Tag Archives: Economics

Jay Richards explains how welfare forces people into dependency

Christian philosopher Jay Richards writing for the Heritage Foundation.

Excerpt:

More than 77 government welfare programs—which are spread across several federal departments and provide cash, food, housing, medical care, and targeted social services to poor and low-income persons—are “means-tested.” That is, beneficiaries qualify if they are below a specified income level.

Regardless of their intention, means-tested programs by their very nature pose disincentives for households to increase their incomes and risk termination of their benefits. Thus, the welfare system effectively set up roadblocks to the two main avenues for economic progress: marriage and employment. A single mother would be ensured of her benefits package as long as she did not take a job or marry an employed husband. Given this scenario, it’s not surprising that dismal societal trends have followed.

Unwed childbearing is the major cause of child poverty in America. Since 1965, the rate of unwed births has soared from 7 percent to 39 percent (and among blacks, to 69 percent). Children born and raised outside marriage are nearly seven times more likely to live in poverty than children born to and raised by a married couple. Moreover, unwed childbearing is concentrated among low-income, less educated women in their early 20s—those who have the least ability to support a family by themselves.

Low levels of parental work is the second major cause of child poverty in the United States. In a typical year, only about one-fourth of all poor households with children have combined work hours of adults equaling 40 hours a week. The typical poor family with children is supported by only 800 hours of work during a year, an average of 16 hours of work per week. If work in each family were raised to 2,000 hours per year—the equivalent of one adult working 40 hours per week through the year—nearly 75 percent of poor children would be lifted out of poverty.[6]

Marriage and one parent working = no child poverty. Why is government undermining that? Because broken homes produce children that require government intervention = more government = higher taxes = greater “equality” of wealth through government-run redistribution.

The article explains several government policies that would reduce dependency on government.

Richards explains:

The Welfare Reform Act of 1996 reduced some of these damaging incentives in one major program, Aid to Families with Dependent Children. Under AFDC, states were given more federal funds if their welfare caseloads increased, and funds were cut whenever the state caseload fell. In other words, states were basically encouraged to swell their welfare rolls.

Welfare reform replaced AFDC with a new program, Temporary Assistance to Needy Families (TANF), which provided incentives to move recipients toward self-sufficiency. Funding to each state remained constant regardless of the size of caseloads, and states were allowed to retain savings from caseload reductions.

In addition, states were required to have at least half of their welfare recipients engaged in work or activity that would prepare them for employment. Rather than anticipating depending on the government indefinitely, recipients were limited to five years on the welfare rolls. (Under the old AFDC program, recipients spent an average of 13 years on the rolls.) These reforms in funding structure and incentives made a substantial difference.

Despite dire predictions by opponents of reform that work requirements and benefit limitations would lead to a surge in poverty, just the opposite occurred. States had the flexibility to design programs that best fit the needs of their constituents. State welfare agencies were transformed overnight into job placement centers, while social workers helped recipients access child care, housing, transportation, or other support that was necessary to move them into jobs and toward self-sufficiency.

Within 10 years, welfare caseloads shrank by more than half: 2.7 million fewer families were dependent on welfare checks. As the welfare caseloads fell, the employment of single mothers surged upward, and 1.6 million fewer children were living in poverty.[7] In 2001, despite the recession, the poverty rate for black children was at the lowest point in America’s history.[8]

Unfortunately, Obama rolled back welfare reforms in order to incentivize people to go back onto government dependence.

Keep in mind that Arthur Brooks of the AEI has shown that the amount of wealth a person has (over the poverty level) is not what makes them happy. What makes a person happy (above the poverty level) is that a person is making their own way and earning their own bread by their own work. That’s what makes people happy.

How is Obama responding to a recession and global instability?

From Investors Business Daily.

Excerpt:

When Democrats held Congress, the Obama agenda was audacious. Today, faced with global unrest and an economic reckoning, the president is filling out basketball brackets and scolding school bullies.

‘There is only one president,” Senate Budget Committee Chairman Kent Conrad, D-N.D., told Politico this week, when asked if President Obama should be exercising leadership toward reforming America’s out-of-control entitlement spending programs, such as Medicare and Social Security.

The soothsayer famously told Julius Caesar to “beware the ides of March.” One of the priority items for Obama on Tuesday, March 15, was taping his picks for the NCAA basketball tournament.

Last week, the president and the first lady were holding a “White House Conference on Bullying Prevention,” at which he recalled being taunted because of “big ears and the name that I have.” He lamented recent youthful suicides, such as those of Ty Field and Carl Walker-Hoover.

We can’t just accept that “kids will be kids,” Obama insisted, citing data showing that many American students have been “pushed, shoved, tripped, even spit on.”

Then, of course, there is the partying. Late last month, the president and first lady treated themselves to an East Room concert by Smokey Robinson, Sheryl Crow, comedian Jamie Foxx and others. At previous soirees, the Obama White House has hosted Stevie Wonder, Paul Simon, Tony Bennett, Bob Dylan, Joan Baez, and even a cavalcade of stars from Broadway shows.

And let’s not forget former Beatle Paul McCartney being flown in from England to sing “Michelle” to the first lady and attack President George W. Bush from the East Room stage.

He has no idea what the average American family is facing right now.

 

 

 

Should government do more to help people achieve prosperity?

From Arthur Brooks at the American Enterprise Institute. (H/T Mary)

Excerpt:

In January, the right-leaning organization Resurgent Republic asked Americans which of the following statements comes closer to their view: (a) “Government should do more to solve problems and help meet the needs of people”; or (b) “Government is trying to do more things than it can do well, things that should be left to the private sector and individuals.” Forty-nine percent of respondents chose (a); 46% chose (b). (The other 5% said they didn’t know.)

[…]The “doing good” philosophy cannot accommodate difficult but necessary budget decisions. It will always devolve into a drunken spending binge largely directed toward rewarding political friends like public-sector unions (witness the current mayhem in Wisconsin), engaging in social engineering (see the new health-care mandates), socializing losses (emergency loans and grants to failing businesses), and doling out pork (look almost anywhere in the stimulus).

[…]So citizens say they want government to help them, politicians oblige, but citizens loathe the result. How do we cut this Gordian Knot? The solution is a real philosophy that outlines what the government should do–and, just as importantly, not do. Our elected officials must then show courage and leadership by governing according to this philosophy.

What is that governing philosophy? Here is an answer from the great economist and Nobel laureate Friedrich Hayek: As regards the economy, the government should provide a minimum basic standard of living for citizens, and address market failures in cases where government action can do so cost effectively. That’s all.

We should acknowledge that markets are not perfect. Market failures can occur when we have monopolies (which eliminate competition), externalities (like pollution), public goods (the military, for example), and information problems (such as when people cheat others in the marketplace). Nearly all economists agree these kinds of failures can justify some degree of state intervention.

Obviously, there is plenty of room for debate in this philosophy. What is a minimum basic standard of living? And are certain services–for example, the Smithsonian Institution–public goods? How much waste can we find in the defense budget? These are the arguments we should be having.

But there are many others we shouldn’t be having, because the answers are clear. Should we bail out car companies? (No: GM would fail precisely because markets are working, not because they are failing.) Should we leave the retirement age at 65 even though people are living much longer than ever before and taking more than they ever paid into the Social Security system? (No: This is middle-class welfare, not a minimum basic standard of living.) Should we continue to prohibit people from buying health insurance from companies across state lines? (No: This induces market failure.) Do we need high-speed trains to take us to St. Louis? (No: This is not a public good.) And so on.

It’s not the government’s job to equalize life outcomes regardless of our own choices. Their job is to referee the game, not to pick winners and losers.