What Comes After The Welfare State?

Today the welfare state is omnipresent in every part of the United States. The federal budget is dominated by entitlement spending, with 45 percent of federal spending in 2012 going to Social Security, Medicaid, and Medicare (among other health care entitlements). Simultaneously, the states are struggling under the fiscal burdens imposed on them by mandatory entitlement programs: spending by the South Carolina Department of Health and Human Services (primarily on Medicaid) has averaged $1.21 billion over the last three budget years. Yet the federal appetite for entitlement spending is far from sated – consider Obamacare – and if history is any guide, we can expect more entitlement programs in the future.

The historical increase in spending has of course been accompanied by a rising portion of Americans who use these entitlement benefits; the Wall Street Journal reported that as of early 2011, 49.1 percent of the population lived in a household where at least one member received government benefits, up from 44.4 percent in late 2008. Further, the size of these programs perpetuates a cycle of dependency as the total benefits package of the average welfare family is actually larger than the average salary of jobs that pay higher than the minimum wage.


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Do Americans Prefer Deception?

There’s more to the deceit and dishonesty about Social Security and Medicare discussed in my recent columns. Congress tells us that one-half (6.2 percent) of the Social Security tax is paid by employees and that the other half is paid by employers, for a total of 12.4 percent. Similarly, we are told that a Medicare tax of 1.45 percent is levied on employees and that another 1.45 percent is levied on employers. The truth of the matter is that the burden of both taxes is borne by employees. In other words, we pay both the employee and the so-called employer share. You say, “Williams, that’s nonsense! Just look at what it says on my pay stub.” OK, let’s look at it.

Pretend you are my employer and agree to pay me $50,000 a year, out of which you’re going to send $3,100 to Washington as my share of Social Security tax (6.2 percent of $50,000), as well as $725 for my share of Medicare (1.45 percent of $50,000), a total of $3,825 for the year. To this you must add your half of Social Security and Medicare taxes, which is also

$3,825 for the year. Your cost to hire me is $53,825.

If it costs you $53,825 a year to hire me, how much value must I produce for it to be profitable for you to keep me? Is it our agreed salary of

$50,000 or $53,825? If you said $53,825, you’d be absolutely right. Then who pays all of the Social Security and Medicare taxes? If you said that I do, you’re right again. The Social Security and Medicare fiction was created because Americans would not be so passive if they knew that the tax they are paying is double what is on their pay stubs — not to mention federal income taxes.


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