When it comes to the federal budget, corporate welfare is often blamed as a major culprit by the overspending crowd. And it’s true that corporate welfare, an immoral and economically inefficient use of taxpayer dollars, costs taxpayers around $100 billion annually.
Yet it is undeniable that the greatest amount of federal welfare goes to those the government defines as poor. According to the Congressional Budget Office (CBO) in a report on February 11, about one-sixth of federal spending went to “means-tested welfare” in 2011 through 10 major programs.
Interestingly, the largest program in this report is Medicaid, and the second-largest is the food stamp program. By 2023, though, CBO expects Obamacare subsidies for “low-and-moderate-income people” will be the second-largest program:
Medicaid accounted for more than 40 percent of the federal spending on those programs in 2012, followed in size by SNAP. A decade from now, Medicaid will account for an even larger share of spending on those programs, CBO projects. A new means-tested program—federal subsidies to help low- and moderate-income people buy health insurance through insurance exchanges, which will begin in 2014—will be the second-largest means-tested program in 2023, CBO estimates.
The growth of this spending has been tremendous. CBO’s infographic on the report (republished below) shows these specific areas of means-tested welfare (defined as “limited to people with specific amounts of income or assets”) have gone from $55 billion in 1972 to $588 billion in 2011, not accounting for inflation.
Why is the growth so large? CBO has the answer:
Two broad factors were responsible for the growth of spending on means-tested programs and tax credits between 1972 and 2011: increases in the number of people participating in those programs and increases in spending per participant….Both of those increases were themselves the result of multiple factors. For example, the rise in participation stemmed from three important causes:
Population growth (the U.S. population increased by almost 50 percent during that period),
- Population growth (the U.S. population increased by almost 50 percent during that period),
- Changes in economic conditions (particularly the recession that occurred from 2007 to 2009 and the weak recovery that followed it), and
- Actions by lawmakers to create new means-tested programs and tax credits and to expand eligibility for some existing ones.
Increases in spending per participant resulted mainly from two factors:
- Growth in the cost of providing assistance (such as rising costs for medical care), and
- Actions by lawmakers to provide more generous benefits (such as increases in SNAP benefits).
That’s right – one of the major factors in the growth of these forms of means-tested welfare is the kindness Congress shows low-income Americans with your tax dollars and deficit spending. This has expanded both the number of people receiving money and tax credits as well as the amount spent per person. Yet President Obama and his allies often say we need more money for the poor.
Public policy should not ignore the poor. But as Heritage scholars Robert Rector and Rachel Sheffield pointed out in 2011, most poor Americans aren’t hungry, live in decent housing, and have TVs, computers, video game consoles, etc. American poverty is not what the media depicts.
Corporate welfare and means-tested welfare alike cost taxpayers over $1 trillion (over $3,000 per American) annually, yet Congress tends to shy away from addressing this major budgetary problem. As 2013 progresses, let’s make sure to hold Congress accountable for these programs, which along with Social Security, Medicare, and interest payments threaten to bankrupt the nation.