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Posts Tagged ‘Dependency’

In my speeches, I routinely argue that an aging population is one of the reasons why we need genuine entitlement reform.

A modest-sized welfare state may be feasible if a country has a “population pyramid,” I explain, Welfare State Wagon Cartoonsbut it’s a recipe for fiscal chaos when changing demographics result in fewer and fewer people pulling the wagon and more and more people riding in the wagon.

And if you somehow doubt that’s what is happening in America, check out this very sobering image showing that America’s population pyramid is turning into a population cylinder.

The bottom line is that demographics and entitlements will mean a Greek fiscal future for America and other nations.

To bolster my case (particularly for folks who might be skeptical of a libertarian message), I frequently cite pessimistic long-run fiscal data from international bureaucracies such as the IMF, BIS, and OECD.

I’m not a big fan of these organizations because they routinely endorse statist policies, but I figure skeptics will be more likely to listen to me if I point out that even left-leaning international bureaucracies agree the public sector is getting too large.

And now I have more evidence to cite. A new report from the International Monetary Fund explores “The Fiscal Consequences of Shrinking Populations.” Here’s what you need to know.

Declining fertility and increasing longevity will lead to a slower-growing, older world population. …For the world, the share of the population older than age 65 could increase from 12 percent today to 38 percent by 2100. …These developments would place public finances of countries under pressure, through two channels. First, spending on age-related programs (pensions and health) would rise. Without further reforms, these outlays would increase by 9 percentage points of GDP and 11 percentage points of GDP in more and less developed countries, respectively, between now and 2100. The fiscal consequences are potentially dire…large tax increases that could stymie economic growth.

Let’s now look at a couple of charts from the study.

The one of the left shows that one-third of developed nations already have negative population growth, and that number will jump to about 60 percent by 2050. And because that means fewer workers to support more old people, the chart on the right shows how the dependency ratio will worsen over time.

So what do these demographic changes mean for fiscal policy?

Well, if you live in a sensible jurisdiction such as Hong Kong or Singapore, there’s not much impact, even though birthrates are very low, because government is small and people basically are responsible for setting aside income for their retirement years.

And if live in a semi-sensible jurisdiction such as Australia or Chile, the impact is modest because personal retirement accounts preclude Social Security-type fiscal challenges.

But if you live just about anywhere else, in places where government somehow is supposed to provide pensions and health care, the situation is very grim.

Here’s another chart from the new IMF report. If you look at developed nations, you can see a big increase in the projected burden of government spending, mostly because of rising expenditures for health care.

At this stage, I can’t resist pointing out that this is one reason why the enactment of Obamacare was a spectacularly irresponsible decision.

But let’s not get sidetracked.

Returning to the IMF report, the authors contemplate possible policy responses.

They look at increased migration, but at best that’s a beggar-thy-neighbor approach. They look at increased labor force participation, which would be a very good development, but it’s hard to see that happening when nations have redistribution policies that discourage people from being in the workforce.

And the report is very skeptical about the prospects of government-induced increases in birthrates.

Boosting birth rates could slow down population aging and gradually reduce fiscal pressures. …However, a “birth rate” solution to aging is unlikely to work for most countries. The pronatalist policies seem to have only modest effects on the number of births, although they might affect the timing of births.

So that means the problem will need to be addressed through fiscal policy.

The IMF’s proposed solutions include some misguided policies, but I was surprisingly pleased by the recognition that steps were needed to limit the growth of government.

Regarding pensions, the IMF suggested higher retirement ages, which is a second-best option, while also suggesting private retirement savings, which is the ideal solution.

Reforming public pension systems can help offset the effects of aging. Raising retirement ages is an especially attractive option… For example, raising retirement ages over 2015–2100 by an additional five years (about 7 months per decade) beyond what is already legislated would reduce pension spending by about 2 percentage points of GDP by 2100 (relative to the baseline) in both the more and less developed countries. …increasing the role of private retirement saving schemes could be helpful in offsetting the potential decline in lifetime retirement income.

But if you recall from above, the biggest problem is rising health care costs.

And kudos to the IMF for supporting market-driven competition. Even more important, though, the international bureaucracy recognizes that the key is to limit the government’s health care spending to the growth of the private economy (sort of a a healthcare version of Mitchell’s Golden Rule).

