The Coming Crisis: How Government Dependency Threatens America's Freedom
by Jim DeMint
The Insider, 12/1/2001
By the next election, the majority of Americans will be dependent on the federal government for their health care, education, income, or retirement - at the same time the number of taxpayers paying for these benefits is rapidly shrinking. How can any free nation survive when a majority of its citizens, now dependent on government services, no longer have the incentive to restrain the growth of government?
Over the last 50 years, American attitudes have shifted from cherishing self-sufficiency and personal responsibility to craving cradle-to-grave security "guaranteed" by government. The result is that increasing numbers of Americans are dependent on government for their income, careers, health care, education, and other essentials. Government benefits - once concentrated on "the needy" - now extend into middle- and upper-middle-class households, even as more and more Americans see their income tax liabilities decrease. Today, the majority of Americans can vote themselves more generous government benefits at little or no cost to themselves. As a result, most have little fiscal incentive to restrain the continued growth of Big Government and the entitlements it dangles before them.
Are We Really the Land of the Free?
Defining freedom is a difficult task. The authors of American liberty had little time to pen a strict definition; they were too busy living it out. But for our discussion, I want you to consider this definition:
Liberty exists when individuals, endowed with unalienable rights and protected by the rule of law, have the ability to make their own choices in pursuit of a life that they value.
There are several key words that I would like you to consider.
First, that freedom is based on individual ownership, self-governance, and self-determination;
Second, the inherent rights of man that are unchanging and irrevocable;
Third, the ability for the individual's capabilities to act independently and responsibly, as well as an external support structure that fosters an individual's rights;
Fourth, the right for individuals to make choices and pursue their own happiness; and
Finally, value, an idea that F. A. Hayek understood well when he wrote, "A society that does not recognize that each individual has values of his own which he is entitled to follow can have no respect for the dignity of the individual and cannot really know freedom." Individuals assigning value and determining their own destiny is what makes people free, and it is this exercise that strengthens the good citizen. I venture to say that most Americans believe that if government gives people adequate income, food, and shelter, then we've done a good thing. But people are not pets, and by making these decisions for people, we strip freedom from people.
Four Pillars of a Free Republic
The principles of economic freedom, social responsibility, spiritual faith, and limited government are the foundations of the American success story.
These four pillars guided America's founding and led to the peace, prosperity, and liberty we enjoy today. Individual decision-making about price and value is what holds all of our freedom in balance. In all four of these areas, when people believe that price equals value, then they are ready to exchange something they have or can do for something that they want. This exchange is what drives our republican government, our free market system, our civil society, and our spiritual lives. Economic Freedom
In a free economy, individuals exchange valuable goods and services for market-determined prices. Sensible consumers buy when they believe the value is equal or better than the price.
But when external controls are injected into the free market system, problems develop. When the tax code made it easier for businesses than individuals to buy health insurance, we created a third-party system that reduced choices, increased costs, and ushered in government dependency. It virtually eliminated the price-value tension that keeps quality high and costs low.
Compounding the problem, Congress and its good intentions created a Medicare system that forces every retired American into government-run health care. The price is almost invisible to the buyer and fixed for the seller. Access is regulated, the delivery of health services is controlled by insurance companies and the bureaucrats, and individual choices are few and far between. We may still have the best health care, but we also have the most expensive health care system in the world.
Compare this to what has happened in a small segment of the health care industry: laser eye surgery. This procedure is paid for by individuals because it is not covered by insurance. Individuals make the price-value decisions. The technology has exploded forward; the costs have declined rapidly; the service now allows people to walk out seeing better within a few minutes.
Similar to the economic freedom pillar, Americans also believe that the price of success and opportunity is hard work and personal responsibility. Recently, I attended a ceremony congratulating new American citizens. Their eyes gleamed with hope and promise. They believe that hard work and personal responsibility are the recipe for a free and successful life - and rightly so. When this price, as measured by the individual, is equal to the perceived value of freedom and opportunity, people work and take on increasing personal and social responsibility.
