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Archive for the ‘Dependency’ Category

Back in 2014, I shared a report that looked at the growth of redistribution spending in developed nations.

That bad news in the story was that the welfare state was expanding at a rapid pace in the United States. The good news is that the overall fiscal burden of those programs was still comparatively low. At least compared to other industrialized countries (though depressingly high by historical standards).

I specifically noted that Switzerland deserved a lot of praise because redistribution spending was not only relatively modest, but that it also was growing at a slow rate. Yet another sign it truly is the “sensible country.”

But I also expressed admiration for Canada.

Canada deserves honorable mention. It has the second-lowest overall burden of welfare spending, and it had the sixth-best performance in controlling spending since 2000. Welfare outlays in our northern neighbor grew by 10 percent since 2000, barely one-fourth as fast as the American increase during the reckless Bush-Obama years.

But I didn’t try to explain why Canada had good numbers.

Now it’s time to rectify that oversight. I went to the University of Texas-Arlington last week to give a speech and had the pleasure of meeting Professor Todd Gabel. Originally from Canada, Professor Gabel has written extensively on Canadian welfare policy and he gave me a basic explanation of what happened in his home country.

I asked him to share some of his academic research and he sent me several publications, including two academic studies he co-authored with Nathan Berg from the University of Otago.

Here are some excerpts from their 2015 study published in the Canadian Journal of Economics. Gabel and Berg explain welfare reform in Canada and look at which policies were most successful.

During the 1990s and 2000s, Canada’s social assistance (SA) system transitioned from a relatively centralized program with federal administrative controls to a decentralized mix of programs in which provinces had considerable discretion to undertake new policies. This transition led to substantially different SA programs across provinces and years… Some provincial governments experimented aggressively with new policy tools aimed at reducing SA participation. Others did not. In different years and by different amounts, nearly all provinces reduced SA benefit levels and tightened eligibility requirements.

By the way, the SA program in Canada is basically a more generous version of the Temporary Assistance to Needy Families (TANF) program in America, in part because there are not separate programs for food and housing.

The study includes this remarkable chart showing a significant drop in Canadian welfare dependency, along with specific data for three provinces.

The authors wanted to know why welfare dependency declined in Canada. Was is simply a result of a better macroeconomic environment? Or did specific reforms in welfare policy play a role?

…what role, if any, did new reform strategies undertaken by provinces play in observed declines in SA participation. This paper attempts to address this question by measuring disaggregated effects of new reform strategies on provinces’ SA participation rates, while controlling for changes in benefit levels, eligibility requirements, labour market conditions, GDP growth and demographic composition.

Their conclusion is that welfare reform helped reduce dependency.

…our econometric models let the data decide on a ranking of which mechanisms—reductions in benefit levels, tightened eligibility requirements, improved macro-economic conditions or adoption of new reform strategies—had the largest statistical associations with declines in participation. The data suggest that new reforms were the second most important policy reform after reductions in employment insurance benefits. … In the empirical models that disaggregate the effects of different new reform strategies, it appears that work requirements with strong sanctions for non-compliance had the largest effects. The presence of strong work requirements is associated with a 27% reduction in SA participation.

Here’s their table showing the drop in various provinces between 1994 and 2009.

The same authors unveiled a new scholarly study published in 2017 in Applied Economics, which is based on individual-level data rather than province-level data.

Here are the key portions.

A heterogeneous mix of aggressive welfare reforms took effect in different provinces and years starting in the 1990s. Welfare participation rates subsequently declined. Previous investigations of these declines focused on cuts in benefits and stricter eligibility requirements. This article focuses instead on work requirements, diversion, earning exemptions and time limits – referred to jointly as new welfare reform strategies.

Here’s their breakdown of the types of reforms in the various provinces.

And here are the results of their statistical investigation.

The empirical models suggest that new reform strategies significantly reduced the probability of welfare participation by a minimum of 13% overall…the mean person in the sample faces a reduced risk of welfare participation of 1.1–1.3 percentage points when new reform strategies are present… the participation rates of the disabled, immigrants, aboriginals and single parents, appear to have responded to the presence of new reform strategies significantly more than the average Canadian in our sample. The expected rate of welfare participation for these groups fell by two to four times the mean rate of decline associated with new reform policies.