…health care reform can be effective in containing the growth of public health spending. …There is past success in improving health outcomes without raising costs through promoting some degree of competition among insurers and service providers. …Containing the growing costs of health care would help reduce long-term fiscal risks. On average, health care costs are projected to increase faster than economic growth. …Assuming policies are able to keep the growth of health care costs per capita in line with GDP per capita, health care spending will increase at a slower rate, reflecting only demographics. Under this scenario, public health care spending pressures would be greatly subdued: by 2100, health spending would be reduced by 4½ percentage points of GDP in the more developed countries.

Interestingly, of all the options examined by the IMF, capping the growth of health care spending had the biggest positive impact on long-run government spending.

So what lessons can we learn?

Most important, the IMF study underscores the importance of the Medicaid reform and Medicare reform proposals that have been included in recent budgets on Capitol Hill.

In addition to making necessary structural changes, both of these reforms cap the annual growth of health care spending, which is precisely what the IMF report says will generate the largest savings.

So we’re actually in a very unusual situation. Some lawmakers want to do the right thing for the right reason at the right time.

But not all of them. Some politicians, either because of malice or ignorance, think we should do nothing, even though that will mean a very unpleasant future.

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Some issues never seem to get resolved. One would think, for instance, that leftists would be more cautious about pushing for a bigger welfare state given the fiscal crisis in Europe.

But we have folks like Bernie Sanders openly arguing we should be more like nations such as Denmark and Sweden.

To give some credit to the Vermont Senator, he’s at least smart enough to pick Scandinavian nations that compensate for the damaging impact of high taxes and excessive spending by being very market-oriented in all other respects.

Though I suspect he’d be horrified to know that he’s basically endorsing a laissez-faire approach to policies such as trade and regulation.

But let’s set aside the quirky candidacy of Bernie Sanders and focus on whether the United States, as a general rule, should be more like Europe.

To be sure, this is a very imprecise way to look at the issue since “Europe” includes very market-oriented countries such as Switzerland and the United Kingdom (both of which rank above the United States for overall economic freedom) as well as very statist nations such as Italy, France, and Greece.

But if you take the average of European nations, there’s no question that the continent would be further to the left than America on the statism spectrum.

So we should be able to learn some lessons by making general comparisons.

Let’s go to the other side of the world to get some insight on this issue. Oliver Hartwich is an economist with the New Zealand Initiative, and he looks at the negative consequences of the welfare state in his new publication, Why Europe Failed. He starts by sharing the grim data on how the burden of government spending has increased.

Government spending as a percentage of GDP increased dramatically across Europe all through the 20th century (Table 1). …Since the immediate post-World War II and reconstruction era, government spending has increased to unprecedented levels. The most extreme case is France where the state now accounts for well over half of the economy. …These spending rises have not been driven by the core areas of government spending of law and order, defence and certain public goods. …these European countries spent almost 30% of GDP on welfare alone, which is more than the total of government spending before World War II.

And here’s the Table he referenced.

Very similar to the data I shared back in 2013 for the simple reason that we’re both citing the superb work of Vito Tanzi.

Oliver adds some analysis, noting that Europe’s voters have sold themselves into dependency.

Bread and circuses – or panem et circenses in the Latin original – were the means of bribing the masses in ancient Rome. Modern Europe is witnessing a similar phenomenon. …Unfortunately, it is often overlooked that government can only bribe the people with their own money. …Buying European citizens’ loyalty for their mixed economy welfare states has effectively enslaved them.

He then shares lessons for New Zealand, but they’re also lessons for the United States.

…we have to make sure we do not repeat Europe’s mistakes. …be watchful of the rise of the welfare state. In Europe, the welfare state was a means of buying political power. Of course, the bribed electorate always paid for its own bribes. However, the arrangement worked for as long as new spending commitments could be financed through higher taxes, more debt, or indeed a combination of both. As government spending has now reached around 50% of GDP, and as the debt load stands at worrying levels, the European welfare state model has reached its limits. … we have the luxury of being three or four decades behind Europe’s demography curve. But this does not have to mean that we will be experiencing Europe’s problems 30 or 40 years later. It should mean that we have 30 or 40 years of finding ways to prevent a European replay by finding different answers to the challenges facing Europe today.

