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Marketplace Morning Report

Government spending cuts will affect everyone

Marketplace Staff Jul 14, 2011
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Jeremy Hobson: Well if there are big cuts in the Federal deficit — either now or in the future — would you feel them?

We’re going to talk about that now with Marketplace Economics Correspondent Chris Farrell. Good morning, Chris.

Chris Farrell: Good morning, Jeremy.

Hobson: Chris, how dependent are Americans en masse when it comes to government support?

Farrell: Well Jeremy, the era of big government — it isn’t over. About 20 percent of our income last year came from government benefits; that’s up from 14 percent before the recession hit. So that’s things like jobless benefits, food stamps, children’s health insurance, Medicaid, housing assistance. So a lot of Americans are very dependent on this government spending.

Hobson: And what about people like you and me who have jobs, we are not getting jobless benefits, and frankly, when I look over the course of the things I do in my life, I don’t really see a whole lot of government support — but am I wrong about that?

Farrell: Well, maybe you need a new pair of glasses. Maybe you should look a little more closely, because things I mentioned like jobless benefits — let’s call that the “visible state.” I mean, you see the government action. But there’s also this thing, it’s a wonderful term from a Cornell University scholar, Suzanne Mettler, called this “submerged state.” And there’s all this social spending that’s encouraged through the tax code. Just pick the two biggest: the exclusion from taxes of what the employer contributes to your medical insurance; and the other big one is, of course, the mortgage interest deduction. So there’s a lot of good social spending that’s encouraged through the tax code, but it affects all of us.

Hobson: If the government is about to make big cuts, whether it be in the next couple of months or down the road a bit further, do you think most Americans will feel that?

Farrell: Jeremy, here’s the fact of the matter, this is the takeaway point: there is no painless way to reduce the deficit and the debt. It will affect everybody. It will affect them in terms of their housing, in terms of their medical care, in terms of their jobless benefits.

Hobson: Marketplace economics correspondent, Chris Farrell, thanks very much.

Farrell: Thanks a lot.

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