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January 18, 2012 in City
Political parties like spending, in one form or another
How do you like your welfare?
Chances are awfully good that you get some and that you approve of it mightily. That you see it as fair and just and righteous and super-constitutional and not-really-welfare-at-all. As opposed to that other guy’s blood-sucking welfare.
But a Washington State University political science professor, Christopher Faricy, has taken a close look at the country’s spending and concluded that we’re telling only half the story when we talk about government spending on social programs.
Faricy, who’s published several articles and is working on a book, argues that there is little bottom-line difference between Republicans and Democrats when it comes to drawing down the Treasury to promote social goals. One party provides welfare for the rich through targeted tax breaks; one provides welfare for the poor through direct spending; both are trolling for votes in friendly waters; and “both believe in massive government subsidies,” as Faricy told Dan Froomkin of the Huffington Post.
And yet, this is not how the narrative usually shapes up. Conventional wisdom tells us that Democrats are the ones who spend government money on social programs to provide health care or protect retirement savings. Republicans just give people their own money back, right? Well, they give certain people their money back. Most of those people are rich, and the richer people are, the bigger their tax breaks.
And in case you don’t consider a tax break a form of spending, rest assured that when it comes to the pluses and minuses of budgeting, there is no difference. Except this: the tax breaks are more or less hidden.
“There are many ways the government spends money that are not reported on the federal budget,” Faricy said.
If you’re concerned that America is becoming a welfare state, you’re behind the curve. America is already in constant tug-of-war between two welfare states, Faricy says, and the total impact on the Treasury grows and grows.
“Although direct spending and tax (breaks) are both treated as ‘spending’ for federal budgetary purposes, these two policy instruments represent very different roles for the government in the economy,” Faricy writes in the introduction to his book manuscript, tentatively titled “The Two American Welfare States: How Both Parties Increase Social Spending and Affect Income Inequality.”
“In particular, direct social spending uses the public sector to redistribute federal money down the income ladder to poorer populations while tax (breaks) accrue more federal money to wealthier individuals through subsidizing the private sector.”
According to Faricy, we are already a larger-than-average, European-sized welfare state, if you add up direct government spending, tax breaks and private spending on social programs.
What we’re not is a European-style welfare state. The United States leads the world in social engineering by tax break. There are 191 tax breaks that benefit some people, such as homeowners or big earners on capital investments, more than others. The number of tax breaks grows year by year. It’s equal to about 2 percent of GDP.
In terms of effect on the Treasury, tax breaks are a bigger factor than spending. In 2010, Faricy says, the government spent about $1.43 trillion on Social Security, Medicaid and Medicare. It gave away $1.7 trillion in tax breaks. And Faricy isn’t even counting corporate welfare.
Whether you view this as welfare for the rich or not, you can’t argue the effect on the bottom line. And these tax breaks don’t lower taxes across the board; they reward certain preferred behaviors.
“People say tax breaks are giving them their own money back, but what’s critical is that only certain people are allowed to get that money back,” Faricy said. “There’s a saying: In America, there’s equality for all, but only tax breaks for some.”
The richer you are, the bigger your tax break. When Mitt Romney pays an effective tax rate of 15 percent, thanks to preferential treatment at tax time, he wins twice: once for paying a lower rate than a wage-earner, and again for the proportional size of his reduction in taxes. Faricy notes that 80 percent of the benefits from tax breaks for private pensions go to the top 20 percent of earners; their after-tax income gets as much as a 4 percent bump.
Direct spending on social programs tilts the other way, of course. The typical family in poverty gets $7.50 in Social Security benefits for every dollar it contributes. Those at four times the poverty level get just 26 cents for each dollar in contributions.
Somehow, though, only this second example occupies our political debates about government spending and fiscal responsibility. Faricy says he hopes his work can help us all tell a fuller story.
“A lot of people, when they think of government spending, they automatically think of African-Americans, Latinos or women as the recipients,” he said. “They don’t actually have an accurate picture of who the recipients of government spending are.”
Shawn Vestal can be reached at (509) 459-5431 or shawnv@spokesman. com. Follow him on Twitter at @vestal13.
The draw of the unknowable 
DickAdams on January 18 at 7:38 a.m.
