Wagon Pullers versus Wagon Riders

Wagon Pullers versus Wagon Riders

April 23, 2007 Posted by J. Scott Moody - No Comments

In my recent report on Maine’s personal income, I found that Maine’s private sector share of persona income had fallen to a new all-time low of 66.1 percent. From an economic perspective, the level of income coming from the private and public sectors is an important determinant of long-run economic growth potential. In addition, from a political perspective, the number of people who rely on either the private or public sectors is an important determinant of political outcomes. If the number of people benefiting from the pubic sector exceeds 50 percent of the population, the deck will be stacked in favor of government run programs over the private sector.


The difficulty in counting the number of people benefiting from the public sector is avoiding double-counting. In other words, a person may be receiving both Social Security and Medicare. Two recent studies have attempted to do this. Unfortunately, both were done strictly on a national basis and provide no state level analysis.
The first study is one done by the Heritage Foundation titled “The 2006 Index of Dependency.” The study finds that up to 25 percent of the U.S. population (over 81.7 million) depend on government aid and/or employment.
However, this may undercount the total number because each person may also have a number of dependents. For example, a single federal employee may be the breadwinner for a household of five people. A recent article in the Christian Science Monitor cites economist Gary Shilling who claims to have “counted dependents a well as the direct recipients of government income.” In his analysis, he found that “slightly over half of all Americans–52.6 percent–now receive significant income from government programs.” This is up significantly from 28.3 percent in 1950.
The critical question; however, is the percentage of voters that are dependent on government spending. Neither study looks at that question. According to the Census Bureau, in 2004, 191 million Americans were registered to vote. I think the Heritage number is the better apples-to-apples comparison which puts the percentage of registered Americans who are reliant on government spending at 43 percent (81.7 million divided by 191 million).