Here’s a short video of Hartwich discussing his work and its implications.

Now let’s look at another source of information. And we’ll actually deal with an argument being peddled by Bernie Sanders.

In an article for the Mises Institute, Ryan McMaken looks at the assertion that the United States has the highest poverty rate in the developed world.

Bernie Sanders claimed that the United States has the highest rate of childhood poverty. …UNICEF…is probably the source of Sanders’s factoid… Sanders probably doesn’t even know what he means by “major country”.

Though maybe the OECD is the source of Senator Sanders’ data. After all, as Ryan explains, some organizations are completely dishonest in that their supposed poverty data actually measures income distribution rather than poverty.

We get much more insight, though, once we have a look at what UNICEF means by “poverty rate.” In this case, UNICEF (and many other organizations) measure the poverty rate as a percentage of the national median household income. …The problem here, of course, is that…the median income in the US is much higher than the median income in much of Europe. So, even someone who earns under 60% of the median income in the US will, in many cases, have higher income than someone who earns the median income in, say, Portugal.

McMaken then crunches the data to see what actually happens if you compare the poverty level of income in the United States to overall income in other industrialized nations.

So what’s the bottom line from this data?

The answer is that it’s better to be a “poor” person in the United States than an average person in many European nations.

…a person at 60% of median  income in the US still has a larger income than the median household in Chile, Czech Rep., Greece, Hungary, Portugal, and several others. And the poverty income in the US is very close to matching the median income in Italy, Japan, Spain, and the UK.

In other words, Bernie Sanders is wrong, UNICEF is wrong, and the OECD is wrong.

Poverty in the United States is not high.

Indeed, experts who have looked at actual measures of deprivation have concluded that the real poverty rate in the United States is relatively low. Even when compared with the more market-oriented countries in Northern Europe.

Last but not least, let’s look at one more Europe-America comparison, just in case the aforementioned data wasn’t sufficiently compelling. Check out this map showing how many young adults still live with their parents (h/t: Paul Kirby).

As pointed out above, Europe is not monolithic. The Northern European economies lean more toward free markets than the Southern European economies, so this map presumably captures some of that difference (though I imagine culture plays a role as well).

But for purposes of today’s analysis, our message is more basic. Simply stated, the United States should not be more like Europe. Instead, we should seek to be more like Hong Kong and Singapore.

Assuming, of course, that the goal is to have policies that promote prosperity.

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Federal government redistribution programs don’t work.

We’ve ignored the lessons of history about the dangers of government intervention, so is it any mystery that we now have millions of people mired in dependency.

Yet some people in Washington want to double down on failure.

Chris Edwards of the Cato Institute, joined by Veronique de Rugy of the Mercatus Center, are understandably distressed that so many politicians – on both sides of the aisle – want to expand the amount of money being redistributed by the federal government. In a new Tax and Budget Bulletin, they make a very compelling case that the so-called earned income tax credit should be abolished rather than expanded.

Here’s the big picture.

…the earned income tax credit (EITC)…is a huge program. In 2015 it will provide an estimated $69 billion in benefits to 28 million recipients. The EITC is the largest federal cash transfer program for low-income households. …While the EITC is administered through the tax code, it is primarily a spending program. The EITC is “refundable,” meaning that individuals who pay no income taxes are nonetheless eligible to receive a payment from the U.S. Treasury. Of the $69 billion in benefits this year, about 88 percent, or $60 billion, is spending.

Now let’s look at some of the details. As is so often the case with government programs, the EITC started small but then quickly expanded.

In the early 1970s, policymakers considered ways to combat the anti-work effects of the growing welfare state. But rather than reining in the welfare state, they decided to expand it in 1975 by enacting the EITC. The credit was aimed at reviving work incentives… Initially, it was a 10- percent wage credit with a maximum value of $400… The EITC is a much larger program today than in 1975. It has credit rates up to 45 percent and a maximum credit of $6,242 in 2015. … expansions in 1986, 1990, 1993, and 2009 greatly increased the costs. …The EITC has increasingly become a spending program over time. The refundable portion of benefits has risen from 70 percent in 1990 to about 88 percent today.

Here’s a chart from their study showing both the growing number of dependents and the growing burden on taxpayers.

