A Nation of Moochers

by Sykes, Charles J.

  • Reliance on government has hit an all-time high: By mid-2010, one in six Americans were receiving aid from antipoverty programs.7* For the first time since the Great Depression, Americans took more in government benefits—in the form of unemployment compensation, welfare, and other aids—than they collectively paid in taxes. Government transfer payments swelled to more than $2 trillion, more than the total amount of taxes paid by individual Americans. Not counting government employees, 64.3 million Americans depend on government to pay for food, health, and housing (up from 21.7 million in 1962). The Heritage Foundation’s William Beach and Patrick Tyrell note that someone on government assistance now gets on average more than four times as much taxpayer money per year—$31,950—as he would have in 1962, adjusting for inflation.8* If government employees are added, more than 88 million Americans are now dependent on government for their livelihood—an increase of 163 percent since 1962.9

  • Major Wall Street firms and failing car makers were handed hundreds of billions of dollars in taxpayer cash subsidies as rewards for their irresponsible risk taking and reckless deal making and spending. (Citigroup and General Motors each received $50 billion in direct aid; the total tab for bailouts may run into the trillions of dollars in a process that has “privatized gains and socialized losses.”) Most Americans, however, were not “too big to fail” and went without bailouts.

  • Middle Americans increasingly find that work no longer pays. A cover story in Forbes documented the perverse incentives (especially for families with college-age students) that punish success and provide incentives for lowering income.10

  • Contemporary politics is dominated by the freebie. Cash for Clunkers: Other people buy you a car (and destroy perfectly good ones in the process). Home credits: Other people help buy you a house. Pork spending: Other people pay for your goodies. In the ultimate moocher culture, someone else buys your food, provides housing, heating, transportation, takes care of your kids, pays for your health care—and gives you a free cell phone.

  • The casino-like mortgage bubble was succeeded by a massive transfer of wealth from taxpayers to bail out reckless lenders and borrowers alike, adding to the nation’s exploding deficit. The unaffordable was bailed out by the unsustainable.

  • A law professor from the University of Arizona argues that far more of the estimated 15 million American homeowners underwater on their mortgages should stiff their lenders and walk away from their mortgages. For good measure he suggests a spending binge before defaulting.11 As a sign that the stigma of default is fading, The Wall Street Journal reports that more homeowners are taking his advice and “deciding to abandon their loan obligations even if they can afford the payments.”12

  • The gap between the two Americas (the public and private sectors) continues to grow. According to the Bureau of Economic Analysis, federal employees now earn more than double what private sector workers make. In 2009, the average federal civil servant pulled down pay and benefits of more than $123,000, while private employees made do with an average of $61,051 in total compensation. The gap between the two Americas has grown in the last decade, with the gap between the compensation of federal and private workers more than doubling.13 In addition to the cushier salaries and benefits packages, government workers on average also have more job security and far richer pensions (and more vacation days).

  • The number of Americans now using food stamps has exploded even as the stigma of dependency has declined.14 Food stamp use hit a record 42.4 million in November 2010—a 58.4 percent jump in just three years.15 One in eight adults and one in four children now use the subsidy. One academic study found that fully half of Americans—and fully 90 percent of black children—at one time or another received food stamps before the age of 20.16

  • Even as dependence on government rose, USA Today reported that income from the private sector dropped to its lowest share of American personal income in history. In the first quarter of 2010, only 41 percent of the nation’s personal income came from private business paychecks. Individuals received nearly a fifth of their income from government programs.17 Another 10 percent was paid in salaries and wages to government workers; when the cost of lavish fringe benefits is added, the proportion swells even more.

  • We are extending dependency throughout society both vertically and horizontally. By legislative fiat the new health care bill extends the dependency of children to age 26, at least when it comes to health insurance, thus codifying a rolling redefinition of the age of independence. The legislation also expands the scope of middle-class dependency by providing government subsidies for health insurance to families making up to roughly $88,000 a year. By 2019, according to the Congressional Budget Office, Obamacare will add another 16 million dependents to Medicaid, while another 19 million will receive taxpayer subsidies for their health insurance. By that year, the government will be responsible for 52 percent of the nation’s health care spending.18 This guarantees that dependency will begin at birth and extend throughout the adult life of many Americans.

  • The 2011 federal budget envisioned a vast, permanent expansion of the welfare state, even after the recession ends. President Obama’s budget called for spending more than 10.3 trillion on poverty programs over the next ten years.19

  • Central cities have become laboratories of mooching where the focus of political and economic activity is the expansion of or access to benefit programs, support programs, or, in the better cases, government jobs with high security and lavish benefits but little accountability. In particular, public education systems have become massive jobs programs (exemplified by the “rubber rooms” set aside for tenured teachers who can’t be fired) and perfect expressions of the moocher culture: You don’t expect much of me and I won’t expect much of you.

