One familiar interpretation of the Age of Reagan is that the American voters have lost interest in the poor and have entered a period of narrow selfishness. But a close look at the changing pattern of incomes in the United States suggests a quite different interpretation -- and some interesting paradoxes.
Since 1960 there has been a major shift in the sources of American incomes, causing understandable resentment among voters. The share of total personal income derived from labor, including self-employment, has fallen from 80 percent in 1960 to 67 percent in 1983. Part of the gain has gone to capital, as declines in the role of dividends and rents have been more than offset by sharp increases in interest income. The increase in income from interest, however, is partially an offset to losses from inflation during the 1970s, so it is not clear that real incomes from capital have risen relative to other sources.
The big recipient of the income lost by labor has been transfer payments, which have more than doubled from 7.2 percent of all personal income in 1960 to 14.8 percent in 1983. A transfer payment is simply a direct payment -- other than for a purchase -- from the government to a person. A pension check is one example; food stamps are another. For somewhat obscure reasons, Medicaid is not listed as a transfer payment; if it were added, the total for 1983 becomes 15.8 percent pf personal income.
It is not surprising that working voters have supported a president who seemed to promise an end to this trend toward less for labor incomes and more for transfers. The problem is that it is far from clear that the voters have elected the candidate of the correct political party to produce this result, or that they have looked closely at exactly who benefits from the recent increase in transfer payments.
The rapid growth of government transfers as a share of personal incomes has occurred primarily under Republican prsidents, including Ronald Reagan. The share of incomes derived from these programs rose by only 1.5 percentage points during the eight years of presidents Kennedy and Johnson, but then increased by 4.3 precentage points in the eight years of Nixon and Ford. Transfer payments actually fell slightly as a share of income in the Carter years, before rising by 1.1 percentage points during the first three years of Ranald Reagan. If the voters are trying to send a message that they want the growth of these expenditures curtailed, they seem to have sent the wrong messenger.
The second paradox is that while most of these payments are defended on grounds of need, most are not directed at the poor. Sixty-two percent of all transfers are provided through social insurance programs such as Social Security and civilian government pensions. If military pensions are added, 66 percent of all transfers are distributed through programs that are not tied directly to need.
The programs that provide for the proverbial "welfare mothers" -- Aid to Families With Dependent Children and food stamps -- represent only 6 percent of the transfer budget or less than 1 percent of all personal incomes. American income maintenance efforts are not directed primarily at moving funds from the well-off to the poor, but instead from those of working age to those who are retired. While many of the elderly are poor, growing private pensions and savings mean that many more are not. And most government programs do not distinguish between the two groups.
If these efforts are looked at carefully, it is not even clear that they merely shift income from the young to the old. During most of the history of this country, it was normal for those of working age to support their parents, a responsibility that often involved large personal and financial costs. Americans have decided to shift a large part of this job to the government, and precisely because of Social Security and Medicare, most citizens of working age do not carry the major costs of supporting their parents.
Directly or indirectly, the present federal system actually transfers income to just about everybody. That leads to a third paradox. While the resentment of transfer payments in general may be deep and widespread, there is hardly anyone who isn't aware of certain important benefits to himself. Perhaps that's why there is so much political support for cutting federal spending in general, and so little support for each specific cut.