I have to imagine that this makes the EITC the fastest-growing redistribution program in Washington.

Chris and Veronique then list some of the reasons why the EITC is a harmful form of income redistribution.

First, it drives down wages, which hurts low-skilled workers who can’t get EITC payments while also providing undeserved subsidies for employers.

One side effect of the EITC is that, to the extent it works by pushing down market wages, it ends up hurting low earners who receive no EITC or a small EITC— mainly childless workers. The labor-supply effect of the EITC also means that the program acts partly as a subsidy to businesses that hire lower-skilled workers because they are able to pay reduced market wages.

Second, while supporters correctly argue that the EITC encourages poor people to enter the labor force (the handouts are tied to earning money), they conveniently overlook the fact that the program penalizes people who want to work more hours and climb the economic ladder.

…people have an incentive to reduce hours worked in both the flat and phase-out ranges of the credit. As it turns out, about three-quarters of people taking the EITC are in those two ranges where the work incentives are negative. …Consider a single parent with two children, as in Figure 2. She would have a disincentive to increase her work effort in the large income range from $13,870 all the way to $44,454.

Here’s a table from the report. The last column shows the “phase-out rate,” which is akin to a marginal tax rate on workers as they seek to earn more income. Keep in mind that these workers, depending on their incomes, will also be paying the payroll tax and the income tax.

So it’s easy to see why poor people face very high marginal tax rates that discourage them from additional productive effort.

Third, the EITC is riddled with fraud.

The EITC error rate has been more than 20 percent since at least the 1980s. The Internal Revenue Service reports that the EITC error and fraud rate in 2014 was 27 percent, which amounted to $18 billion in overpayments.

Though I guess we shouldn’t be surprised. There’s lots of Medicare fraud, Medicaid fraud, Food Stamps fraud,  and disability fraud, so this just seems to be an inevitable additional cost when governments spend money.

Fourth, the EITC is absurdly complex (like other parts of the tax code).

The EITC is a particularly complex credit. Benefits change as income rises, with four phase-in rates and three phase-out rates. It is adjusted by filing status and number of children. The rules regarding child eligibility are complex due to issues such as separation and divorce. There are rules and calculations regarding earned income, investment income, and adjusted gross income. …For individuals, the IRS guidebook for the EITC (Publication 596) is 37 pages long. But the rules are so complicated that more than two-thirds of all tax returns claiming the EITC are done by paid preparers.

Fifth, like all other forms of government spending, it’s important to calculate the economic burden that is imposed when resources are taken from the productive sector of the economy and transferred to government.

The process of extracting taxes damages the economy because it causes people to reduce their productive activities, such as working and investing. The harm from the behavioral responses to higher taxes is called “deadweight losses.” For the federal income tax, studies have found, on average, that the deadweight loss of raising taxes by a dollar is roughly 30 to 50 cents. … expanding the EITC—or any other federal spending program—would ultimately mean higher taxes, and thus more tax distortions and higher deadweight losses.

So what’s the bottom line?

Well, since great minds think alike, you won’t be surprised to see that Chris and Veronique also want to get the federal government out of the redistribution racket.

The EITC should not be expanded. Indeed, the best long-term solution would be to end the EITC, while also cutting other welfare programs… The credit creates a modest increase in workforce participation by single mothers, but that benefit is outweighed by the work disincentives during the phase-out range, billions of dollars of errors and fraud, substantial paperwork costs, and the damage caused by the higher taxes needed to fund the program.

Amen.

As I’ve repeatedly explained, redistribution programs are bad news for both poor people and taxpayers.

Yet our statist friends want to make the current system worse, with proposals for a government-guaranteed income. And they’re willing to lie to advance their agenda.

P.S. Click here for a video that explains why free markets are better than redistribution if you really want to help the less fortunate.

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It’s no exaggeration to say that a nation’s long-run vitality and prosperity are correlated with the spirit of independence and self-reliance among its people.

Simply stated, if too many people thinks it’s okay to ride in the wagon of government dependency, that a troubling sign that social or cultural capital has eroded.

Government policy obviously plays a role, both because politicians create various redistribution programs and also because they can set rules that help determine whether there is any stigma for relying on taxpayers.

