March 19, 2015
Since
2010, the economy has created more than 12 million private-sector jobs. Businesses have made
additions to their payrolls for 60 straight months. The unemployment rate
is down to 5.5 percent.
There’s
no better time for some tough love on welfare.
Earlier
this month, in response to a request by U.S. Rep.
Tom Price (R-GA), the
Congressional Budget Office (CBO) documented just how vastly “public
assistance” has expanded since the Great Recession struck. Between the 2007 and
2015 fiscal years, spending on Medicaid soared from $191 billion to $335
billion. Subsidies to Obamacare’s insurance policies rose from nothing to $28
billion. (The CBO estimates that by 2025, the figure will be $112 billion.) The
price for food stamps ballooned from $35 billion to $78 billion. Outlays for Supplemental
Security Income -- which a 2010 investigation by The Boston Globe characterized as a program “gone seriously astray,
becoming an alternative welfare system with troubling built-in incentives that
risk harm to children” -- jumped from $36 billion to $55 billion.
Social
Security Disability Insurance, the
Hoover Institution’s Lanhee J. Chen wrote in The Wall Street Journal, “paid $140.1 billion to disabled workers
and their dependents in 2013 (according to the latest trust-fund data). By the
end of that year spending outpaced receipts by $32 billion, and the balance of
the program’s trust fund was a little more than $90 billion. Trust-fund
reserves are expected to run out in late 2016.” Offices, factories, and stores
have gotten substantially safer in the last three decades, but the CBO
noted that during the period, “the number of disabled workers who receive
benefits from the Social Security Disability Insurance … program has increased
more than threefold.”
National
means-tested programs are projected to cost $683 billion this year. State and
local spending will add much more. It’s fiscally unsustainable -- wildly so --
and a powerful excuse to avoid job-hunting in an expansion that finally appears
to have found solid footing.
In a
January paper for the Manhattan Institute for Policy Research, economist
Diana Furchtgott-Roth decried “the number of Americans who have simply stopped
seeking work altogether.” The “U.S. labor-force participation rate [has]
descended to its lowest level since 1978. Nor can America’s aging population
alone explain this alarming trend: in September 2014, the labor-force
participation rate, aged 25-54, was just 80.7 percent, the lowest level since
1984.”
A
metastasizing dole may not be the sole cause of declining interest in
employment, but it’s a major contributor. A 2013 Cato Institute study of seven
programs found that “in Hawaii; Massachusetts; Connecticut; New York; New
Jersey; Rhode Island; Vermont; and Washington, D.C.; welfare pays more than a
$20-an-hour job, and in five additional states it yields more than a
$15-per-hour job.”
As the
University of Chicago’s Casey Mulligan argued in testimony before the Committee
on Ways and Means of U.S. House of Representatives, working “requires
sacrifices, and people evaluate whether the net income earned is enough to
justify the sacrifices. When [welfare programs] pay more, the sacrifices that
jobs require do not disappear. The commuting hassle is still there, the
possibility for injury on the job is still there, and jobs still take time away
from family, schooling, hobbies, and sleep. But the reward to working declines,
because some of the money earned on the job is now available even when not
working.”
What
happens when welfare is curtailed? Behavior changes. Often dramatically. During
the Clinton administration, Aid
to Families with Dependent Children was replaced by Temporary
Assistance to Needy Families. Deadlines and work requirements made the transition
an unqualified
success, for beneficiaries and taxpayers alike.
More
recently, evidence has emerged to bolster former Treasury
secretary Lawrence Summers’s assessment that unemployment insurance
“increases the measure of unemployment by inducing people to say that they are
job hunting in order to collect benefits.” The John Locke Foundation’s John
Hood described
a revealing result in the Tar Heel State: “North Carolina had one of the
largest labor-market improvements in the country after exiting extended
[unemployment] benefits in July 2013, and the nation as a whole has seen clear
labor-market improvement since it exited extended benefits in January 2014.”
Don’t
look for the White House to embrace welfare reforms/reductions in response to a
stronger economy. The administration’s doctrinaire moonbats support “public
investments” when times are prosperous or hard. But states can examine what
their largesse -- often boosted by federal dollars -- is doing to keep the
able-bodied away from work. It’s sure to be an effective tool for both fiscal
responsibility and economic development.
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
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