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The Dependency Index

By Craig J. Cantoni

Mr. Cantoni is an author and columnist.
March 2007

The Dependency Index published by the Heritage Foundation shows how dependency on the federal government has grown over the decades.

The results are alarming.

Using 1980 as a benchmark of 100, the Index hit 238 in 2005, or a 138 percent increase in 25 years.

As sobering as the Index and its accompanying statistics are, I believe that Heritage has underestimated dependency. But letís start with Heritageís numbers.

Heritage calculates that 18 percent of Americans are dependent on handouts, transfer payments, and subsidies from the federal government. It also calculates that dependency increases to 25 percent if federal and state employees are included in the estimates.

In terms of absolute numbers, the 25 percent translates to 81.7 million Americans who are dependent on the government, an increase of 141 percent over the 33.9 million in 1962. That increase is 2.5 times greater than the increase in the U.S. population during the same period.

The underestimate stems from the fact that Heritage did not include three other groups in the 81.7 million total.

First, it did not include dependents of government employees. Assuming that each government employee has, on average, 1.8 other people in the household, there are approximately an additional 38 million people who are dependent in whole or part on the government for their household income and thus have a stake in bigger government. Adding the 38 million to Heritageís total of 81.7 million gives a revised total of 119.7 million.

Second, Heritage did not include the many Americans who hold private-sector jobs that owe their existence to the regulatory state. The 53,000 tax preparers are an obvious example. Not so obvious are the 150,000 human resources specialists, many of whom administer and interpret labor, payroll, and benefits regulations. Similarly, many of the 10 million ďhealth careĒ workers administer and interpret the 100,000 pages of Medicare regulations.

A complete list of government-dependent private-sector occupations would fill this page and include such occupations as software writers who develop recordkeeping systems required by the government, sales people who sell the systems, paper companies that make and sell the paper on which mandated reports are printed, consultants who advise companies on regulatory compliance, lawyers who defend companies accused of violating regulations, lobbyists who try to influence politicians and government regulators, and scores of other occupations. Unfortunately, itís impossible to get an accurate count of how many private-sector workers hold such occupations, but itís a safe guess that they number in the millions and possibly as high as 10 million.

Third, as Heritage admits, the Index does not include Americans who are dependent on state-funded or municipal-funded handouts and subsidies. Estimating the total number is beyond the scope of this article, but I have estimated how many Americans are in the largest subsidy program at the local level.

Iím referring to the estimated 100 million parents who have children in K-12 public schools. Although they donít see public education as a subsidy program, it is indeed highly subsidized. It is subsidized by the 20 percent of Americans who remain childless all their lives, by the one million parents who home-school their children, and by the approximately 10 million parents who send their children to private schools.

The doubling of state and local per-pupil spending in real dollars over the last 30 years attests to the price-insensitivity caused by subsidies. Also, according to Heritage, federal educational subsidies have risen 127 percent since 1980, including a whopping 21 percent in 2005 alone.

As I calculated in another article (ďHas the USA reached the point of no return?Ē), 84 percent of the voting-age population is dependent on the government for all or part of their livelihood, retirement, or children's education.

Whether you use Heritageís figures or mine, the dependency trend is alarming, not just from a cost perspective, but also from the perspective what it portends for the nationís culture, freedom, competitiveness, politics, savings rate, wealth, and industriousness.

The nation may not be doomed, but if the trend isnít checked, it will be increasingly difficult to avoid a political, social and economic nightmare.

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A detailed explanation of the Index and accompanying charts and analysis can be found at:
www.heritage.org/Research/Budget/cda06-11.cfm

Pamphlet No. 1098, April, 2007