The bottom line is that welfare reform was very beneficial for Canada. Taxpayers benefited because the fiscal burden decreased. And poor people benefited because of a transition from dependency to work.

Let’s close by looking at data measuring redistribution spending in Canada compared to other developed nations. These OECD numbers include social insurance outlays as well as social welfare outlays, so this is a broad measure of redistribution spending, not just the money being spent on welfare. But it’s nonetheless worth noting the huge improvement in Canada’s numbers starting about 1994.

Canada now has the world’s 5th-freest economy. Welfare reform is just one piece of a very good policy puzzle. There also have been relatively sensible policies involving spending restraint, corporate tax reform, bank bailoutsregulatory budgeting, the tax treatment of saving, and privatization of air traffic control.

P.S. If it wasn’t so cold in Canada, that might be my escape option instead of Australia.

P.P.S. Given the mentality of the current Prime Minister, it’s unclear whether Canada will remain an economic success story.

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The notion that government should automatically give everyone money – a policy known as “universal basic income” – is now getting a lot of attention.

From an economic perspective, I acknowledge that the idea should not be summarily rejected. Here’s some of what I wrote earlier this year.

…there actually is a reasonable argument that the current welfare state is so dysfunctional that it would be better to simply give everyone a check instead.

But I’m nonetheless very skeptical. Simply stated, the math doesn’t work, people would have less incentive to work, and there would be “public choice” pressures to expand the size of the checks.

So when the topic came up as part of a recent interview, I criticized the proposal and praised Swiss voters for rejecting – by an overwhelming margin – a referendum that would have created a basic income in that nation.

My reaction was probably even more hostile than normal because I don’t like it when guilt-ridden rich people try to atone for their wealth by giving away my money.

Moreover, it’s silly for Zuckerberg to use Alaska as an example because of its oil wealth and small population.

That being said, if I had more time, I would have been more nuanced and pointed out that we hopefully will learn more from some of the experiments that are happening around the world. Especially what’s happening on the other side of the north pole from Alaska.

The New York Times published an in-depth preview of Finland’s experiment late last year. Here’s a description of the problem that Finnish policymakers want to solve.

…this city has…thousands of skilled engineers in need of work. Many were laid off by Nokia… While entrepreneurs are eager to put these people to work, the rules of Finland’s generous social safety net effectively discourage this. Jobless people generally cannot earn additional income while collecting unemployment benefits or they risk losing that assistance. For laid-off workers from Nokia, simply collecting a guaranteed unemployment check often presents a better financial proposition than taking a leap with a start-up.

For anyone who has studied the impact of redistribution programs on incentives to work, this hardly comes as a surprise.

Indeed, the story has both data and anecdotes to illustrate how the Finnish welfare state is subsidizing idleness.

In the five years after suffering a job loss, a Finnish family of four that is eligible for housing assistance receives average benefits equal to 73 percent of previous wages, according to data from the Organization for Economic Cooperation and Development. That is nearly triple the level in the United States. …the social safety net…appears to be impeding the reinvigoration of the economy by discouraging unemployed people from working part time. …Mr. Saloranta has his eyes on a former Nokia employee who is masterly at developing prototypes. He only needs him part time. He could pay 2,000 euros a month (about $2,090). Yet this potential hire is bringing home more than that via his unemployment benefits. “It’s more profitable for him to just wait at home for some ideal job,” Mr. Saloranta complains.

So the Finnish government wants to see if a basic income can solve this problem.

…the Finnish government is exploring how to change that calculus, initiating an experiment in a form of social welfare: universal basic income. Early next year, the government plans to randomly select roughly 2,000 unemployed people — from white-collar coders to blue-collar construction workers. It will give them benefits automatically, absent bureaucratic hassle and minus penalties for amassing extra income. The government is eager to see what happens next. Will more people pursue jobs or start businesses? How many will stop working and squander their money on vodka? Will those liberated from the time-sucking entanglements of the unemployment system use their freedom to gain education, setting themselves up for promising new careers? …The answers — to be determined over a two-year trial — could shape social welfare policy far beyond Nordic terrain.

The results from this experiment will help answer some big questions.

