source: Mercatus Center
de Rugy explains:
This chart examines the change in the composition of personal income in the United States since 1929. The most notable trend is the increase in the portion of personal income coming from government transfers. These transfers include Social Security payments, unemployment benefits, food stamps, and personal and business tax credits. During the time period examined, the proportion of total personal income constituted by these benefits has grown from 0.9% to 17.2%. Complementary decreases of wage earnings as percentages of total personal income (from 59.5% to 52.3%) are also quite evident.A quote from USA Today highlights the consequences:
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.The bond market agrees. So do MaxedOutMama and I. Writing in the Washington Post, Arthur Brooks calls choosing a response "America's new culture war":
Those old battles have been eclipsed by a new struggle between two competing visions of the country's future. In one, America will continue to be an exceptional nation organized around the principles of free enterprise -- limited government, a reliance on entrepreneurship and rewards determined by market forces. In the other, America will move toward European-style statism grounded in expanding bureaucracies, a managed economy and large-scale income redistribution. These visions are not reconcilable. We must choose.I'm fairly certain Obama already has. Still, he should read Mark Steyn:
It no longer matters whether you’re intellectually in favour of European-style social democracy: simply as a practical matter, it’s unaffordable.
How did the Western world reach this point? Well, as my correspondent put it, we assumed that we were rich enough that we could afford to be stupid. . .
Across the developed world, a beleaguered middle class is beginning to understand that it’s no longer that rich. At some point, it will look at the sheer waste of government spending, the other shoe will drop, and it will decide that it no longer wishes to be that stupid.