The Day the American Dream Dies

Terry Jeffrey

5/6/2009 12:01:00 AM - Terry Jeffrey

With little fanfare, the Government Accountability Office released a document last week that points to the day when the American dream dies and is buried beneath a middle-class welfare state.

You can see death coming for the American dream as surely as you can see cirrhosis coming for a drunk.

We are bringing it upon ourselves -- although not all Americans deserve what is going to happen. For one, our children don't deserve it. For another, Americans who have tried to live independent, self-reliant lives don't deserve it, either.

But they are going to be dragged down with everyone else, if we don't make dramatic changes in public policies soon.

What the document said is that what the GAO dryly calls the "federal fiscal gap" may now equal as much as $62.9 trillion.

That gap, says the GAO, is the amount that federal spending must be cut or federal taxes increased to pay the benefits of Medicare, Social Security and other federal entitlement programs that have been promised to people over the next 75 years.

The $62.7 trillion "gap" was calculated by assuming that the spending programs in President Obama's stimulus are only temporary, that other discretionary spending programs will grow only at the rate the economy grows and that the lower income-tax rates set by President Bush's tax cuts earlier this decade are allowed to continue for one more decade even though they are now scheduled to expire next year.

After 2019, in this calculation, federal tax revenues would remain constant at the long-term historical rate of 18.3 percent of gross domestic product.

Under another scenario, GAO assumed that discretionary federal spending would be frozen at the rate of inflation for the next 10 years and then allowed to grow with the economy and that the current lower income-tax rates would not be extended after next year, allowing annual federal tax revenues to increase by 11 percent, from 18.3 percent of GDP to 20.3 percent of GDP.

Under this scenario, the "federal fiscal gap" would be a mere $33.7 trillion.

So, what does $62.9 trillion -- or, for that matter, $33.7 trillion -- mean to your family and your earnings?

Well, according to the Census Bureau, there were 112,377,977 households in the United States in 2007. If every one of these households were charged an equal amount to cover a $62.9 trillion federal shortfall, they would each need to pay $559,778. If the shortfall was a mere $33.7 trillion, they would pay $299,880.

It is not realistic, of course, to assume that all households would be required to shoulder an equal share of the "gap." According to the Census Bureau, for example, there are 28,966,842 American households where no one works at all. If you exempt these from paying a share of the gap, the other 83,411,135 households (where someone works) would need to pay $754,095 apiece.

If the GAO's rosier $33.7 trillion scenario played out, these 83.4 million working households would only pay $404,022 apiece.

Now, the class warriors reading this are probably thinking: Hey, wait a minute. Some of those 28,966,842 households where no one works are probably populated by "rich" people who sit around all day doing nothing. These "rich" people approach life, the class warrior has convinced himself, with the same indolence as welfare bums -- except they have a lot of money. They must be taxed more to help cover Uncle Sam's shortfall.

Or look at it still another way: The Census Bureau says there are 13,850,060 American households living below the poverty line. Exempt these poor people, and the 98,527,917 non-poor households would need to pay $638,397 apiece to cover a $62.9 trillion federal shortfall or $342,035 apiece to cover a $33.7 trillion shortfall.

In other words, every American household that wasn't poor would need to hand over to the federal government enough cash to buy a very nice home.

Unless we start rolling back the welfare state now, a horrendous fiscal crisis is coming. When it arrives, politicians who have sustained themselves in power by sustaining the welfare state will be looking for vast new sums of money to tax away from Americans so they can pay off their voting base and stay in power.

The accumulated wealth of Americans who have worked hard and saved their entire lives to build businesses, pay off mortgages and grow personal retirement funds will be targeted by these politicians.

If these politicians win -- if they succeed in creating a society where those who work and sacrifice and save their entire lives can see the fruits of their labors confiscated to pay government benefits to someone else -- that will be the day the American Dream dies.

The future depends on smaller government.