…basic income confronts fundamental disagreements about human reality. If people are released from fears that — absent work — they risk finding themselves sleeping outdoors, will they devolve into freeloaders? “Some people think basic income will solve every problem under the sun, and some people think it’s from the hand of Satan and will destroy our work ethic,” says Olli Kangas, who oversees research at Kela, a Finnish government agency that administers many social welfare programs. “I’m hoping we can create some knowledge on this issue.” …Finland’s concerns are pragmatic. The government has no interest in freeing wage earners to write poetry. It is eager to generate more jobs.

As I noted above, this New York Times report was from late last year. It was a preview of Finland’s experiment.

People have been getting checks for several months. Are there any preliminary indications of the impact?

Well, the good news is that recipients apparently like getting free money. Here are some excerpts from a report by Business Insider.

…some of the 2,000 recipients are already reporting lower levels of stress. The $600 they receive each month might not be much, but it’s enough to put some people’s anxiety at ease.

But the bad news is that the handouts are giving people the flexibility to reject work.

Marjukka Turunen, head of Kela’s legal benefits unit, told Kera News. “There was this one woman who said: ‘I was afraid every time the phone would ring, that unemployment services are calling to offer me a job,'”… Scott Santens, a basic income advocate and writer…says basic income redistributes power into the middle-class — namely, to turn down unappealing jobs.

The last sentence of the excerpt is particularly worrisome. Some advocates think universal handouts are good precisely because people can work less.

It’s obviously too early to draw sweeping conclusions, especially based on a couple of anecdotes.

However, a recent column in the New York Times by two left-leaning Finns suggests that the data will not be favorable to universal handouts. The authors start with a basic explanation of the issue.

Universal basic income is generating considerable interest these days, from Bernie Sanders, who says he is “absolutely sympathetic” to the idea, to Mark Zuckerberg, Facebook’s chief executive, and other tech billionaires. The basic idea behind it is that handing out unconditional cash to all citizens, employed or not, would help reduce poverty and inequality… As a rich country in the European Union, with one of the highest rates of social spending in the world, Finland seemed like an ideal testing ground for a state-of-the-art social welfare experiment. …Kela, the national social-insurance institute, randomly selected 2,000 Finns between 25 and 58 years of age who were already getting some form of unemployment benefits. The subsidies were offered to people who had been unemployed for about one year or more, or who had less than six months of work experience.

But then they denigrate the study.

…the Finnish trial was poorly designed… The trial size was cut to one-fifth of what had originally been proposed, and is now too small to be scientifically viable. Instead of giving free money to everyone, the experiment is handing out, in effect, a form of unconditional unemployment benefits. In other words, there is nothing universal about this version of universal basic income. …The government has made no secret of the fact that its universal basic income experiment isn’t about liberating the poor or fighting inequality. Instead, the trial’s “primary goal” is “promoting employment,” the government explained in a 2016 document proposing the project to Parliament. Meaning: The project was always meant to incentivize people to accept low-paying and low-productivity jobs.

Maybe I’m reading between the lines, but it sounds like they are worried that the results ultimately will show that a basic income discourages labor supply.

Which reinforces my concerns about the entire concept.

Yes, the current system is bad for both poor people and taxpayers. But why would anyone think that we’ll get better results if we give generous handouts to everyone?

So if we replace all those handouts with one big universal handout, is there any reason to expect that somehow people will be more likely to find jobs and contribute to the economy?

Again, we need to wait another year or two before we have comprehensive data from Finland. But I’m skeptical that we’ll get a favorable outcome.

P.S. The Wizard-of-Id parody shown above contains a lot of insight about labor supply and incentives. As does this Chuck Asay cartoon and this Robert Gorrell cartoon.

P.P.S. Since I rarely write about Finland, I should point out that it is ranked #20 for economic liberty, only four spots behind the United States (and the country is more pro-market than America when looking at non-fiscal policy factors).

P.P.P.S. On the minus side, Finland has decided that broadband access is somehow a human right. On the plus side, the country’s central bank produces good research on the burden of government spending, and its former president understood the essential flaw of Keynesian economics.

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I like sharing topical items on the 4th of July.

