Posts tagged welfare
Posts tagged welfare
(Source: The New York Times)
In a December 2011 op-ed, former Massachusetts Governor Mitt Romney warned ominously of the dangers that the nation faces from the encroachment of the “Entitlement Society,” predicting that in a few years, “we will have created a society that contains a sizable contingent of long-term jobless, dependent on government benefits for survival.” “Government dependency,” he wrote, “can only foster passivity and sloth.” Similarly, former Senator Rick Santorum said that recent expansions in the “reach of government” and the spending behind them are “systematically destroying the work ethic.”
The claim behind these critiques is clear: federal spending on entitlements and other mandatory programs through which individuals receive benefits is promoting laziness, creating a dependent class of Americans who are losing the desire to work and would rather collect government benefits than find a job.
Such beliefs are starkly at odds with the basic facts regarding social programs, the analysis finds. Federal budget and Census data show that, in 2010, 91 percentof the benefit dollars from entitlement and other mandatory programs went to the elderly (people 65 and over), the seriously disabled, and members of working households. People who are neither elderly nor disabled — and do not live in a working household — received only 9 percent of the benefits.
The entire “welfare state”, “entitlement society”, “dependency creating” approach to social services is nothing more than aggressive anti-poor propaganda designed to minimize taxation on the wealthy by creating a false sense of exploitation.
In a recent Wall Street Journal op-ed, Robert Barro dismisses Agriculture Secretary Tom Vilsack’s claim that every dollar spent on food stamps generates $1.84 of economic activity. Barro claims Secretary Vilsack’s “Keynesian” estimate conflicts with “regular” economics, which he says predicts that increasing transfer payments like food stamps and unemployment insurance (UI) would lead to a decline in economic activity and a fall in employment because they would “motivate less work effort by reducing the reward from working.”
Contrary to Barro’s assertion, however, the Secretary is in good company appealing to Keynesian multiplier analysis under current economic conditions, and Barro’s assessment is implausible. For example, the Congressional Budget Office has estimated that transfer payments to individuals like the increase in food stamp benefits and additional UI compensation of the 2009 Recovery Act generate between 80 cents and $2.10 for each dollar spent when the Federal Reserve holds short-term interest rates as low as possible (see Table 2 here). Barro says “there is zero evidence” that deficit-financed transfers increase economic activity and boost employment;” CBO explains why, taken as a whole, the evidence says they do.
Circumstances matter. When the economy is humming along on all cylinders and unemployment is very low – think the late 1990s – deficit-financed increases in food stamps and UI would not increase economic activity or boost employment. The multiplier would be essentially zero because the Federal Reserve would raise interest rates in response. Any rise in demand stimulated by the increase in transfers would be offset by the fall in demand due to higher interest rates. Barro’s concern about work disincentives could come into play if transfers were exceedingly generous.
That’s not where we are now. Higher interest rates due to Fed tightening will not likely be a concern anytime soon. Instead, we face a long period of high unemployment and excess productive capacity. These are just the circumstances in which transfers will most likely be effective in stimulating demand and creating jobs.
Food stamp and UI recipients spend most of any increase in income they get, and they spend it quickly. That means more spending at local businesses and more orders for those businesses’ suppliers. The additional spending generates income for local businesses and their suppliers, and the boost to demand multiplies through the economy. With nine unemployed workers for every two job openings and businesses generally operating well below full capacity, constraints on expanding production and employment to meet the increased demand should be minimal. Treasury borrowing costs will continue to be low and we will increase the odds that a real economic recovery will take hold.
I wish we were at a point where further deficit-financed spending would be counterproductive because growth is strong and full employment is in sight. But, we’re clearly not there yet and it’s bad economic policy – regular or irregular – to pretend otherwise.
Trying to eliminate food stamps and unemployment to help the economy is not only cruel, it’s stupid. You’d get better results trying to squeeze water from a stone.
Still think people on food stamps have it too good? Chef Karl Wilder is trying to feed his family on the budget equivalent of what they would receive on food stamps. He’s been documenting his meals on his blog as part of an awareness campaign for the San Francisco Food Bank.
He just finished his two months on a food stamp budget, and he says, “I admit to being bored by it. I am sick of many of the foods that work in this budget. I am ready for it to be over.” He went to the doctor and found that although he’d lost weight, his body fat percentage went up, and his blood sugar, cholesterol and triglyceride levels were all higher.
Still think poor people have it made on food stamps?