Study Bemoans Federal Dependency, but Ignores the Billionaire Blues

Study Bemoans Federal Dependency, but Ignores the Billionaire Blues
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Real efforts to rebuild middle class prosperity will mean spreading the wealth around, not doubling down on tech bros.

house poor

As talk heats up in Washington about cutting federal programs such as Medicare, Medicaid, Social Security, along with SNAP and Veteran benefits, I’m beginning to see more reports arguing that federal spending is out of control.

It’s a bit of a sleight of hand approach, and deeply relevant to the building industry. People dependent on federal subsidies are not buying homes. They can barely hang on to the housing they have. And rural counties, especially, should rightly be worried. It’s not just individuals depending on federal money, it’s most of the rural counties in the U.S. 

What happened? According to various “pro-growth” research groups, income from work and investing just hasn’t kept up with the costs of living, so federal money has filled the gap, to the tune of covering more than one fourth of all income sources.  

Share of Personal Income from Government Transfers 1970

Back in 1970, few counties in the U.S. depended heavily on federal programs to meet daily needs.


Share of Personal Income from Government Transfers 2022

With healthcare costs far and away the largest household drain, most of the country now depends heavily on federal programs for a little less than 25% of all income. The study notes than only a few major urban hubs still earn (and pay) enough in the private sector to keep this dependency small.


What’s to be done? Right-leaning researchers suggest that a more investment-friendly agenda might gradually reverse the transfer trend. They point to places like Seattle, where tech firms have bucked the trend. Tech earnings have outpaced federal dependency.

They’re not wrong about the facts, but they’re selective. The population is aging. Healthcare costs are out of control. But where’s the private money coagulating? 

According to MarketWatch the top 10% of U.S. Households, as of the first quarter of 2024, the top 10% of U.S. households owned approximately 66.9% of the nation's wealth.  Contrast that with the bottom 50% of Households. They hold only about 2.5% of total household wealth. 

At present, most of the gains from investment and work flow upward instead of downward, so naturally, dependency on federal dollars will keep growing. But the root cause is structural. Huge amounts of capital are controlled by a tiny number of top earners. With that money out of the pipeline, how can smaller entrepeneurs, investors and workers  innovation and investment. They need access to money to train workers, encourage workers and identify new opportunities.

The mention of any kind of redistricting of wealth in the U.S. often triggers people. They think it’s a socialist scheme that’s destructive to economies. But according to Jonathan D. Ostry of the World Economic Forum, that’s rarely the case.

“Redistributive policies,” he says, “unless they are extreme, seem not to carry the disincentive effects that have worried some people. And, by improving equality, they actually help sustain growth and support other policies and self help – allowing the less well off to get a better education or better access to health and proper nutrition.”

I’d add to that, the ability to afford higher quality shelter and maintain a more middle class lifestyle. If we ever want the building market to return to its boom days of starter homes and affordability, we need sanity and limits on how wealth is thrown around in the U.S.


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