  • In 2010, I contemplated the challenging issue of libertarians and patriotism. My view, for what it’s worth, is captured by this t-shirt.
  • In 2011, I pondered research about the partisan implications of patriotism and the 4th of July.
  • In 2012, I shared an inspirational video about freedom and individualism from Ronald Reagan.
  • In 2013, I discussed the proper meaning of patriotism in the aftermath of revelations about NSA snooping.
  • In 2014, I decided on a humorous approach with one a Remy video about government being “up in your grill.”
  • In 2015, I waded into the controversial topic of what happens when flag burning meets the modern regulatory state.
  • In 2016, I looked at how government has increased the cost of celebrating Independence Day.

I actually did two columns in 2011. I also put together a satirical Declaration of Dependence for my left-wing friends. Here’s how it started.

We hold these truths to be self-evident, that all people should be made equal, that they are endowed by their government with certain unalienable Rights, that among these are jobs, healthcare and housing.

I’m definitely not in the same league as P.J. O’Rourke or Mark Steyn, but I thought I was being at least halfway funny and somewhat clever.

But Bernie Sanders must have read it and took it seriously, at least if this tweet is any indication.

In other words, he’s saying you have a “right” that is predicated on other people paying for you.

When I first saw that tweet, the first thing that came to mind was the cartoon about the choice between “work hard” and “free stuff.”

Then I thought about the failure of nations that go too far down the path of redistribution, such as Greece and Venezuela.

And I wondered whether Senator Sanders actually understands what he’s saying. In other words, is he crazy, blind, or evil?

Or perhaps immoral? In his Washington Times column, Richard Rahn looked at the ethical implications.

Sen. Bernie Sanders keeps repeating that “all Americans have a right to health care” — nice applause line, but what does it mean? There is no such right mentioned in the Declaration of Independence or the Constitution. Health care is not a free good — someone has to pay for it. Ask yourself — who should pay for your health care? …Do you have the obligation to pay for someone else’s health care? If so, how much and why? …The 13th Amendment to the Constitution prohibits “involuntary servitude” and slavery. At what point does a tax on someone’s labor — where the proceeds of that tax are largely used to provide income or services to others — constitute “involuntary servitude”? …Those who think they have the right to the labor of those they revile, i.e., the “rich,” have the same mentality of the slaveholder who also thought he had the right to others’ labor.

Ultimately, this is about a conflict between the classical liberal vision of “negative liberty” and the welfare state vision of “positive liberty.”

Here’s how I explained the difference a few years ago.

Libertarians, along with many conservatives, believe in the right to be left alone and to not be molested by government. This is sometimes referred to in the literature as “negative liberty,” which is just another way of saying “the absence of coercive constraint on the individual.” Statists, by contrast, believe in “positive liberty.” This means that you have a “right” to things that the government will give you… Which means, of course, that the government has an obligation to take things from somebody else. How else, after all, will the government satisfy your supposed right to a job, education, healthcare, housing, etc.

I also should have pointed out that negative liberty doesn’t impose obligations on other people. My freedom of speech doesn’t conflict with your freedom of speech. My freedom or religion doesn’t conflict with your freedom of religion. My freedom to earn and produce doesn’t conflict with your freedom to earn and produce.

But that’s not true with so-called positive liberty. If I have a “right” to health care, that means the government will use coercion. Either indirectly by using the tax code to take money from other people, or directly as explained by Senator Rand Paul.

P.S. Before Bernie, there was FDR, who was also misguided or malicious about the supposed right to other people’s money.

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I don’t know if Dr. Seuss would appreciate my title, which borrows from his children’s classic.

But given how I enjoy comparative rankings, I couldn’t help myself after perusing a new study from WalletHub that ranks states on their independence (or lack thereof).

Being a policy wonk, what really caught my attention was the section on government dependency, which is based on four criteria.

As you can see, the four factors are not weighted equally. The “federally dependent states” variable is considered four times as important as any of the other variables.

That’s important, to be sure, but is it really more important (or that much more important) than the other categories?

Moreover, I’m not sure the “tax freedom day” variable is a measure of dependency. What’s really captured by this variable, given the way the tax code doesn’t tax low-income people and over-taxes high-income people, is the degree to which state have lots of rich people or poor people. But that’s not a measure of dependence (particularly if the rich people stole money instead of earning it).