Some lawmakers even think recipients should be publicly identified, in part to weed out fraudsters and also to discourage dependency. Here are some passages from a story in the Washington Post.

If you receive government assistance in the state of Maine, Lewiston Mayor Robert Macdonald thinks the public has a right to know about it. …Macdonald said a bill will be submitted during Maine’s next legislative session “asking that a Web site be created containing the names, addresses, length of time on assistance and the benefits being collected by every individual on the dole.” He added: “After all, the public has a right to know how its money is being spent.” …Macdonald told the Portland Press Herald that …“I hope this makes people think twice about applying for welfare.” …Publicly posting personal information, he said, could encourage people to go after those “gaming the system.”

Needless to say, this approach causes great consternation for some folks on the left.

Here’s some of what Dana Milbank wrote in his Washington Post column.

Rick Brattin, a young Republican state representative in Missouri, has…introduced House Bill 813, making it illegal for food-stamp recipients to use their benefits “to purchase cookies, chips, energy drinks, soft drinks, seafood, or steak.” …This is less about public policy than about demeaning public-benefit recipients. The surf-and-turf bill is one of a flurry of new legislative proposals at the state and local level to dehumanize and even criminalize the poor.

I admit it’s paternalistic, but if taxpayers are paying for someone else’s food, then shouldn’t they have the right to insist that recipients don’t buy junk food?

My view, of course, is that the federal government shouldn’t be in the business of redistributing income, but that’s an issue we discussed a few days ago.

Milbank also is upset that some lawmakers don’t want welfare benefits spent on frivolous things.

…the Kansas legislature passed House Bill 2258, punishing the poor by limiting their cash withdrawals of welfare benefits to $25 per day and forbidding them to use their benefits “in any retail liquor store, casino, gaming establishment, jewelry store, tattoo parlor, massage parlor, body piercing parlor, spa, nail salon, lingerie shop, tobacco paraphernalia store, vapor cigarette store, psychic or fortune telling business, bail bond company, video arcade, movie theater, swimming pool, cruise ship, theme park, dog or horse racing facility, pari-mutuel facility, or sexually oriented business . . . or in any business or retail establishment where minors under age 18 are not permitted.” …another state that prohibits welfare funds for cruise ships is true-blue Massachusetts.

Again, I have to ask why it’s unreasonable for taxpayers to put limits on how welfare funds are spent?

Setting aside my desire to get Washington out of the business of maintaining a welfare state, shouldn’t the people paying the bills have some right to decide whether they want recipients going to massage parlors and casinos?

Let’s now look at a very real-world example of how our friends on the left are trying to make dependency easier and more respectable.

They now want to make it easier and less discomforting for folks to get food stamps. Here are some excerpts from a story in the Daily Caller.

A report from the U.S. Department of Agriculture (USDA) looked at whether it should get rid of in-person interviews for those who apply to receive benefits under the Supplemental Nutrition Assistance Program (SNAP), which is commonly known as food stamps. …the USDA with the Food and Nutrition Service (FNS) conducted a limited real-world test to see if the in-person interviews are needed.

The report looks at test cases in Utah and Oregon to gauge the impact on “client and worker outcomes,” but obviously didn’t consider the impact on taxpayers.

The report says that the increase of participants from 17 million in 2000 to nearly 47 million recipients in 2014 is one reason why the application process should be made easier and less costly, but others have argued that more relaxed entry requirements into the program are the very reason it has expanded so much.

The latter group is correct. If people can sign up for freebies over the phone, with very weak verification procedures, then it should go without saying that the burden on taxpayers will grow even faster.

And for purposes of our discussion today, this proposal would make it even easier for people to become dependents. The government already has turned food stamps into a welfare-state version of a debit card, which means that recipients feel less conspicuous about relying on taxpayers. Now they wouldn’t even have to visit a food stamp office when first signing up for the system!

The bottom line is that it will be very healthy for our nation if most people feel reluctant and/or embarrassed to become wards of the state.

Fortunately, there are some folks who already have this self-reliant streak. Here’s a blurb from some analysis by Angela Rachidi for the American Enterprise Institute.

