Thread: How has government spending on social programs changed over time?

I was having a casual discussion with a friend, who is quite conservative, and he made the statement that 34% of the population is supporting the entire economy, and everyone else is either a government employee (including education, police, etc) or the recipient of social benefits of some type. How accurate is this statement? And how has government spending on social programs increased or decreased over time in the US and/or Canada? He disagreed with my statement that I thought it was actually much more difficult to qualify for many social programs and that time limits were stricter than they were, say, 30 or 40 years ago. He also disagreed with my statement that "Big Government" or over all spending had increased as much under conservative administrations as liberal ones. What do you think?

Well, I guess there's a lot here to argue about, and I will let anyone who is interested have at it.

I think what you said to your friend was accurate.
BTW, working for the government doesn't mean "tax exempt" our salaries are still taxed so we're still supporting the country.

This is great subject to cover and I am hardly believing that you've had no replies so far....
First off 34% is hardly accurate, all workers are taxed, propetries are taxed and everything else has a sales tax which is pretty much excepted world wide so to say 34% of us are supporting the rest is hardly accurate.... Money must flow in order to provide the population with paychecks and those paychecks must be chipped away at in order to provide others with their paychecks for next week.... This system keeps the flow of things going, and it's pretty simple to see as a concept but is a very complicated process over all.... I can't give you exact figures because they are very complex but you can look up some things like economic growth, taxes and come up with some figures in your own mind....

And people like this will, sooner or later, come up with the argument that "I run my household finances properly and I'd be broke if I treated my household the way the government handles the country".

And they never think about the differences between household and national accounts. If you pay your bills, give the kids their pocket money, buy your groceries and clothing and dry cleaning and all the rest of it, that money is gone forever from a household budget. To make a valid comparison with national accounts, you'd have to be able to get back some of each of those transactions as they are taxed in each transaction that the money facilitates. And every transaction that the other parties to those transactions engage in having received those funds. It's entirely possible for the whole amount of government funds to come back as taxes after they've been distributed as benefits of various sorts. The only way the merry go round stops is at the point the funds are banked by the recipients and no longer circulated in the economy. That might happen right at the beginning if the funds go to people who don't need them for immediate expenditure and the merry go round never gets started. If the government targets such outlays correctly, the funds could circulate 10 or 100 times before they reach someone who'll bank it for long-term investment rather than short term savings.

That's why Keynesian policies work when funds are distributed to low income earners/ pensioners or to job creation schemes and, to a lesser extent, infrastructure projects. The people on the receiving end have no option but to spend all the additional wages and other funds that they get because they really don't have enough money to live well. And when that money gets into circulation, some businesses will need to employ more people or, at least, more working hours from their existing employees. And all of that money is also taxed - when it is earned, when it is spent, or both.

I'd be really happy if I could organise my household finances so that significant portions of what I outlay came promptly back to me as contributions that I could use to pay for further goods and services - portions of which would also come back to me. That's why comparisons of government finances to household management and individual business operations always fail.

Originally Posted by grmpysmrf

I think what you said to your friend was accurate.
BTW, working for the government doesn't mean "tax exempt" our salaries are still taxed so we're still supporting the country.

Well, it seemed some how unfair to characterize every government employee as being a drain on the capitalist engine. These are services that people expect, and increase productivity or wealth in the long run. People would have to pay for these services in some manner, and the private sector either isn't interested in providing those services, or the public simply doesn't trust it to do it fairly or ethically, or with certain objectives beyond profit - which is why we have publicly funded police departments, museums, military, education, and in Canada, health care, etc.

It was a short discussion, though, because to be honest I wasn't really sure of my facts as far as how things had changed over time.

Originally Posted by adelady

I'd be really happy if I could organise my household finances so that significant portions of what I outlay came promptly back to me as contributions that I could use to pay for further goods and services - portions of which would also come back to me. That's why comparisons of government finances to household management and individual business operations always fail.

That's a good point. Surprisingly, the only thing he did agree with me about was the benefits of raising minimum wage.

Originally Posted by adelady

The only way the merry go round stops is at the point the funds are banked by the recipients and no longer circulated in the economy. That might happen right at the beginning if the funds go to people who don't need them for immediate expenditure and the merry go round never gets started.

And thus is the problem with low taxes for the "job creators." They don't spend their excess funds, they bank them. They stock pile their resources and have the ability to out wait the rest of us.

Originally Posted by grmpysmrf

Originally Posted by adelady

The only way the merry go round stops is at the point the funds are banked by the recipients and no longer circulated in the economy. That might happen right at the beginning if the funds go to people who don't need them for immediate expenditure and the merry go round never gets started.

And thus is the problem with low taxes for the "job creators." They don't spend their excess funds, they bank them. They stock pile their resources and have the ability to out wait the rest of us.

I had never heard of "negative interest rates" until the other days on the news. The European Central Bank actually adopted negative interests rates to push money out of banks and back into the economy. But even that may not work: "Time will tell whether cutting the deposit rate will encourage banks to increase lending, will lead to capital outflows, or whether banks will treat this as a cost of operating and simply pass it on to consumers and businesses." said TD Bank economist Andrew Labelle.

Two comments:
First, textbook purists will tell you that the mother nominated wage is a curse on the economy. Higher wages mean a higher barrier of entry for employment (the high cost of employment means less workers will be hired, and higher unemployment will result). This is particularly true with small employers, who, by the way, make up two thirds of all employment in the United States. New-conservatives (smart people) will tell you that the social safety net of welfare will catch all those who fall through the cracks. No minimum wage is the best way to boost employment. Fed watchers will look at a girl like Yellen, appointed by a Democrat named (whatever), and conclude, "She's going to take up this one." We're talking about, "woman's intuition" here, and they may be correct. This sort of mission creep by the Fed is something to worry about. Never like it, or any statements like it put out by the Fed, because their job is hard enough.

Second, the interest rate you are talking about is the overnight rate charged by the Fed for minimum deposits a bank must keep in its vault. Like any business, they invest their money, mostly with home mortgages, and anything left over is a burden. The fed's overnight rate is the rate of interest charged on its member banks for a loan from a fellow bank to keep a minimum amount of currency in its vault. This amount is set by the Fed, and it is definitely be to assure enough cash is on hand every day to meet customer needs. A higher, "Discount Rate" means a greater cost to banks, which is automatically passed on to the marketplace in the form of higher home mortgage rates. Because of the influence this has in the building industry, and the economy as a whole, this area is called constantly watched and reported by the news media. It may seem like triteness, but it is not. It is the marketplace law of supply and demand. If you read a news story where the European Central Bank is charging a negative interest to its member banks, then that is a very surprising development. I think the news was reported wrong.

With no minimum wage, how is anyone supposed to actually make enough money to actually live? The concept that no minimum wage would work is shown to be false simply by looking at the living conditions and work weeks of families who work minimum wage.

Everything is changing according to the new government policy. I think social policy will be improved in the future.

Originally Posted by Paleoichneum

With no minimum wage, how is anyone supposed to actually make enough money to actually live? The concept that no minimum wage would work is shown to be false simply by looking at the living conditions and work weeks of families who work minimum wage.

Oh, it _can_ work. It just leads to more problems than it solves.