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Most Americans Get ‘Free Stuff’ From The Government

Who doesn’t love free stuff? We’re a country that turns every national holiday into a sale. You’re more likely to see a riot over discount video game consoles on Black Friday than over political debates.

But in politics, “free stuff” has come to mean something very different. In 2012, Mitt Romney said he told members of the NAACP that if they wanted “free stuff” from the government — including Obamacare and other benefits — they should vote for President Obama. Last week, Republican presidential candidate Jeb Bush, when asked about attracting black voters, said his message was different from that of Democrats because it was not “get in line and we’ll take care of you with free stuff.”

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Bush and Romney were apparently using the term to refer to the government benefits generally associated with low-income people, such as food stamps. Playing on resentment of such benefits is an old political tactic, sometimes using a barely veiled racial code, as when Ronald Reagan inveighed against a “welfare queen” during his 1976 presidential campaign.1

But “free stuff” from the government is far more extensive than the benefits disdained by those politicians, and is eagerly accepted by people of every race and income level. As Howard Gleckman, a tax expert who writes for the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute, pointed out recently, virtually every American gets some kind of government subsidy, from people who have mortgages or employer-sponsored health care (big tax deductions) to those who work for or invest in big companies (big corporate tax subsidies). Recipients of Social Security and Medicare get back far more in benefits than they paid in taxes.

Benefits to people who are not poor often equal or dwarf the cost of those for the poor. The home mortgage interest deduction, which the Congressional Budget Office found largely benefits the top one-fifth of income earners, cost the federal government about $70 billion in 2013; food stamps cost the government $74 billion last year. The tax break for employers who provide health insurance cost Washington $250 billion in 2013.

Medicare, which is available to all seniors regardless of income level, is more expensive ($587 billion in 2013) than Medicaid ($449 billion), the health care program for the poor, and an average-income couple retiring this year will get back three times more in Medicare benefits than they paid in Medicare taxes.

These comparisons of benefits rarely come up when talk on the campaign trail turns to “handouts.” But even the “free stuff” the politicians do bring up goes to a larger, more diverse group of people than is commonly believed.

The Census Bureau measures the recipients of six programs that are means-tested (based on income and other economic criteria) and designed to go only to low-income people: Medicaid, food stamps, housing assistance, Supplemental Security Income, and Temporary Assistance for Needy Families (TANF) and General Assistance (which are what remain of the old welfare system). Its most recent study found that in 2012, 21 percent of the U.S. population, or 52.2 million people, participated in one or more of those six programs on average each month.

Black Americans are overrepresented among recipients of those benefits, but they are not the majority of recipients. In any given month during 2012, 42 percent of black Americans received a means-tested benefit, compared with 36 percent of Hispanics, 18 percent of Asians/Pacific Islanders and 13 percent of non-Hispanic whites. Currently the U.S. population is 77 percent white (62 percent of them non-Latino white Americans), 13 percent black, 17 percent Latino and 5 percent Asian. (Latinos are an ethnicity and may be of any race.)

Overall, white Americans still make up the largest number of people on means-tested programs (though they represent less than their share of the population). Among food stamp participants in fiscal year 2013, 40 percent were white, 26 percent black, 10 percent Latino and 2 percent Asian. Among TANF recipients in fiscal year 2010, the overall numbers are 32 percent white, 32 percent black and 30 percent Hispanic.

The racial breakdown of Medicaid recipients in 2011, according to the Centers for Medicare and Medicaid Services, was 40 percent white, 22 percent black non-Hispanic, 25 percent Hispanic and 3 percent Asian. And enrollees in the Affordable Care Act health insurance exchanges are 63 percent white, 17 percent black, 11 percent Latino and 8 percent Asian.

Beyond the question of race, the Pew Research Center did a survey about beneficiaries of federal entitlement programs (both means-tested and not) in 2012 and found that 55 percent of Americans said they had benefited, including 57 percent of self-described conservatives and 53 percent each of liberals and moderates.Among the biggest recipients of government generosity are corporations, which receive a multitude of federal and state tax breaks and incentives. These subsidies, sometimes called “corporate welfare,” primarily benefit the shareholders and executives of the nation’s largest companies. As of last year, 96 percent of Fortune 500 CEOs were white, and white investors typically have three times as much money in the stock market as nonwhites. Investors are not direct recipients of corporate welfare, but the value of their holdings is shaped by any federal, state and local funds going to the publicly held corporations.

