One Nation On Welfare. Living Your Life On The Dole

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Adam Golfer for TIME

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This is true for huge numbers of Americans. Government is still America's largest job sector, directly employing about 22 million workers at the federal, state and local levels--which means teachers, cops, prison guards, park rangers, coroners, prosecutors, you name it. It is impossible to estimate how many jobs the federal government creates indirectly through contracts for everything from fighter jets to the guys who manage my tennis courts. Other industries depend on government, like health care, lobbying and Washington real estate. And the entire nonprofit world depends on the charitable tax deduction, which costs the Treasury about $40 billion a year. Obama proposed to limit it for rich donors, but charities went berserk, and with antitax Republicans running the House, Congress isn't eliminating tax breaks these days.

That's especially true of the tax breaks that deprive the Treasury of the most revenue because they tend to go to taxpayers with the most income. Take that mortgage-interest deduction, the third-costliest tax expenditure at $94 billion a year. It's available only to homeowners, who tend to be better off than renters. And since it's a deduction from your income, it's worth more to taxpayers who earn more. That's because the higher your income, the higher your tax bracket. And if you are in the top brackets, you can deduct a bigger portion of your mortgage interest from your taxes. Politicians love providing benefits through the tax code because it makes them look like tax cutters rather than spenders. And a politician who tried to get rid of the mortgage deduction would probably become an ex-politician.

1 p.m.--6 p.m.: Subsidized medicine, savings and businesses

I usually spend most of the afternoon in my office, with occasional soccer breaks when 2-year-old Lina bangs on my door and shouts, "Kick ball me!" I often grab lunch with a friend--maybe Xavier, a private-equity guy, or Damian, a developer, or Alan, an environmental activist. I do physical therapy twice a week for a bum shoulder. Except for my escape with Lina, who'd be a more convincing athlete if she didn't carry a doll onto the field, this is all subsidized too.

The physical therapy is helping my aching shoulder, but it's also helping drive the U.S. toward insolvency. We're not Greece or anything like Greece, but we do have a long-term debt problem, and it's almost entirely a result of rising health care costs. On graphs of long-term government-spending projections, health care looks like a ski slope, and everything else looks like a sidewalk. Most of the problem is Medicare and Medicaid, which spend about $800 billion and rising a year to cover the elderly and the poor. But the tax advantages for health care are the country's costliest tax expenditure, draining the Treasury of $184 billion a year. Health benefits provided by employers are tax exempt, which encourages Time Inc. to give me better benefits than it otherwise might have. That may have encouraged me to get my shoulder checked out earlier than I otherwise would have, which might save me from costly surgery. Then again, my orthopedist might not have done an MRI in addition to an X-ray if I didn't have such comprehensive insurance; when the tax code rewards a behavior, like consuming health care, people do more of that behavior.

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