But I’m quibbling. I might put together a different formula with some different variables, but WalletHub has done something very interesting.

And if we look at their 25 least-dependent states, you see a very interesting pattern. Of the 10-most independent states, only three of them are Trump-voting red states (Kansas, Nebraska, and Utah).

The other seven are blue states. And some of them – such as Illinois, New Jersey, and California – are dark blue states.

And the #11 and #12 states also were Hillary states as well.

Which raises an interesting question. Why are voters in those states in favor of big government when they don’t disproportionately benefit from handouts?

Are they culturally left-wing, putting social issues above economic issues?

Or are they motivated by some issue involving foreign policy and/or defense?

Or maybe masochistic?

Beats me.

By the way, the WalletHub email announcing the report included a very interesting factoid that may explain why Hillary lost Pennsylvania.

Pennsylvania has the lowest percentage of government workers (local, state and federal), at 10.8 percent. Alaska has the nation’s highest percentage, at 25.1 percent.

Though I can’t see those details in the actual report, which is disappointing. I’d like to see a ranking of the states based solely on the number-of-bureaucrats criteria (we have data comparing countries, for those interested).

Now let’s shift to the states that have the highest levels of dependency.

If you look at the bottom of the final image, you’ll notice that it’s a reverse of the top-10. Seven of the most-dependent states are red states that voted for Trump.

Only New Mexico, Oregon, and Maine supported Hillary (and Trump actually won one-fourth of Maine’s electoral votes).

So this raises a separate question. Are red state people voting against their interests? Should they be voting for politicians who will further expand the size and scope of government so they can get even more goodies from Uncle Sam?

For what it’s worth, a leftist actually wrote a book entitled What’s the Matter with Kansas, which examined why the people of the Sunflower State weren’t voting for statism.

Well, part of the answer may be that Kansas is one of the most independent states, so perhaps the author should have picked another example.

But even if he had selected Mississippi (#49), I suspected the answer is that low-income people don’t necessarily think that it’s morally right to steal money from other states, even if the loot is laundered through Washington.

In other words, people is those states still have social capital or cultural capital.

It’s also possible, of course, that voters in red states with lots of dependency (at least as measured by WalletHub) are instead motivated by cultural issues or foreign policy issues.

There’s even a very interesting study from Professor Alesina at Harvard, which finds that ethnically diverse jurisdictions can be more hostile to redistribution (and homogeneous societies like the Nordic nations are more supportive of a large welfare state).

And since many of the red states at the bottom of the rankings also happen to be states with large minority populations, perhaps that’s a partial explanation.

Though California has a very large minority population as well, yet it routinely votes for more redistribution.

The bottom line is that we probably can’t draw any sweeping conclusions from this data.

Though it leaves me even more convinced that the best approach is to eliminate all DC-based redistribution and let states decide how much to tax and how much to spend. In other words, federalism.

P.S. I put together my own ranking of state dependency, based on a formula involving welfare usage and poverty. Vermont was the worst state and Nevada was the best state.

P.P.S. I also shared calculations based solely on the share of eligible people who signed up for food stamps. Interestingly, Californians rank as the most self-reliant. Maybe my predictions of long-run doom for that state are a bit exaggerated.

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There are a lot of positive things to be said about Norway.

In other words, Norway is a typical Nordic nation, with open markets, light regulation, free trade, and honest government. That’s the good news.

The bad news, at least from my perspective, is that Norway also is a typical Nordic nation in that it has a big welfare state.

But unlike the other Nordic nations, Norway also has a lot of oil. And, just like Alaska, it’s very easy to finance a big public sector when a government has access to a huge amount of petroleum-related revenue.

So does this make the country special? Is Norway a welfare-state Nirvana? In some sense, the answer is yes. As I’ve noted before, if a country wants a big welfare state, it makes a lot of sense to have very market-oriented policy in other areas to compensate. And if the country also happens to be rich with oil, that’s presumably not a bad combination.

But I would argue, of course, that Norway would be in better shape if the fiscal burden of government wasn’t so onerous.

And there’s growing evidence to validate my concerns. Bloomberg reports that falling oil prices are exposing problems with Norway’s extravagant welfare state.