  • To pay for all of this, taxes on future generations will have to be more than doubled to pay off an exploding national debt, which will reach 100 percent of the Gross Domestic Product (GDP) within a decade. By 2020, nearly half of all income tax revenues will go toward paying interest on the national debt.20 By 2050, the national debt will rise to more than 300 percent of the GDP; by 2080, it will be eight times the size of the entire economy.21

  OPM (Other People’s Money)

  This blizzard of transfer payments is advanced by advocates and politicians who rely on what William Voegeli wryly calls “non-Euclidean economics,” in which taxpayers are led to believe that all of these goodies are paid for by someone else. By “blackening the skies with criss-crossing dollars,” writes Voegeli, “the welfare state manages people’s perceptions of its costs and benefits to encourage them to believe an impossibility; that every household can be a net importer of the wealth redistributed by the government.”22

  But despite the fondest hopes of those chasing the criss-crossing dollars, multiple mooches do not cancel each other out. The young may mooch off the old, the old off the young, but the result is not a wash. Rather, the mooching creates the habit and the expectation of relying on others; everyone feels not only entitled to the wealth of others, but convinced that they have to keep mooching or be left out. Only suckers pass up the free money.

  The effect of all this on the national character goes beyond the impact on the economy. A culture of mooching undermines responsible behavior by rewarding and subsidizing failure, irresponsibility, and dependency.

  In contemporary America, we now have two parallel cultures: an anachronistic culture of independence and responsibility, and the emerging moocher culture. We continually draw on the reserves of that older culture, with the unspoken assumption that it will always be there to mooch from and that responsibility and hard work are simply givens. But to sustain deadbeats, others have to pay their bills on time. Massive defaults are subsidized by the people who continue to meet their obligations to pay on time and in full. To paraphrase Margaret Thatcher, the problem with moochers is that sooner or later they run out of Other People’s Money. This divide has become the flashpoint of Americ
an politics and will be for the next several decades.

  A Moocher Checklist

  What precisely is a “moocher”? Herewith some preliminary steps toward a definition.

  A moocher is:

  Someone who believes there is always a free lunch and that somebody else should pay for it.

  Someone who expects others to pay to clean up their messes.

  Someone who lays claim to something to which they are not rightfully due.

  Someone who shifts the cost of their own irresponsibility onto others who have behaved responsibly, who, as a matter of choice, takes from or relies on the efforts and resources of others.

  Someone who takes unfair advantage of others to enrich themselves or otherwise bail themselves out.

  Someone who is a recipient of the transfer of wealth created by others (without just cause) or lives off the productive efforts of others and appropriates the fruits of their enterprise without making a proportionate contribution.

  Someone who voluntarily seeks to be dependent on others.

  Are you a moocher? Here is a handy checklist:

  Are you over 21 and living at your mother’s house?

  Does the government send you more money than you pay in federal income taxes?

  Have taxpayers bought you breakfast, a car, or a house in the last few years? (Please include tax credits for clunkers, electric cars, and new home purchases.)

  Has the government paid you not to grow something? Have you received “disaster aid” without having suffered any losses from a disaster?

  Do you receive payments from pension funds that are disproportionate to your contributions?

  Do you routinely get something for nothing?

  Do you work for Goldman Sachs, Citigroup, AIG, or the government?

  Have you walked away from your mortgage?

  Do you think the government has a stash of cash that you are entitled to draw from?

  Are you an able-bodied, childless adult who spends his/her day playing Guitar Hero, watching The View, or surfing the Net while your spouse works to support you?

  Do you work for a lobbyist, “public affairs” company, or other corporate group whose job it is to seek privileges, benefits, or pork from government?

  Are you living off or depending on money that will have to be paid back by your children and grandchildren?

  If you answered yes to any of the above, chances are quite good that you are a citizen of Moocher Nation.

  Chapter 2

  * * *

  HAVE WE REACHED THE TIPPING POINT?

  * * *

  By 2004, the nonpartisan Tax Foundation calculated, 20 percent of U.S. households were already getting about 75 percent of their income from the federal government. Government programs accounted for at least 40 percent of the income of another 20 percent of households, meaning that two in five households were reliant on the government for their livelihoods.1

  Roughly 60 percent of American households actually were receiving more government benefits and services than they were paying back in taxes, and the Tax Foundation estimated that under the 2009 federal budget, 70 percent of households would take in more than they contribute.

  “Look at it this way,” commented Rep. Paul Ryan (R-Wis.), “three out of ten American families are supporting themselves plus—through government—supplying or supplementing the incomes of seven other households. As a permanent arrangement, this is individually unfair, politically inequitable, and economically dangerous.”

  The numbers, said Ryan, suggest that we are approaching or perhaps have even passed a “tipping point.” Once we pass that point, he says, “we will become a different people.”

