Welfare payments make up 35 percent of total US wages, study says

The old version of U.S. food stamps, from 1980.

Social welfare benefits are expected to rise as more Baby Boomers reach retirement age. (Photo Credit: CC BY/chrstphre campbell/Flickr)

An independent study utilizing Bureau of Economic Analysis data indicates that more than one-third of total U.S. wages and salaries go toward government payouts like Social Security, Medicare and other social welfare benefits. This has shocked numerous economists. CNBC Fast Money Executive Producer John Melloy suggests that this record figure will continue to expand as the majority of the Baby Boom generation retire.

Solving the US wage equation

The U.S. wage survey, which was conducted by TrimTabs Investment Research, indicated that the percentage of salaries has grown significantly, even since 2000. The chunk of wages derived from government aid in 2010 was 35 percent, but in 2000 it was 21 percent. In 1960 it was only 10 percent. As a small consolation, data indicates that the welfare wage is 44 percent in the U.K.

The United States’ dependence upon government stimulus must be broken, said TrimTabs’ Director of Macroeconomic Research, Madeline Schnapp.

“The U.S. economy has become alarmingly dependent on government stimulus,” she said. “Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits.”

Increasing salaries by 35 percent (from $6.5 trillion to $8.8 trillion) or a 23 percent cut to social welfare payouts (tumbling down 23 percent to $1.7 trillion) are the best options available, according to Schnapp. Considering that the federal government is already stringing together short-term, shoestring measures to avert a government shutdown, experts believe only a serious compromise will turn the tide for U.S. salaries versus social welfare services.

Will the US approve of cutting Social Security?

Difficult decisions must be made to keep the U.S. government from reaching terminal bankruptcy velocity. Yet two of the most often discussed options – cutting Social Security and Medicare – are quite unpopular, according to a Wall Street Journal/NBC News poll. Across all age groups in the survey, a vast majority checked “unacceptable” when it came to the question of drastically reducing Social Security. That included 67 of respondents who labeled themselves tea party supporters, who generally do not support big government programs.

A majority of poll participants did voice their support for two alternative measures: cutting Social Security and Medicare payments to U.S. citizens in higher income brackets (which received 60 percent support) and increasing the U.S. retirement age to 69 by 2075. Currently, full retirement benefits kick in at age 66. The age isn’t scheduled to increase until 2027, and then it will be 67.

Resources for battling the recession

The recession that set in during 2008 hit the U.S. hard. Thus, it comes as little surprise that welfare payments increased by a mind-boggling $514 billion since then, reports TrimTabs. As the the U.S. housing market remains on shaky ground, dramatic recovery may still be far away. Thus, a cure for the 35 percent welfare wage percentage may still be far away.



Wall Street Journal

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