More than a fifth of its working age population relied on unemployment or sick-leave benefits throughout 2016, according to a study by the Norwegian Labor and Welfare Administration, or NAV. With welfare payments up 3 percent in 2016, the growing dependence will likely make it harder for Norway to wean itself off oil and gas production. While the discovery of petroleum 50 years ago…helped make the world’s most generous welfare system possible — declining resources…means that the country will need to find other legs to stand on to keep up its standard of living.

Norway isn’t in any immediate danger, but I wonder whether it can still prosper when the oil runs out.

Simply stated, the welfare state may have eroded the country’s work ethic (something that’s also a problem in America).

That’s something that the stewards of the system readily admit. The agency’s acronym has even become a verb, to NAV, which means `being on benefits.’ “To uphold the Norwegian welfare system we need more people at work and not on passive benefits,” said Sigrun Vageng, the head of NAV, in an emailed answered to questions.

The problem of dependency has even spread to the richer parts of the country.

…dependency on state handouts now runs deeper. It also spread to the nation’s richest regions after the plunge in oil prices… Welfare payments in Rogaland, the regional center of the oil industry and home to Statoil ASA, rose a whopping 13 percent last year. Some 19 percent received benefits on average each month in Rogaland. In Oslo, it was 15 percent.

And once there are too many people riding in the wagon of government dependency, it’s not easy to rejuvenate a nation’s social capital.

…with an increasing share of its working age population on welfare benefits instead of paying taxes, the desired changes could prove a difficult task for whoever is in power. And many are also pulling out of the workforce altogether. The percentage of people of working age in employment fell to 70.6 percent in 2016, a 21-year low… “This comes as a big cost for the society, both through lost tax revenues and the direct expenses from social benefit payments,” said Jeanette Strom Fjaere, an economist at DNB.

On the bright side, Norway has set aside lots of oil money.

Norway…has over the past 20 years built up a sovereign wealth fund.

In other words, Norway is the opposite of Venezuela. It hasn’t squandered its oil wealth on bigger government.

On the dark side, it has reached the point where its sovereign wealth fund is shrinking rather than growing.

…the government last year started withdrawing cash for the first time.

Some people say this is similar to America’s Social Security system, which has a Trust Fund that is now being depleted. I reject that analogy for the simple reason that Norway’s fund is filled with real assets. The Social Security Trust Fund, by contrast, is nothing but a pile of IOUs (as even the Clinton Administration acknowledged).

But I’m digressing. Let’s close by observing that development economists sometimes write about a “resource curse” that exists when politicians feel they can impose lots of bad policy because it is easy to generate revenue by selling natural resources.

Some argue that Norway, with its commitment to the rule of law and markets, is the exception to the rule. Yes, its welfare state is excessive, but not because of oil. Indeed, there’s more welfare spending as a share of GDP in Denmark, Sweden, and Finland.

Though don’t forget that Norway’s GDP is boosted by all the oil wealth, so I’m guessing per-capita welfare outlays are higher than in neighboring countries (an important distinction, as illustrated by this data on government health spending).

So perhaps a version of the resource curse will hit Norway. But it won’t be because of a Venezuelan-style kleptocracy. Instead, it will be because the welfare state lures too many people into dependency. And when the oil money runs out, fixing that problem will be very difficult.

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I’m agnostic about President’s Trump’s budget. It has some good proposals to save money and control the burden of government spending, but after he got rolled by the big spenders earlier this year, I wonder if he’s serious about tackling wasteful government.

Nonetheless, I’m the libertarian version of Sisyphus. Except instead of trying to roll a boulder up a hill, I have the much harder task of trying to convince the crowd in Washington to shrink the size and scope of the federal government.

So I’ve written in favor of some of Trump’s proposals.

  • Shutting down the wasteful National Endowment for the Arts.
  • Defunding National Public Radio and the Corporation for Public Broadcasting.
  • Terminating the scandal-plagued Community Development Block Grant program.
  • Block-granting Medicaid and reducing central government funding and control.
  • Curtailing foreign aid payments that enable bad policy in poor nations.

Today, let’s add to this list by looking at what’s being proposed to control spending on food stamps.

