Several readers claim that I am over-reading the news that, for the first time since the Great Depression, Americans took more aid from the government than they paid in taxes. Here’s one rather dyspeptic reader:
During recessions, tax revenues go down and at the same time more people qualify for benefits. That’s normal and expected. During really bad recessions, revenues really go down, and needs really go up.
So, logically, you’d kind of expect that the worst downturn since the Great Depression would produce the second worst example of benefits approaching or exceeding tax revenue. And it happened.
This is surprising to you why exactly? Wow. That’s some deep thinking.
In one sense, I think they have a point, for the reasons laid out here.
In another sense I think they misread where I’m coming from. There’s a context to all of this. You could glean the context from the McCarthy post I referenced. We’re watching the Democrats scramble to conscript the American people into a mandatory health-care system. The Obama budget was intended to expand the baseline to put the government on the path of ever greater expansion. There’s a concerted push to remove the stigma on such aid as food stamps. Barack Obama campaigned on his vision of “spreading the wealth around.” He came into office encouraging comparisons to the New Deal, which were made ad nauseum by his biggest supporters. Just in the last week, the Obama administration has floated the idea of using government power to manipulate wages on a massive scale. Leading liberal pundits saw the financial crisis as an opportunity for establishing a European style social welfare state. And so on.
I don’t dispute that the government should — and will — go into deficit spending during a downturn. But there are ways to do that and there are ways to do that. The Obama administration’s approach hardly seems solely intended to “get the economy moving again.”
Update: Oh, and a friend makes a good, basic, point that somehow I didn’t articulate since it was in the plain text of the line “for the first time since the Great Depression”:
Plus we’ve had recessions before few people deny that transfers should go up and revenues down in a recession, but in addition to that cyclical effect there is very likely a long-term trend–otherwise this wouldn’t be the first time this happened; the 1982 recession would have seen it too.