Government benefits now account for nearly a fifth of Americans’ income, according to a report by the Economic Innovation Group (EIG).
The study shows a significant increase in reliance on federal aid over the past 50 years, with more people turning to programs like Social Security, Medicare, and Medicaid to support their income.
The report reveals that Americans receive 17.6% of their income from government handouts, more than double the 8% recorded in 1970.
The rise in government aid is primarily driven by an aging population and skyrocketing healthcare expenses.
In 2022, the federal government distributed $3.8 trillion in assistance, with the majority directed towards supporting senior citizens through Medicare and Social Security programs.
The rise in federal assistance highlights a troubling trend for the U.S. economy. Income from government programs has grown nearly three times faster than income from other sources over the last half-century.
As a result, more than half of all U.S. counties now see a significant portion of their residents’ income come from federal aid, compared to fewer than 1% of counties in 1970.
This dependency is particularly pronounced in older, rural, and less wealthy areas, which have become increasingly reliant on state support to sustain their local economies.
In contrast, metropolitan hubs, affluent suburbs, and high-income farming and mining communities remain minimally dependent on such aid.
State Economist Corey Miller pointed out that Mississippi, one of the states most reliant on government programs, has seen participation in Medicaid and Supplemental Nutrition Assistance Program (SNAP) reach some of the highest levels in the country.
Approximately 14% of Mississippians rely on SNAP benefits, while nearly 24% are enrolled in Medicaid, with some counties showing dependency rates as high as 30%.
“Mississippi’s participation in these programs is higher than the national average,” Miller noted.
“And while it’s not as high as surrounding states like Arkansas and Louisiana, the numbers are still troubling.”
An aging population and healthcare inflation are the primary drivers behind this growing dependence.
One in six Americans is now over the age of 65, compared to just one in ten in 1970. Between 2010 and 2022, the number of Americans older than 65 surged by nearly 17 million.
This trend is expected to continue, with the over-65 population projected to grow by another 20 million people over the coming years.
In addition, the EIG report warns that the U.S. is on a “collision course” with significant fiscal challenges.
It suggests that raising taxes or cutting spending to address this issue could harm economic activity, making it imperative for lawmakers to pursue a “growth agenda” to foster economic dynamism and increase workforce participation.
The report also notes that counties heavily dependent on government aid are concentrated in swing states, meaning that neither political party has much incentive to reduce spending on these programs.
This could have a major impact on upcoming elections, as voters in these states look for candidates who will continue to support federal assistance.
With more Americans relying on government aid than ever before, the U.S. faces its most significant economic challenge since the aftermath of World War II.
The EIG report highlights the importance of policies aimed at encouraging economic growth, supporting family formation, and investing in research and innovation.
Without these measures, the U.S. risks further entrenching this dependency, leading to an unsustainable fiscal future.