Entitlement nation: The federal government has gradually turned into a gigantic wealth-transfer machine

From Mark Perry of "Carpe Diem."

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Below are some selected excerpts from an excellent article in today’s Investor’s Business Daily by John Merline (“70% Of U.S. Spending Is Writing Checks To Individuals“):

Buried deep in a section of President Obama’s budget, released this week, is an eye-opening fact: This year, 70% of all the money the federal government spends will be in the form of direct payments to individuals, an all-time high (see chart above, data here in Table 6.1).

In effect, the government has become primarily a massive money-transfer machine, taking $2.6 trillion from some and handing it back out to others. These government transfers now account for 15% of GDP, another all-time high. In 1991, direct payments accounted for less than half the budget and 10% of GDP. What’s more, the cost of these direct payments is exploding. Even after adjusting for inflation, they’ve shot up 29% under Obama.

Where do these checks go? The biggest chunk, 38.6%, goes to pay health bills, either through Medicare, Medicaid or ObamaCare. A third goes out in the form of Social Security checks. Only 21% goes toward poverty programs — or “income security” as it’s labeled in the budget — and a mere 5% ends up in the hands of veterans.

Interestingly, despite Obama’s frequent pledges to reduce income inequality, the share of direct payments going toward “income security” has dropped from 25% in 2009 to 20% in 2014. (The average share from 1980 to 2008 was 25.4%.) Obama’s Fiscal Year 2015 budget calls for this share to drop to just 17% by 2019, as his programs devote more and more federal tax money to middle-class entitlement programs such as ObamaCare.

This massive shift in federal spending toward direct payments to individuals not only balloons the size of the federal government, it makes cutting the budget all the harder, since any meaningful spending reductions will invariably mean cutting back on some of these check-writing programs.

The Congressional Budget Office figures that, by 2038, Medicare and Social Security alone will eat up 42% of the budget. The explosive growth in these direct-payment programs is also squeezing traditional government functions, such as national defense, which Obama wants to sharply cut. His budget calls for Pentagon spending to drop from $623 billion in 2015 to $570 billion in 2017."