In 2012, The New York Times found that Washington and the states had given out $170 billion in corporate incentives and breaks. On a local and state level, much of this money was intended to create jobs, though many governments never tracked how many jobs were created as a result of the “free stuff.”

Also frequently labeled “corporate welfare” are the billions of dollars of subsidies in the federal farm bill, more than $90 billion over 10 years. Much of the money goes to agribusiness rather than family farms, particularly in industries such as catfish farming and rice, peanut and sugar production. In addition, in 2010 the federal government agreed to pay $1.25 billion to settle a class-action lawsuit by black farmers claiming that they were not given loans comparable with those white farmers received through the U.S. Department of Agriculture farm loan program.

Government assistance was responsible for one of the pillars of the U.S. economy: the construction and purchase of private homes, which was made possible through federally insured home loans and tax breaks for mortgage interest and local property taxes. The most widespread benefit was the insurance for more than 40 million mortgages made by the Federal Housing Administration (FHA) since 1934, which made it possible for lenders to offer loans with low down payments and reduced interest costs, mostly to first-time homebuyers.

Those houses became a key part of building household wealth beginning with the post-World War II boom, but even though that wealth was made possible by federal benefits, it accrued disproportionately to white families. Black Americans were not given legal access or equal private access to this means of enrichment, because of redlining policies by lenders and legal restrictions on where blacks could buy property. (Restrictive covenants continued openly until the Supreme Court made them unenforceable in 1948, and they were later made illegal by the Fair Housing Act of 1968. Redlining persisted through the mid-1970s; it was prohibited by the Community Reinvestment Act of 1977.)

Many black or Latino homebuyers were steered toward subprime loans, which were not backed by the government and lacked the advantages of the FHA-insured conventional loans, costing buyers more in interest and other fees. A 1998 Department of Housing and Urban Development (HUD) study found that subprime loans were five times more likely in black neighborhoods in Atlanta than in white neighborhoods.

That history extended to the present era, as was made clear after the housing bust that helped produce the Great Recession. In 2012, five major lenders agreed to a $25 billion settlement after the Department of Justice and HUD found loan and foreclosure abuses that escalated seizures of homes, many those of nonwhite owners. Subsequent investigations have found that the lenders are not in compliance with that agreement, or are only partially so. Other settlements dealt with the issue of race directly, including a $335 million pact between Countrywide Financial and the Department of Justice to settle allegations that black and Latino buyers were steered into subprime mortgages and charged higher fees. PNC Bank and Wells Fargo also entered multimillion-dollar settlements based on allegations of racial discrimination.

A Wall Street Journal investigation of $2.5 trillion in subprime loans found that in 2005-06, more than half of all homebuyers who got saddled with the costly agreements would probably have qualified for regular loans. And a separate study of Home Mortgage Disclosure Act data found that blacks and Latinos were more than twice as likely as whites of similar finances to get subprime loans.

Jeb Bush concluded his statement about “free stuff” with an assertion that black voters would be attracted to the Republican Party with the “uplifting” message “that you can achieve earned success.” But white Americans are given more opportunities to fail and recover when it comes to earnings, and the employment field is markedly unequal. For example, sociologist Devah Pager sent college students from Milwaukee, black and white, to apply for jobs either as a non-felon or as someone with a felony drug conviction. After testing hundreds of employers, Pager found that white men with felony records were more likely to get callbacks and job offers than black men without a criminal record.

Bush himself benefited from federal policies around debt and default that few Americans of any race receive. Federal regulators wrote down a $4.6 million loan on a downtown Miami office building to $500,000, after the failure of a savings and loan that lent money to one of his real estate partnerships. His brother Neil Bush was a director of Colorado’s Silverado Savings and Loan. When the S&L defaulted, the federal government paid $1 billion to repay clients. The officials settled for $49.5 million, of which Neil Bush paid $50,000.

As the campaign continues, keeping the numbers on wealth and race in mind will give context to political claims about what black Americans — or any group of voters — do and don’t want.

CLARIFICATION (Oct. 2, 4:35 p.m.): A previous version of this article omitted an affiliation for Howard Gleckman, who writes for the Tax Policy Center. The center is a joint venture of the both the Brookings Institution and the Urban Institute, not just of Brookings.

Footnotes

  1. The woman in question later turned out to be a disturbingly brazen con artist and possible murderer who was apparently white.

Farai Chideya is a senior writer for FiveThirtyEight.

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