Heck, the owners of the Spokesman Review have been receiving corporate welfare for years and years. Just a reminder about the Spokesman Review building, where the owners paid absolutely zero dollars for their real-estate taxes on a 10 year tax exemption. The owners even found a loop hole in the exemption taxes where they did not even pay taxes on the land the structure sits on. And in the mid 1990s the River Park Square rip off. The owners even got caught cheating by the IRS. As is said, the owners live by the golden rule, i. e., those who have the gold shall rule.
Albert on January 18 at 9:44 a.m.
Does it really matter? Teddy and Franklin Roosevelt were the ultimate “givers”, and absolutely nothing has changed - nor will it ever change. $$$=votes and votes=$$$ for broke politicians who retire rich. We all sit back in our “one vote” frustration and in the end, “things” remain the same. We are now imploding because of what Franklin Roosevelt created to fund WWII. Time, corruption, and unchecked spending have caught up. There are NO answers, so getting all worked up, spouting unworkable personal solutions, are not worth it good friends. Have a cup of coffee, a SPD donut, put a smile on your face, and go about your day. Shawn is just trying to build a name on controversy. Keep your BP down and move on.
mikeln on January 18 at 10:17 a.m.
There are solutions to these problems. The problem is they will contribute nothing to the wealthy. Certain people think they are worth much much more then everyone else and as long the “we have to do better then the jones” marketing mentality exists, we will stay the same. Unless we come to grips with the fact that resourses are limited to what we have on this planet and run-a-way consumerism is going to make sure no one ends up anything we will head down the path to extinction.
gotcha on January 18 at 10:48 a.m.
As a tax payer of Washington State I know I have had enough. My Progressive led legislature ignores my concerns of over spending and continually rewards money to the Public Sector Unions who spend my money and than use it against me to get what they want. When negotiations take place between the Unions and the state we as the taxpaying public are not allowed into the negotiation sessions and neither is the media. These meetings are not even subject to the Freedom of Information Act. Unions may have tied my hands as a taxpayer, but not my rights as a voter in this state. I am at war with the Public Sector’s Unions and their blotted benifits, unfunded pensions, and over compensated salarys. From here on out I will turn down every tax increase, and new tax put before me as a voter. I will also vote all union loving Progressive politicans out of office. No more will my tax dollars be used against me and no more will I be treated like a fool. I encourage others to join me and put these clowns in their place.
liberal_in_right_wing_land on January 18 at 11:30 a.m.
Its funny when people think unions are the ones ruining the country.
Please, stop watching Fox News for 10 minutes and take the time to learn the truth on your own, not from the talking heads on TV who are being paid millions of dollars to promote the opinions of the people paying them millions of dollars.
zelda on January 18 at 1:13 p.m.
I’ve talked to friends who are quick to blame the Washington state legislature for leading us to financial ruin, but I’ve got to say that a lot of the spending came via the initiative process. I know there’s people like Tim Eyman who fought back (not that I like the guy) but after a while you just have to take the long view. There’s an ebb and flow to all this. When it seems like the dough is rolling in, citizens tend to want to spend it.
Before long, Washington will be joining the pack and pushing for Internet gambling. Just like we pushed for Lotto in the major recession of the late70s/early 80s.
Best money advice I ever got was to go out and buy a Lasser’s Guide when doing my taxes. This was back before Quicken, obviously. It didn’t turn me into a tax activist but it sure opened my eyes as to how things work. It was the financial equivalent of taking apart a clock to see all the moving parts.
I agree with Albert to some extent — $$$=votes. Money is America’s religion.
gotcha on January 18 at 4:18 p.m.
It might suit my Liberal friends to look at what states are suffering under the weight of Public Sector Unions. Illinois, Michigan, California, Rhode Island New York and our very own Washington have been bathed in the Public Sector Unions bloted benifits, unfunded pensions and inflated salarys. Many of those states teater on being insolvent. Follow the money my friends, follow the money. No, sorry, I do not see coporate devils stealing my tax dollars but I sure see the likes of Andy Sterns, and Trumka’s at the White house doing a fine job on me. Anyone care to talk about SEIU and Obama care?? Obama’s Stimulus money where did it go? Thats right, to the Unions.
greenlibertarian on January 18 at 7:39 p.m.
From here on out I will turn down every tax increase, and new tax put before me as a voter.
-gotcha
Right, like you EVER voted for a tax increase before. I’m sure whoever puts a tax increase on the ballot is really counting on your vote. NOT.