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Freeloader Fabrications

David Callahan

Another week, another distraction for the Romney campaign. This latest flap, though, is instructive. The revelation that Romney told donors that nearly half all Americans are basically freeloaders offers insights into the core ideas -- or myths, as it turns out -- that animate modern conservative thinking.

Of the Americans who don't pay federal income taxes, 37% are not in the labor force either because they're students, elderly, or unemployed. (University of Denver)

The conservative framework that pits hardworking Americans against a growing hoard of freeloaders rests on four claims, none of which stand up to scrutiny.

Myth One: Nearly half of all Americans don't pay taxes. We have knocked this down before, but we'll do it again -- because, apparently, even people with Harvard MBAs believe this myth. While it is true that nearly half of all Americans don't pay income taxes, some 86 percent pay taxes in the form of payroll taxes -- which now account for almost of half of all revenues coming into the federal government. As anyone who looks at their pay stubs know, payroll taxes aren't nothing: they can take a big bite, especially for lower income workers. Meanwhile, those Americans who don't pay income taxes have good reasons for not doing so. For starters, 37 percent of Americans are not in the labor force for one reason or another: because they are retired or are students or are unemployed. Nobody expects these folks to be paying taxes. Then there are those workers who simply don't make enough money to pay income taxes. A disturbingly large slice of the labor force makes under $25,000 a year. Once these filers take their basic exemptions, and other deductions -- like for the Earned Income Tax Credit, which is designed to encourage work -- they don't owe anything. This fact is a commentary on the low compensation for hard work in America, not the laziness of workers. 

Myth Two: More Americans are becoming dependent on government benefits. We've rebutted this one, too, so let's just repeat verbatim from my post from last month:

Only a tiny sliver of overall government assistance -- less than 10 percent -- goes to non-working adults in their prime years, and much of that is in the form of emergency assistance to people who have lost their jobs through no fault of their own. While Romney wrote in an op-ed last year that "Government dependency can only foster passivity and sloth," there are few signs of a growing army of layabouts subsisting on the dole.

On the contrary, as reported by the Center for Budget and Policy Priorities early this year: "more than 90 percent of the benefit dollars that entitlement and other mandatory programs spend go to assist people who are elderly, seriously disabled, or members of working households — not to able-bodied, working-age Americans who choose not to work. This figure has changed little in the past few years."

. . . . Seniors receiving Medicare and Social Security are receiving benefits from programs that they paid into during their entire working lives. In any case, no one expects old people or the disabled to work, and so it's hard to say these folks are part of some Freeloader Nation. Meanwhile, students receiving Pell Grants are making investments in their human capital -- meaning that they are less likely to be dependent later, whether on government or family.

And with TANF rolls down and work requirements in place, old fashion welfare dependency is largely a problem of the past. So basically it's unemployed people getting UI and food stamps that the right is really talking about. Yet if you just look at trends in these programs, which show soaring participation rates after the economy turned down, it's clear that the supposed "dependency" here is structurally driven and temporary (assuming growth returns). That's the whole idea of the safety net: People can "depend" on it in hard times.

Myth Three: Americans have more of an "entitlement mindset" these days. This claim is vaguer, but an important current in conservative thinking. If you listen to politicians like Paul Ryan, American values of self-reliance are in decline and government is corrupting our can-do spirit and sense of personal empowerment. We are becoming a nation of wimps, in effect. This is nonsense. Work remains a central value in American society and social benefits still carry considerable stigma -- which helps explain why participation rates in many entitlement programs is anything but 100 percent. Millions of eligible Americans don't take advantage of programs like food stamps, welfare, Medicaid, and so on -- as a GAO report documented in 2005. 

Myth Four: It's poor people who are the biggest freeloaders. What's especially galling about conservative attacks on "takers" is that they focus exclusively on lower income groups and leave out all the subsidies to middle and upper income households. Yes, tax breaks for the working poor -- like the EITC -- have been expanded, but they still pale in comparison to the giveaways to better off groups. The three biggest tax breaks in FY 2014, according to Congressional Research Service, will be as follows: $164 billion for employer-provided health insurance, $162 billion for retirement savings (mainly 401ks), and $99.8 billion for the home mortgage interest deduction. Needless to say, most poor people don't benefit from these giant breaks because they don't have employer-provided health insurance, 401ks, or own homes. Meanwhile, the EITC will cost $58 billion in FY 2014. 

Beating up on the economic losers is not new in America. It was popular in the late 19th century, when Social Darwinism was in vogue. But today such attacks have moved to the very heart of the conservative project.