Here are the key details from the Trump budget.

The Budget provides a path toward welfare reform, particularly to encourage those individuals dependent on the Government to return to the workforce. In doing so, this Budget includes Supplemental Nutrition Assistance Program (SNAP) reforms that tighten eligibility and encourage work… SNAP—formerly Food Stamps—has grown significantly in the past decade. …despite improvements in unemployment since the recession ended, SNAP participation remains persistently high. The Budget proposes a series of reforms to SNAP that close eligibility loopholes, target benefits to the neediest households, and require able-bodied adults to work. Combined, these reforms will reduce SNAP expenditures while maintaining the basic assistance low-income families need to weather hard times. The Budget also proposes SNAP reforms that will re-balance the State-Federal partnership in providing benefits by establishing a State match for benefit costs. The Budget assumes a gradual phase-in of the match, beginning with a national average of 10 percent in 2020 and increasing to an average of 25 percent by 2023.

This is not the approach I prefer. It would be better to create a block grant that slowly phases out over a number of years (as part of an overall plan to get the federal government out of the redistribution racket).

Nonetheless, the Trump proposal would save money for taxpayers. Here are the projected savings from the budget.

To put those numbers in context, the Congressional Budget Office projects that food stamp outlays will be about $70 billion per year if current policy is left in place.

Folks on the left are predictably warning that any restrictions on the program will cause poor people to go hungry.

Yet it seems that many of these people are happy to give up their food stamps in order to avoid productive activity. I’ve already discussed examples from Maine, Wisconsin, and Kansas. Now let’s look at a news report from Alabama.

Thirteen previously exempted Alabama counties saw an 85 percent drop in food stamp participation after work requirements were put in place on Jan. 1, according to the Alabama Department of Human Resources. …there were 5,538 adults ages 18-50 without dependents receiving food stamps as of Jan. 1, 2017. That number dropped to 831 – a decline of about 85 percent – by May 1, 2017. …Statewide, the number of able-bodied adults receiving food stamps has fallen by almost 35,000 people since Jan. 1, 2016. …Nationwide, there are about 44 million people receiving SNAP benefits at a cost of about $71 billion. The Trump administration has vowed to cut the food stamp rolls over the next decade, including ensuring that able-bodied adults recipients are working.

The same thing is happening in Arkansas.

Food stamp enrollment dropped by 25,000 people in Arkansas in 2016, after the state reinstated work requirements limited individuals to three months of benefits unless they found or trained for a job… Arkansas stopped granting waivers to work requirements January 1, 2016, and by April, 9,000 people were off of food stamps, also called Supplemental Nutrition Assistance Program (SNAP) benefits. Another 15,000 more lost their benefits between April and November… J.R. Davis, a spokesman for Hutchinson’s office, told Arkansas Online. “If you’re receiving these SNAP benefits, you can continue to receive those SNAP benefits, but you have to work if you’re between 18 and 49 — that’s a conservative philosophy that the governor believes.”

By the way, recipients often don’t need to actually work to satisfy the work requirements. They can simply be enrolled in some sort of job-training program, many of which are run by the government at no direct cost to participants.

Yet a huge proportion of these able-bodied adults would rather give up food stamps than participate. Maybe I’m heartless, but this suggests that they are not actually dependent on handouts.

Let’s close by augmenting our list of con artists (the Octo-mom, college kids, etc) who mooch off the food stamp program. As reported by the Daily Caller, one of Mayor de Blasio’s cronies in New York City pretended to be poor so he could steal money from taxpayers.

A religious leader and big-time fundraiser for Democratic New York City Mayor Bill de Blasio has been charged with welfare fraud for getting around $30,000 in food stamps. Yitzchok “Isaac” Sofer, a Hasidic religious leader, hosted a fundraiser for de Blasio’s 2013 mayoral campaign at the same time he was receiving food stamps illegally. …FBI…agents found that Sofer has been on food stamps since the beginning of 2010, and received more than $30,000 in benefits from the Supplemental Nutrition Assistance Program (SNAP) since 2012, according to court documents… On his food stamp application in 2012, Sofer claimed to make $250 a week, or about $13,000 a year…in 2012, however, he listed his income for 2011 at $100,000, and assets at more than $600,000, according to the criminal complaint. Sofer still has ties with de Blasio’s office.

