Welfare Queens

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Welfare is often derided as payment to people for doing nothing, or people getting paid not to work. The recipients are called freeloaders, lazy, etc. I would like to apply this definition to selected government programs which are not generally considered ‘welfare’, compare the spending of these activities to the spending of programs traditionally defined as welfare, and see which parties are actually the biggest freeloaders on taxpayer money.

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Unless noted, all figures being used cover the period from 2009 through 2013, with annual figures being the average of these five years.

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The total cost of the following federal programs averaged $203,554,000,000 ($204 billion) over the past five years:

• All food and nutrition assistance (food stamps, etc.)

• Unemployment

• Supplemental Security Income (not Social Security)

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While not accounting for the money spent for all programs where it could be argued that individuals receive money for doing nothing, the total spent for these items makes them the three most expensive programs which make direct payments to individuals, and cover the lion’s share of what is traditionally defined as welfare. I am leaving Social Security, Medicare, and Medicaid out of this section, as these programs are paid for by workers and employers, and not generally considered welfare.

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$204 billion per year is a lot of money. But is it really, when compared with other government programs which literally pay individuals and organizations for doing nothing?

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The net interest paid by the U.S. Government over the past five years has averaged $211 billion per year. The people who collect this interest are getting paid for doing nothing. Just sitting on the couch, eating Cheetos and watching Oprah, while collecting interest payments. Some of them are probably using these proceeds to buy drugs or liquor, the lazy freeloaders. The annual cost of this one program is more than the fore-mentioned traditional welfare programs. Foreign and international organizations hold close to half of outstanding U.S. Treasuries, accounting for approximately $100 B of the 211 B annual average interest paid. At least most funds spent on traditional welfare immediately re-enter the economy in America, when they are spent on food, rent, or anything else, which in turn benefits other Americans. Conversely, interest money going to foreign countries may never make it back into the U.S. economy.

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The U.S. Federal Reserve Bank increased its assets by approximately $3 trillion from October of 2008 through the end of 2013. Most of this was due to an activity known as quantitative easing, or QE. There are several reasons that a good percentage of this $3 trillion amount will likely never be recouped by the Fed. Approximately $2 trillion of this total has been used for purchases of mortgage backed securities (MBS). Any loss realized on these assets when they are eventually sold is effectively welfare for the parties these assets were purchased from (banks, other corporations, hedge funds, pensions, governments, and individuals), as a full price paper value was paid by the Fed at the time of purchase. The people and organizations which sold the assets have passed any potential losses on these assets to the U.S. taxpayer. Due to a litany of problems with the valuation of the assets underlying these MBS, as well as a likely decline in the overall market, which is currently overpriced, a marked loss on these purchases is likely. Assuming a 40% loss on these MBS purchases when they are eventually sold by the Fed, $160 billion per year will be lost on this endeavor, in addition to the interest cost, as the Fed has been working with borrowed money. The people running the organizations receiving this free government money did not need to be smart, hard working, or well educated to collect this welfare. Generating the assets required to purchase these MBS securities may have required those traits, but selling dodgy assets to the Fed at top dollar in a bubble market is a no-brainer. In fact, purchasing said MBS securities in the first place may not have been such a bright idea, until the Fed came to the rescue, buying the questionable assets while simultaneously artificially inflating the market valuations.

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National defense and veterans affairs cost $793 billion per year, on average, over the period we are analyzing. Obviously, the taxpayers are receiving some value for the money spent here, but a great deal of this amount can certainly be considered welfare. Any profits realized by contractors providing goods and services to the Defense Department can be considered the amount the government was overcharged for said goods and services. These overcharges are then given to the shareholders of contracting corporations as profits. Overcharging is not work, so this is welfare. One could also argue that money spent by the government for which no benefit is realized by American citizens can be considered welfare, whether any actual work was done or not. Most of what the U.S. military has done in Iraq, Afghanistan, and other countries could and should have been done by native police, military, or other organizations and paid for by the people of these countries. These services are welfare benefits received by the people of these countries, at least for the ones on the ‘right’ side. Any jobs ‘created’ by this activity in Africa, Asia, and the middle east are not likely to be filled by unemployed Americans, taking them off the welfare rolls. If the U.S. Government had not pursued illegal, imperial wars of choice based on lies in Iraq, Afghanistan, Pakistan, Yemen, Libya, and several other countries over the past five years, the $793 billion annual “defense” cost could have easily been $300 billion less. With all of this taken into account, a $300 billion per year war welfare amount seems reasonable, if not too small.

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For our five year time period, total corporate profits in the U.S. were $9,589 billion, while corporate federal income tax receipts were $1,027 billion, for an overall tax rate of 10.7%. From 1967 – 1971, the actual corporate income tax rate was 34%. Applying the 23.3% difference in rates between the 1967 – 1971 period and the past five years gives an annual average of approximately $447 billion in lost tax revenue. Forty-five years ago is ancient history, you say? The period from 1996 through 2000 saw an actual corporate income tax rate of 24.8%, or 14.1% greater than the that of the past five years. These two periods are only separated by 8 years. This 14.1% difference, when applied to the past five years profits, averages $270 billion per year. This lost revenue, by itself, is much more than the cost of traditional welfare. One could argue that a tax decrease cannot be considered welfare, as the recipient does not receive money, but pays less in. Many corporations not only pay no tax, but get a refund to boot. These instances can certainly be considered welfare, and are part of the reason the overall tax rate is so low. Also, all corporations paying one-third to half of the total tax rate they have paid in the past, and a much lower rate than that which many individuals pay, can arguably be considered a form of welfare.

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From just the four areas of government activity and amounts presented here, up to $1,118 billion per year has been spent on welfare for these programs, with most of these benefits going to corporations, wealthy individuals, and foreigners. Are these welfare activities a better use of funds than helping people in the U.S. who need assistance? Are they worth five times as much? Would you prefer some of your tax dollars go toward feeding your neighbor’s kids, or give five times that amount to the government of China, warlords on the other side of the planet, corporations, and billionaires?