Chapter 1
A NATION OF MOOCHERS
We are all born moochers; whether we choose to remain so determines our character and our future. All we have to lose is our dependency.
Is America becoming a country where the irresponsible and grasping increasingly live off of those who work, save, invest, and otherwise play by the rules? Have we reached a tipping point where more Americans are relying on the efforts of others rather than their own?
Are we becoming a nation of moochers?
We are very close to that point if we have not already crossed the line. From the corporate bailouts on Wall Street to the declining stigmas on default and dependency, the new moocher culture cuts across lines of class, race, and private and public sectors. Members of the middle class are increasingly as likely to become moochers as the poor; CEOS are as likely to belly up to the trough as the underprivileged; and the BlackBerry has emerged as a more effective tool for mooching than a tin cup. In the Great Bailout, an expensively educated, richly compensated, elaborately insulated, politically powerful, and well-connected elite toyed with the nation's wealth and bailed themselves out at the expense of millions of waitresses, steamfitters, shopkeepers, schoolteachers, farmers, retirees—and their children and grandchildren—in what may turn out to be the greatest intergenerational transfer of wealth in history.
Momentum
Moocher Nation is not driven by a coherent ideology or even a consistent approach to dealing with either need or "fairness." What it has is … momentum.
More programs of dependency generate more reliance on ever more and varied handouts, as the habit of dependency becomes ingrained and increasingly attractive to others. Subsidies breed subsidies; pork inspires pork (especially if it can masquerade as stimulus); tax credits multiply like bacteria; and lobbyists swarm at the prospect of congressional handouts. The explosion of bailouts and handouts creates its own dynamic: How can you say no to would-be moocher A when B and C are getting mountains of federal cash? How can politicians turn down farmers when the bankers are fattening at the trough; or plead for fiscal restraint to Main Street when Wall Street is awash in OPM (Other People's Money)? One CEO who jumps on a Gulfstream jet to fly to Washington to wring a few billion dollars from compliant senators inspires dozens, maybe hundreds, of other businessmen to book planes, trains, and limousines to get their own slice of somebody else's American Dream.
The stigma of dependency—being on the dole—still runs deep in American culture, certainly far deeper than in Great Britain or France, where students and pensioners take to the streets at the merest whiff of a suggestion that they might lose one of their cherished benefits. But it is not inexhaustible. The stigma has been all but erased in some central cities where the long lines that form even at the rumor of free stuff have become testaments to the pervasiveness of the moocher culture, a way of life passed from generation to generation.
Meanwhile, the infrastructure of mooching issues forth armies of social workers, caring professionals, caseworkers, program officers, bureaucrats, advocates, activists, and nonprofits, who see it as their mission to ease the transition of taxpayer dollars into the hands of the "disadvantaged," or at least the well-connected. Every crisis, every natural disaster or financial setback, becomes another occasion for expanding the size of the moocher state. Each cause has its own symbols of need and woe and justification for their own comfortable jobs as agents of the moocher culture: the deprived child, the bereft farmer, the impoverished oldster—but the message is always the same: more. Says the Tax Foundation's Scott Hodge: "Every marketing guru will tell you that people love free stuff and they will take as much as they can get whether they need it or not. But for a nation, this is a recipe for disaster."1
Human nature being what it is, politicians throughout the ages have understood that it is far easier and more popular to hand out bread and circuses, entitlements, and freebies than it is to take them away. Promises, even if they are unaffordable, tend to win more votes than truth telling, especially if that means delivering the bad news that there is no more free lunch and that government workers might have to contribute more to their own pensions.
Scenes of public employees besieging state capitols in Wisconsin and Ohio to protect their bloated benefits and union power are likely a preview of the ferocity with which the entitled will fight to keep their spot at the public trough.
Always More
There is an inexorable quality to the new culture. Regardless of how much has already been done or whether those efforts have succeeded or failed, advocates continue to press for ever greater efforts by the government to help the downtrodden. By definition, whatever has been or is being or will be done is insufficient: After trillions of dollars spent on the War on Poverty, more is urgently required, even if that means continually redefining poverty. But it is one thing to erect a safety net for the needy, and quite another to provide a soft down-filled mattress with a taxpayer-funded mint on the pillow and minibar privileges.
Some of these developments can be dismissed as artifacts of the deep recession, but the loss of the stigma associated with default and dependency may also mark a decisive shift in the American ethos and character. The Great Recession of 2007 saw the destruction of millions of jobs and vastly increased the numbers of Americans reliant on government. But the growth in dependency predated the deluge and Washington used the crisis as a pretext to further shrink the private sector and expand government dependency. This recession hit hardest those who played by the rules and sharpened the gap between the two Americas: those who had 401(k)s, owned a home they intended to pay for, and worked in the private economy, versus those who lived on government entitlements, deadbeats who defaulted on debts, and companies that benefited from bailouts or massive pork subsidies. All of this raises fundamental issues of fairness. As Oxford University ethicist Henry Shue says, "If whoever makes a mess receives the benefits and does not pay the costs, not only does he have no incentive to avoid making as many messes as he likes, but he is also unfair to whoever does pay the costs." And philosopher David Schmidtz explains, "To be just is to avoid, as best we can, leaving our neighbors to pay for our negligent choices."2
But that is precisely what has happened. Much of the anger of recent years stems from the realization by millions of Americans that the story of the ant and the grasshopper is being turned on its head: Increasingly, those who take responsibility are being asked to bail out the profligate.
The milestones are troubling:
• Even as more people became dependent on government, fewer were paying their share of the tab. By tax day in 2010, nearly half of U.S. households paid no federal income taxes. After years of cuts, credits, and outright rebates, 47 percent of households had no net liability at all. A family of four could make up to $51,000 without paying a nickel in federal income taxes.3 Many of them have a "negative tax liability," which means they get a check from the government.
"The result," notes the Associated Press, "is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure, and education."4
• While the top 10 percent of earners now pay around 73 percent of the federal income tax burden, fully 40 percent of individuals actually get more money from the tax system than what they pay in. Rather than sending in a tax payment on April 15, the government actually sends them a check, paid for, of course, by other taxpayers. "In essence," writes the Tax Foundation's Hodge, "lawmakers have turned the IRS into an ATM machine for welfare benefits—and ATM now stands for Another Taxpayer's Money."5
• There are now more takers than makers in the American economy. As The Wall Street Journal's Stephen Moore writes, in the United States today, government now employs nearly twice as many people (22.5 million) as work in all of manufacturing (11.5 million). "It gets worse," notes Moore. "More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers."6
• 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 American politics and will be for the next several decades.
Copyright © 2011 by Charles J. Sykes
