The federal government provided about twenty percent of Americans’ personal income last year through channels such as jobless benefits, food stamps, Social Security, and disability. As the New York Times stated:
Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics. In states hit hard by the downturn, like Arizona, Florida, Michigan and Ohio, residents derived even more of their income from the government.
Moody’s estimates that $37 billion of various benefits are set to run out this year. Let’s all hope the job market bounces back by 2012, because there will be a $37 billion hole in spending to account for with this alone. While $37 billion is a very small percentage of US GDP, any decreases in personal spending are unwelcome to the 18.4% of underemployed workers.
It is also pretty astounding that the government currently provides twenty percent of personal income. This kind of reliance on government, or frankly anything close to it, cannot end well in the long run. For the time being, Americans should be counting their lucky stars for Europe. US bonds are still viewed as safe while the comparatively less productive, larger welfare states of Europe are mired in the same after effects of the financial crisis. Both the US and the Eurozone have this in common: debt up to their eyeballs, expansive monetary policy, and a fiat currency.
Photo Credit: Cornell University