline has continued this year. Wages slipped to another historic low of 50.5% of personal income in February.  Another government effort -- the Social Security payroll tax cut -- has lifted income in 2011. The temporary tax cut puts more money in workers' pockets and counts as an income boost, even when wages stay the same.

From 1980 to 2000, government aid was roughly constant at 12.5%. The sharp increase since then -- especially since the start of 2008 -- reflects several changes: the expansion of health care and federal programs generally, the aging population and lingering economic problems.

Total benefit payments are holding steady so far this year at a $2.3 trillion annual rate. A drop in unemployment benefits has been offset by rises in retirement and health care programs.
Americans got an average of $7,427 in benefits each in 2010, up from an inflation-adjusted $4,763 in 2000 and $3,686 in 1990. The federal government pays about 90% of the benefits.

"What's frightening is the Baby Boomers haven't really started to retire," says University of Michigan economist Donald Grimes  of the 77 million people born from 1946 through 1964 whose oldest wave turns 65 this year. "That's when the cost of Medicare will start to explode."

Accounting for 80% of safety-net spending in 2010: Social Security, Medicare (health insurance for seniors), Medicaid (health insurance for the poor) and unemployment insurance.

USA Today

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