There is a lot of commentary today about the persistently high federal budget deficit in the United States and the increasing federal debt resulting from the growing deficit. The federal budget deficit for the fiscal year reached $3.1 trillion, accounting for approximately 15% of the U.S. GDP, and the federal debt currently stands at $28 trillion, roughly 129% of the GDP. The Congressional Budget Office predicts that, at current tax and spending levels, both the annual budget deficit and outstanding debt will continue to rise for a long time to come.

The U.S. Congress holds the "power of the purse," representing the electorate and designated by the Constitution as the legislative body responsible for managing federal taxes and expenditures. Compared to these deficit and debt figures, less attention but equally important is the fact that a significant portion of Americans' lives are entirely dependent on federal transfer payments. Many are unaware that these benefits, particularly Social Security, Medicare, and Medicaid, account for two-thirds of federal spending. Instead, many mistakenly believe that defense spending is the largest single federal expenditure, whereas in reality, defense accounts for only about % of the federal budget.

A recent report from the Economic Innovation Group () has revealed some startling facts about Americans' reliance on transfer payments. Based on county-level data from the Regional Economic Accounts files maintained by the U.S. Department of Commerce's Bureau of Economic Analysis (), the report includes the following findings: Not long ago, government programs such as Social Security, Medicare, Medicaid, food stamps, Section housing subsidies, and many other transfer payments made up a small portion of Americans' personal income; in the s, only a very small number of long-struggling regions relied on transfer payments for a significant portion of their income; by the century, the role of transfer income in local economies became more prominent; by , most counties in the U.S. will have % or more of their income dependent on federal transfer payments, while counties that are almost entirely independent of transfer payments have gone from being the norm to nearly disappearing.

Today, the vast areas relying on transfer payments include most of New England, parts of upstate New York, some parts of the upper Midwest (Minnesota, Wisconsin, Michigan), other Midwest states (Kansas, Missouri, Oklahoma), all states in the Southeast, almost all of New Mexico, parts of Arizona, Colorado, and Nevada, all counties north of the San Francisco Bay Area in California; most of the West (Oregon and Washington, Idaho, parts of Montana and Wyoming). In Alaska and Hawaii, a percentage or more of personal income in the counties depends on federal transfer payments; in the year, Americans received transfer income from the government amounting to . trillion dollars. If calculated on a per capita basis for the . billion population of the United States, it amounts to approximately dollars per person; transfer payments currently account for nearly % of total personal income in the United States, higher than the % in .

Three trends have driven the growth of transfer payments: an aging population, rapidly rising healthcare costs, and the growth of other income (wages and investment income) failing to keep pace with the increase in transfer payments; these demographic and societal shifts have led to an increase in transfer payment programs, which were initiated by the New Deal of the 1930s and the Great Society programs of the 1960s. Before the 20th century, the United States had virtually no transfer payments; Social Security is the progenitor of all transfer payment programs, currently benefiting 60 million Americans (about 19% of the total U.S. population), and it originated from the New Deal. Programs stemming from the Great Society include Medicare (benefiting 60 million), Medicaid (benefiting 70 million), and federal financial aid for higher education students. Some may not consider student financial aid as a transfer payment, but student grants and loans can be used to cover living expenses and tuition, and federal student loans are evolving into direct grants, promising loan "forgiveness" in place of repayment obligations. Student financial aid benefits over 44% of Americans annually.

As Americans' reliance on transfer payments increases, the number of federal, state, and local government employees has also grown significantly. Of course, some of these employees are managers and staff who administer transfer payments. It should be noted that these findings overlook "tax expenditures," which are special provisions in the U.S. tax code, such as tax deductions, exclusions, deferrals, and credits that benefit specific activities or taxpayer groups. Examples include exempting any medical benefits provided by employers from taxable income; exempting contributions to retirement plans by employees and employers; tax credits for purchasing electric vehicles; the Earned Income Tax Credit; the Child Tax Credit; and the Child and Dependent Care Credit. Some tax credits are "refundable," meaning that taxpayers who do not owe income tax can still receive the credit in the form of a refund check. Combining tax expenditures with transfer payments would reveal an even higher level of dependence on the government.

The consequences of dependency on transfer payments, as understood in Mises's thought, lead only to negative outcomes. The greater the extent of government subsidies in the economy, the greater the hindrance to market operations, and the less efficient the market becomes in meeting consumer needs. Consequently, the more government subsidies, the lower the standard of living for everyone, all consumers. However, dependent Americans benefiting from transfer payment programs are content to accept the government's generous assistance to cover their living expenses, as they believe their other income (wages and investments) cannot keep pace with the cost of living. No American wants to be seen as a parasite, but they are happy to vote for politicians who promise to increase transfer payments. Politicians, in every election season, propose countless new direct transfer payments (and tax expenditures) initiatives.

At the same time, it is understandable that politicians are reluctant to mention the extent of Americans' reliance on transfer payments, nor do they wish to imply that voters might be rude and lazy, especially after presidential candidates like Obama in 2008, Romney in 2012, and Clinton in 2016 alienated many people by holding derogatory views about certain voter groups. Few can forget Obama's revealing comments about white working-class voters "clinging stubbornly to guns or religion," or the statement that "47% of people depend on the government, see themselves as victims, believe the government is responsible for taking care of them... these people do not pay income taxes." Or Hillary Clinton's remark that "half of Trump's supporters belong to a basket of deplorables," characterized by racism, sexism, homophobia, xenophobia, and Islamophobia. These statements remain part of political discourse to this day. Therefore, transfer payments continue, but few discuss them in the broader context of the proper relationship between government and citizens.

In short, the reality is that Americans seem unwilling to tax themselves sufficiently to support the level of federal spending they expect, particularly for transfer payments. The amounts of these payments have effectively shifted the Overton window far enough to make them politically and socially acceptable to taxpayers, beneficiaries, elected officials, the media, and the bureaucrats who administer the transfer programs. However, the extraordinary growth of these transfer payment programs has led to what can be described as an unprecedented and seemingly endless fiscal crisis in the United States. Moreover, it is hard to imagine that elected officials can control these transfer payments (and tax expenditures), or that Americans can overcome their reliance on them. One can only speculate on the outcome of this dependency within the broader narrative of the American story.