 By Alan Hall | Excerpted from the May 2012 Socionomist
Originally published under the title “A Historic Peak in the Amount of U.S. Government Entitlements” |
After 80 years of persistent growth, Washington’s annual spending on entitlements now accounts for more than half of total federal outlays. In this article, Alan Hall surveys the multi-decade, social-entitlement tsunami – a wave that, like all others, will eventually subside as social mood hits bottom. Here is an excerpt of his May 2012 report.
A Supercycle-Degree Advance in Entitlements
The top (red) line in Figure 1 plots 80 years of rise—a 17-fold increase—in U.S. government entitlements as a percentage of total personal income. The lower graph is the Dow Jones Industrial Average adjusted for inflation via the Producer Price Index (Dow/PPI). For ease of reference, we added Elliott labels to the entitlements trend.
… The long-term trend in both lines has been dramatically higher. But the timing of their movements differs radically. During positive mood phases, entitlements tended to slow or even retrace their ascent. During negative-mood phases, entitlements expanded dramatically. Specifically, during the three bear phases in the Dow/PPI, the entitlement ratio increased by 500%, 100% and 45% respectively, for an average gain of 215%. In sharp contrast, the bull phases saw a gain in entitlements of 7% and a loss of 1%, for an average gain of just 3%.
Where We Are Today
Having skyrocketed since 2000, Americans’ reliance on government benefits is now at an all-time high. … The Congressional Budget Office (CBO) expects the overall entitlement-growth trend to continue:
[The] long-term trend is clear. Over the next 25 years, as the population ages and medical costs climb, the budget office projects that benefits programs will grow faster than any other part of government, driving the federal debt to dangerous heights.2
The large-degree negative social mood trend that began in 2000 will indeed drive the current entitlement boom higher. But the CBO’s 25-year forecast is a linear projection—an assumption that the trend of recent decades will continue—and does not consider future fluctuations in social mood.
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In the remainder of this article, author Alan Hall explains why the impending collapse in government entitlements may occur sooner than almost everyone (including staffers at the CBO and Treasury Department) think.
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