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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?
As we all know, 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.
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.
When computers were first introduced, they were bought by large institutions. They were as large as this room, expensive, complicated, and controlled by a few people. But when free-enterprise competition spurred innovation, computers became faster, smaller, and affordable. Computer manufacturers competing for millions of consumers keep the prices low, the value high, and the choices plentiful. Individuals decide if the value is equal to the price, and this constant tension between the buyer and the competing sellers keeps our economic system productive and in control. From Dell Computers to Del Monte foods, our freedom turns the wheels of the market, producing more affordable, quality, and plentiful goods.
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.
Like P. J. O'Rourke said, if you think health care is expensive now, just wait until it is free. Smothered by government costs and paperwork, the pulse of freedom in our health care system is fading; and even today Congress is planning more government intervention to protect patients, since we've created a system that doesn't allow individuals to protect themselves in the first place.
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.
The problem with distorting individual decision-making about the price is evident not only in health care, but with education, energy, and many government services that replace the dynamic of freedom. When the price is too low, the demand and the costs go up as the quality and the choices go down. The entrance of third-party control has broken down the delicate balance between the value of a service and the citizen's willingness to pay its price.
Social Responsibility
Similar to economic freedom, 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.
Creating freedom disabilities has a dramatic impact on the spiritual strength of our nation as well.
Limited Government
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.
You see, 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. But today, a near majority of voters pay little or no income taxes while they receive an increasing number of benefits from the government.
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. It's like handing someone a menu, telling them its covered, and then letting them order whatever they want. How could anyone refuse?
In my hometown of Greenville, South Carolina, the new school superintendent has called for a referendum to raise property taxes to pay for "better education." This would add about $60 a year to the taxes on a $100,000 house. Everyone wants better schools, but citizens are up in arms about the increase in taxes. Why? Because just about everyone pays property taxes on their homes or cars. They feel the cost of the increase.
The head of the local taxpayers association is attacking the increase; yet in a recent meeting, he asked me privately why I wasn't working to get more money from the federal government for school construction. In his mind, there is no conflict because federal money is free money to most voters.
Let's look at who's paying the costs of the federal government:
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. We also have a small minority of voters who pay a high price for government with much less demand for services, yet they have a decreasing amount of political power to stop the growth of government.
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.
Government Dependency
This dependence on government, along with the low cost to the beneficiaries, has dramatically increased the demand for government. This raises an important political question for conservatives in Congress. The dilemma is clear. If we fight to reduce government dependency by scaling back programs while making the tax code fairer and more visible, we are likely to lose elections because, as modern elections have shown us, candidates are engaging in an "I'll match you and raise you" and "Anything you promise I will promise more" political strategy. Asking dependent voters to vote for a candidate that promises to cut government spending makes as much sense as a valuable employee asking her employer for a pay cut.
This is what's happening. The loss of the price-value tension between the taxpayers and the government has created a large demand for more government. As government has expanded into the other spheres of freedom, the value of freedom in all areas of our lives has been reduced. More people expect government to pay the price and establish the values. This expectation has created a competing vision of America that replaces the principles of freedom with a reliance on government.
Partly by design and partly by circumstance, the American system grew up with the individual at the center, with the individual deciding about price and value in many different roles: as voter, taxpayer, citizen, seller, and buyer. When individuals are making price-value decisions, freedom works. But for many Americans, government is now seen as the hub or the manager of America's economic, social, and spiritual activity: Government or institutional control becomes a replacement for individual decision-making about price and value.
There has always been a price for freedom, and it is this price that gives freedom its value. America achieved such greatness because it was the only country in the world that let the dynamic of freedom work in all areas of the nation. Individual Americans had the freedom to assess the value and pay the price in all areas of their lives. This vision will still work if we let it, but few seem to understand why government has gotten out of balance, or even that we have a problem.
The crisis is creeping forward: Every day in America more people become dependent on the government, demanding more services and benefits, while every day in America there are fewer people paying the price for these services. The political power is shifting from those who pay taxes to those who receive the benefits. The number of Americans who are dependent on Social Security and Medicare alone will double in the next 30 years. These folks will not be voting for less taxes and less government, and they won't be voting for conservatives.
Many politicians have already figured out that dependency means more political power for them. Quite simply, a dependent voter is a dependable vote. A dependent America will vote for the politicians who promise the most from government and shift the cost to the "rich." But in the end, there is nothing compassionate about this massive disabling of Americans.
Stopping Government Dependency
So what is the solution? First, we must admit that we have a problem.
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.
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.
Friends, you came here today to hear about a coming crisis in America: The threat is subtle and creeping, discreet and easy to overlook. Unlike a foreign threat or internal discord, it is a crisis that, unless we sound the warning, will surface when it is too late to turn back.
Some of you may still be skeptical, but I have never seen a problem more definitive with results more destructive than the picture I have tried to fit together for you. It is that serious.
The divisions do not follow traditional Republican or Democrat lines. Liberals and conservatives who are truly interested in individual liberty, civil society, and sustaining the vision of our American experiment and its people should agree that we cannot allow this trend to continue.
Let's debate about how much the government should spend to remove barriers to freedom and to build the human capabilities necessary for our people to live free. But we shouldn't have to debate whether or not well-intentioned government programs should force people into a life of dependency. And we shouldn't have to debate the danger of sending voters to the polls who don't have any stake in the cost of government.
Our generation was given unprecedented freedom, opportunity, and prosperity. Few of us had to pay a high price for the freedom we enjoy, and perhaps because of that, we don't value it as we should. I think, for this reason, we are in danger of letting freedom slip away right in front of our eyes.
The secret to freedom is courage. It is my hope that what you've heard today is a truth that few will have courage to deny.
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