Before welfare reform, entire communities were ravaged by government policies that attempted to give individuals freedom and opportunity without asking them to pay the price. Not surprisingly, the demand for these benefits went up and the value of hard work and responsibility went down. Welfare encouraged an entitlement attitude. The government made millions of Americans "freedom disabled" because they lost the ability to attach a real value to freedom's benefits.
America has generally advocated morality and sacrifice as the "price" - or payment - for being a good, compassionate, and worthy servant to one's neighbor. These beliefs fuel a commitment to charity and volunteerism, as well as a strong work ethic. Just as our government has institutional checks, individuals attaching stigma or favor to certain behaviors keeps our society in check.
Government and the media, however, have done much to discontinue the religious habits of old, as well as to replace faith-based community efforts of compassion and charity with ineffective government programs. As a result, the growth of dependency has decreased the citizen's desire to live an upright and responsible life. People who act in a socially destructive fashion - promiscuous sex, drug addictions, crime, etc. - generally feel no personal shame because there is no corporate rebuke. They often enjoy the same privilege of acceptance as those who live moral, decent, and responsible lives in the home, workplace, and community.
When the price of government declines, the demand for government increases. In other words, if you offer something for nothing, people will want a lot of it. And as a consequence, the government expands into the private sector and crowds out our freedom. This leads me to define what I believe to be the coming crisis in America.
The demand by voters for more federal benefits is overwhelming and growing. Despite our best efforts, conservative lawmakers are like children on the beach trying to hold back the tide with sand castles. Unless we reduce dependency quickly and develop a tax code that makes the cost of government more visible, Americans will demand more and more from government, to the point where freedom will be no stronger than a flickering flame on a shrinking wick.
Our founders created a system where taxes are the price for government benefits and services. The American system of government is built on the premise that the voters will restrain the growth and expansion of government because of the personal cost to themselves in taxes. There must be this tension that balances the price and the value of government.
Today, however, the extreme progressiveness of our tax code has reduced, and in some cases eliminated, the price of government for a growing majority of voters. At the same time, the number of voters who are dependent on the government for their income, their health care, and other government services has grown dramatically. As the price for government in terms of taxes has declined, the demand for federal benefits and services has increased.
Fifty percent of Americans now pay less than 4 percent of the total individual income taxes, while the top 5 percent pay nearly 55 percent of individual income taxes. We now have a majority of voters that have very little incentive to restrain the growth of government. The price is low, so the demand for government services is high.
At the same time, those who are paying the least for government are receiving the most benefits: Americans who receive nearly half of federal government benefits pay only 1 percent of the taxes. Many of these beneficiaries are poor, but an increasing number are middle-class retirees who are dependent on the government for their income and health care through Social Security and Medicare.
America's aging population, along with an increasing number of federal programs and subsidies, has resulted in a large and growing number of Americans who are dependent on the federal government for their income, their health care, housing, the education of their children, and other important benefits.
Turning the Corner: Stopping the Growth of Government Dependency
So what is the solution? First, we must admit that we have a problem. Liberals must recognize that we can't help people by making them dependent on the government, and conservatives must recognize that fighting the symptoms will not preserve our freedom. The Heritage Foundation's Index of Government Dependency will be an invaluable tool in educating Members of Congress, their staff, the public, and the media.
For my colleagues in Congress, I have a few recommendations:
We need to move from a government-owned Social Security system to individually owned retirement accounts. Americans who are secure, independent, and wealthy when they retire will want less from government, less taxes, and more freedom.
The same will be true if we reform health insurance in America to encourage individual ownership of health insurance policies. Americans who have their own health insurance in retirement are independent, and even if the government subsidizes the cost of premiums for the poor, the level of dependency is much less than the total dependency we now have under the current Medicare system.
Finally, on the other side of the problem, we must have a new tax code that allows all voters to see and feel the cost of government. Using the tax code to help low-income workers only disconnects them from the responsibilities of freedom. It would be far better to increase spending for programs that remove barriers, and enhance the capabilities and opportunities for the poor, instead of trapping them in dependency and insulating them from the cost of the government they vote for.
The Honorable Jim DeMint, a Republican, represents the Fourth District of South Carolina in the U.S. House of Representatives. This article is taken from a lecture he delivered at The Heritage Foundation on April 5, 2001.