Sounds like he’s a wonderful human being. Let’s call him Exhibit A for the decline of social capital in the United States (though certain fast food restaurants might be an even more ominous sign of eroding cultural norms).

P.S. Even if Trump isn’t sincere about wanting to control food stamp spending, I guess I shouldn’t be too depressed. After all, at least he’s not proposing to make the problem worse. By contrast, the Obama Administration actually bribed states to lure more people into food stamp dependency. And, if you can believe it, Obama’s Agriculture Secretary argued that food stamps stimulate the economy.

P.P.S. Speaking of states, here are the states with the most and least food stamp dependency, and here is a ranking of states looking at the ratio of recipients compared to the eligible population.

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A couple of years ago, filled with disgust at the sleazy corruption of the federal Leviathan, I put forth a simple explanation for what happens in Washington, DC.

I call it the “First Theorem of Government,” and I think it accurately reflects the real purpose and operation of government. Except I probably should have added lobbyists and contractors. And it goes without saying (though I probably should have said it anyhow) that politicians are the main beneficiaries of this odious racket.

I think this theorem has stood the test of time. It works just as well when Republicans are in charge as it does when Democrats are in charge.

But it doesn’t describe everything.

For instance, Republicans have won landslide elections in recent years by promising that they will repeal Obamacare the moment they’re in charge. Well, now they control both Congress and the White House and their muscular rhetoric has magically transformed into anemic legislation.

This is very disappointing and perhaps I’ll share some of Michael Cannon’s work in future columns about the policy details, but today I want to focus on why GOP toughness has turned into mush.

In part, this is simply a reflection of the fact the rhetoric of politicians is always bolder than their legislation (I didn’t agree with 98 percent of what was said by Mario Cuomo, the former Governor of New York, but he was correct that “You campaign in poetry. You govern in prose.”)

But that’s just a small part of the problem. The real issue is that it’s relatively easy for GOP politicians to battle against proposed handouts and it’s very difficult to battle against existing handouts. That’s because government goodies are like a drug. Recipients quickly get hooked and they will fight much harder to preserve handouts than they will to get them in the first place.

And that’s the basic insight of the “Second Theorem of Government.”

Here’s a recent interview on FBN. The topic is the Republican reluctance to fully repeal Obamacare. I only got two soundbites, and they both occur in the first half of the discussion, but you can see why I was motivated to put forth the new theorem.

Simply stated, I’m disappointed, but I’m more resigned than agitated because this development was so sadly predictable.

And here are a couple of follow-up observations. I guess we’ll call them corollaries to the theorem.

  1. You break it, you buy it – Government intervention had screwed up the system well before Obamacare was enacted, but people now blame the 2010 law (and the Democrats who voted for it) for everything that goes wrong with healthcare. Republicans fear that all the blame will shift to them if their “Repeal and Replace” legislation is adopted.
  2. Follow the money – What’s partly driving GOP timidity is their desire not to anger many of the interest groups – such as state governments, hospitals, doctors, insurance companies, etc – who benefit from various Obamacare handouts. That’s what is motivating criticism for politicians such as Ohio’s John Kasich and Alaska’s Lisa Murkowski.
  3. Don’t throw the baby out with the bathwater – The “Cadillac Tax” is the one part of Obamacare that’s worth preserving because it will slowly cut back on the distorting tax preferences that lead to over-insurance and third-party payer. For what it’s worth, the GOP plan retains that provision, albeit postponed until 2025.
  4. The switch in time that saved…Obamacare – I’m still upset that Chief Justice John Roberts (aka, the reincarnation of the 1930s version of Justice Roberts) put politics above the Constitution by providing the decisive vote in the Supreme Court decision that upheld Obamacare. If the law had been blocked before the handouts began, we wouldn’t be in the current mess.

For these reasons (as well as other corollaries to my theorem), I’m not brimming with optimism that we’ll get real Obamacare repeal this year. Or even substantive Obamacare reform.

P.S. Now you know what I speculated many years ago that Obamacare would be a long-run victory for the left even though Democrats lost many elections because of it. I sometimes hate when I’m right.

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