Samuelson: The fat cats vs. the facts

Washington PostNovember 20, 2013 

How often have you heard that we have the best government money can buy? Washington is overrun, it’s said, with fat-cat lobbyists whose lavish campaign contributions and insider connections manipulate the White House and Congress to serve big corporations and the rich. Meanwhile, the poor and middle class are ignored. This damning and demoralizing indictment has only one major defect: It’s about 98 percent untrue.

What we actually have is government that’s beholden to the poor and middle class. It redistributes from the young, well-off and wealthy to the old, needy and unlucky. To be sure, Washington is awash with lobbyists who do secure tax breaks, congressional preferences and regulatory advantages for wealthy clients. But these triumphs — often cited to prove the system’s “unfairness” — are small potatoes in the larger scheme of things.

This is no secret. But now a report from the Congressional Budget Office makes the point with a deluge of data.

The report — called “The Distribution of Federal Spending and Taxes in 2006” — shows where government’s money comes from and where it goes. The CBO divides the population into elderly (65 and over) and non-elderly households. They’re respectively 15 percent and 85 percent of the population. The non-elderly are also examined by income, from the poorest to the richest fifth. Here’s what the CBO found (The year 2006 was the latest for which detailed data were available):

• Slightly more than half (53 percent) of non-interest federal spending represented individual benefits and health care. Of these transfers (nearly $1.3 trillion), almost 60 percent went to the elderly. Social Security and Medicare dominated overall spending. Other benefits included Medicaid, unemployment insurance, food stamps, Pell grants, veterans’ benefits, subsidized school meals and housing assistance.

• Of the non-elderly’s $550 billion of benefits and health care, the poorest fifth of households received half. The next two poorest fifths took roughly another 30 percent. Thus, most benefits went to people in the lower half of the income distribution. Payments to the upper middle class often reflected Social Security begun before 65 and/or early Medicare eligibility.

• The non-elderly paid almost 85 percent of taxes, with the richest fifth covering two-thirds of that. If government taxes and transfers — what people pay and get — are lumped together, the average elderly household received a net payment of $13,900 in 2006; the poorest fifth of non-elderly households received $12,600. By contrast, the net tax payment for the richest fifth of non-elderly households averaged $66,000.

• Growing transfers have shrunk traditional government functions, from defense to transportation to parks. They’re only 40 percent of 2006 spending.

If lobbyists aim to empower the rich, they’re doing a lousy job. Democracy responds more to the mass of voters and to political crusades than to the wealthy or business interests. In the recent government shutdown, corporate America discovered that its influence on congressional Republicans was modest or nonexistent. It’s not that big companies and wealthy individuals are powerless; but their power is vastly exaggerated.

The idea that government is routinely bought and sold by the rich is a source of widespread — but misleading — cynicism. It’s the false premise on which so-called campaign finance “reform” rests. Moneyed interests are allegedly so corrupt that they must be controlled or else they will ruin democracy. The resulting campaign rules have, by inspiring evasions and compromising free speech, fed the cynicism they were supposed to suppress. They have made politics more costly and cumbersome without making it more effective.

Democracy’s problem is not the influence of money. It’s the influence of people. As the CBO report shows, so many Americans have become dependent on government that consensual change is difficult and, perhaps, impossible.

Mr. Samuelson has worked for The National Journal and Newsweek.

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