Great Society’s Cost

November 22, 1965

The last session of Congress passed bill after bill to enact the Great Society, the complete welfare state. It gave something to everybody. Major programs included medicare, the war on poverty, aid to Appalachia, foreign aid, aid to local elementary and high schools, aid to colleges, aid to farmers, aid to cities. Congress voted money for public health, for economic development, for public housing, for work-training programs, for adult education, for control of water pollution and air pollution, for making salt water into fresh water, for a National Foundation on the Arts and Humanities, and so on and on. It authorized rent subsidies for low-income families, but postponed an appropriation.

The first year’s money-cost of each of these programs was often specified, and sometimes even the rising cost in later years. But neither Congress nor the Administration has so far bothered to put the total cost together, even for the first year, let alone the next five.

SIZE OF THE BILL

That total cost will be high. Senator Dirksen made public a compilation by the staff of the Republican policy committee of just 50 examples of authorizations and appropriations passed in the last session. The total cost of these, over the next five years or so, came to more than $112 billion. The New York Times reports that total Federal government spending will rise a minimum of $10 billion and a maximum of $13 billion in the calendar year 1966 over 1965. Still another unofficial estimate is that total cash Federal spending will rise to $130.2 billion in the current fiscal year ending next June 30 (as compared with $122.4 billion in the 1964–65 fiscal year), and to $143 billion next fiscal year.

Where is the money going to come from? Who is going to pay for the Great Society—and when? There is no evidence that either the Administration or Congress has so far paid any attention to these questions.

Let us suppose that we miraculously resolved to return to balanced budgets, and to pay as we go for the Great Society. How much would taxes have to be increased?

Last January the President estimated total cash receipts for the current fiscal year at $123.5 billion. Just to pay for this fiscal year’s $130.2 billion would mean raising $6.7 billion more. To pay for next year’s expenditures we would have to raise $19.5 billion more. Over the last five years tax revenues have risen an average of $2.8 billion a year in the administrative budget, and an average of $4.7 billion a year in the total cash budget. But even if we assume that they will rise $5 billion next year, we would still have to raise about $14.5 billion more by more taxation.

WHO WILL PAY?

How and where would we get it? Let’s look at our four main revenue sources, which together raise 87 percent of all our tax receipts. Personal income taxes are officially estimated to bring in $48 billion this fiscal year. The tax rates in excess of 50 percent, however, have been bringing in less than $250 million a year—not enough to run the government for a full day. If raised they would probably yield even less. More money would have to come from increases in rates on middle and lower incomes.

The corporation tax yields less than $28 billion. It already takes nearly half of corporate income. If raised it would further penalize and discourage production. Excise taxes yield less than $14 billion. Even if restored to previous levels they would only yield about $1.7 billion more—and of course discourage sales and output. Employment taxes yield less than $19 billion. They will certainly be raised; but they fall proportionately on the lowest incomes, and force the poor to pay for their own welfare benefits.

If our Federal government were bound by the restrictions of many foreign governments, and of some of our states, and were forced to accompany every new spending bill with a new tax bill to raise the money for it, so that everybody knew who was paying as well as who was getting, there would be considerably less enthusiasm for the Great Society.

The current delusion is that the cost will come out of some fourth dimension. But there is strong reason to suspect that in the long run the anti-poverty program will create more poverty than it relieves.