  The Sucker Principle

  The explosion of free taxpayer cash has its own seductive logic.

  If the government is handing out money, the argument goes, who am I to say no? Subsidies for flood insurance for my beachfront villa? Payments to farmers for disasters they didn’t suffer or for crops they never grew? Tax credits to buy myself a new car? Debit cards and free stays on luxury liners? In many circumstances the decision to pocket the free money is completely rational, if occasionally distasteful to both payers and payees. No one wants to be the first to walk away empty-handed, and everyone hopes they will be able to cash in before the pyramid collapses.

  So what is the tipping point for most people?

  Think about the common experience of standing in a line, for a bus, concert tickets, or a ride at Disney World. Generally, people will wait their turn, recognizing that the first-come, first-served system is, if not strictly fair, at least manageable and comprehensible and will in all likelihood result in getting on the bus, obtaining the tickets, or getting on the ride.

  The queue is maintained by cultural norms and social pressure. If someone tries to jump the line, fellow line-goers likely will object and attempt to enforce the rules. But what if their attempt fails? What happens if not just one or two but dozens of individuals begin ignoring the line, jumping ahead of others and getting their hands on scarce and coveted tickets or bus seats?

  Think of it as the sucker principle: The line remains intact only until those who play by the rules and wait patiently in line begin to regard themselves as suckers.

  Now consider what happens when society’s rewards go to those who jump the line and grab the subsidies, transfer payments, and other freebies offered by the government rather than to those who work, invest, and save prudently.

  Tipping Points

  One of the central questions of this book is whether we are at or nearing that “tipping point.”

  • When do independent, self-sufficient men or women realize that they are society’s suckers, being made to work for the benefit of an ever-growing, ever-shifting, and increasingly insistent and more grasping class of moochers? When do they decide to jump the line?

  • When does the principled politician who ran for office against pork and waste look around him at the rush for boodle and recognize that he and his constituents are being left out of one of history’s great cash grabs? And when does he join the rush for the freebies?

  • When does a businessman decide that the competitive free market—producing good products at a reasonable price—is a fool’s game when competitors have invested more in clout than innovation? When does he decide that the free market is all well and good in principle but that a realist has to play the game of political grease to get access to cash subsidies, tax credits, pork barrel largesse, or mandates that compel the purchase of their product or service? When does the lobbyist become more important than the engineer, and the political fixer become more important than marketers, or designers? When do lawyers become more critical than the salesperson or the vice president of research?

  Are we already there?

  Plunder

  In his classic The Rise and Decline of Nations, economist Mancur Olson describes the turning point in societies when special-interest coalitions emerge that are dedicated to seeking special privileges and benefits. Olson calls them “distributional coalitions” because they are focused not on increasing productivity or prosperity but rather on trying to “capture a larger share of the national income” through lobbying, pushing for more government regulations that protect and benefit them, while also engaging in what other economists call “rent-seeking,” an inelegant term that essentially means mooching. Over time, these “distributional coalitions” cause growth to stagnate, and change the character and culture and ultimately the identity of a society.

  “The incentive to produce is diminished,” writes Olson, while “the incentive to seek a larger share of what is produced [by others] increases. The reward for pleasing those to whom we sell our goods and labor declines, while the reward for evading or exploiting regulations, politics, and bureaucracy and for asserting our rights, through bargaining or the complex understandings, becomes greater.”2

  “These changes in the patterns of incentives in turn deflect the direction of a society’s evolutions
,” writes Olson, as he describes how a dynamic economy stagnates, then atrophies, and ultimately goes into decline.

  Another early prophet of the rise of Moocher Nation, economist Frederic Bastiat, warned of what he called “the fatal tendency that exists in the heart of man to satisfy his wants with the least possible effort,” which explains man’s propensity for looting, rather than labor. Since men naturally gravitate toward the easiest path, “it follows that men will resort to plunder whenever plunder is easier than work.” When that tipping point is reached, wrote Bastiat, “neither religion nor morality can stop it.”

  The whole point of the rule of law, argued Bastiat, was to make sure that plunder was not more rewarding than labor, and therefore its goal should always be “to protect property and punish plunder.”

  But Bastiat envisioned a world turned upside down: “It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder.”3

  Celebrating Dependency

  Not everyone, however, sees this “tipping point” as a bad thing; some leading “progressives” see the growth of dependency as an opportunity for political success.

  Writing in The Atlantic, liberal analyst Thomas Edsall made a compelling case for the rise of a coalition of takers and dependents that will dominate American politics. In an article entitled “The Obama Coalition,” Edsall argued that such a coalition of those dependent on government aid, public employees, minorities, unions, and other “Social Democrat”–minded liberals could cobble together a majority that would use its clout to spread around even more wealth.4