…research shows that a sizeable number of eligible people do not participate in SNAP because they do not want government assistance. According to a 2003 USDA report on the subject, 27% of eligible non-participants indicated that they would not enroll in the program even if they were assured they were eligible. The report cited the desire to feel independent as the primary driver in not wanting benefits.

Thank goodness there are still a non-trivial number of Americans who don’t want to mooch off taxpayers.

By the way, you may be shocked to learn that the people of California are the least likely to sign up for food stamps.

Too bad the folks in Maine, Oregon, Vermont, and Washington don’t have the same spirit of self reliance.

Heck, Vermont’s already famous for having the top spot in the Moocher Index.

P.S. While Dana Milbank apparently thinks there shouldn’t be any restrictions on food stamps, most taxpayers probably won’t be pleased to see these examples of their money being misspent.

Then Mr. Milbank can start investigating other examples of fraud, starting with Medicaid and the disability program.

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As we get deeper into an election season, many politicians feel compelled to discuss how to deal with poverty.  And some of them may even be serious about trying to improve the system.

This hopefully will lead to big-picture discussions of key issues, such as why the poverty rate stopped falling in the mid-1960s.

If so, it helps to look past the headline numbers and actually understand the scope of the problem.

Nicholas Eberstadt of the American Enterprise Institute explains that the official poverty data from the Census Bureau overstates the number of poor people.

…the official poverty rate is a positive embarrassment today. The poverty rate manifestly cannot do the single thing it was intended for: to count the number of people in our country subsisting below a fixed and absolute “poverty line.” Among its many other shortcomings, this index implicitly assumes that a family’s annual reported income is identical to its spending power… But income and spending patterns no longer track for the lowest income strata in modern America. …the bottom quintile of US households spent 130% more than their reported pretax income. The disparity between spending and income levels for poorer Americans has been gradually widening over time.

Though the shortcomings of the Census Bureau sometimes largely don’t matter because advocates of bigger government arbitrarily choose different numbers that further exaggerate the degree of poverty in the United States.

In a column for National Review, the Heritage Foundation’s Robert Rector exposes the dishonest tactic (promoted by the Obama Administration and used by the OECD) of measuring income differences instead of actual poverty.

The Left often claims that the U.S has a far higher poverty rate than other developed nations have. These claims are based on a “relative poverty” standard, in which being “poor” is defined as having an income below 50 percent of the national median. Since the median income in the United States is substantially higher than the median income in most European countries, these comparisons establish a higher hurdle for escaping from “poverty” in the U.S. than is found elsewhere.

Based on honest apples-to-apples numbers, the United States is just as capable as other developed nations of minimizing material deprivation.

A more meaningful analysis would compare countries against a uniform standard. …Garfinkel and his co-authors do exactly that. They measure the percentage of people in each country who fall below the poverty-income threshold in the U.S. ($24,008 per year for a family of four in 2014). The authors reasonably broaden the measure of income to include “non-cash” benefits such as food stamps, the earned-income tax credit, and equivalent programs in other nations. They also subtract taxes paid by low-income families, which are heavy in Europe. …the differences in poverty according to this uniform standard were very small. For example, the poverty rate in the U.S. was 8.7 percent, while the average among other affluent countries was around 7.6 percent. The rate in Germany was 7.3 percent, and in Sweden, it was 7.5 percent. Using a slightly higher uniform standard set at 125 percent of the U.S. poverty-income thresholds, the authors find that the U.S. actually has a slightly lower poverty rate than other affluent countries.

These numbers probably disappoint leftists who want to believe that European nations are somehow more generous and more effective in dealing with poverty.

But Robert explains that advocates of smaller government and individual responsibility should not be happy because the federal government’s profligacy isn’t helping poor people become self sufficient.

It is, of course, a good thing that left-wing claims of widespread deprivation in the U.S. are inaccurate. But government welfare policy should be about more than shoveling out a trillion dollars per year in “free” benefits. When President Lyndon Johnson launched the War on Poverty, he sought to decrease welfare dependence and increase self-sufficiency: the ability of family to support itself above poverty without the need for government handouts. By that score, the War on Poverty has been a $24 trillion flop. While self-sufficiency improved dramatically in the decades before the War on Poverty started, for the last 45 years, it has been at a standstill.

Robert Doar and Angela Rachidi of the American Enterprise Institute make a very similar point about the welfare state failing to promote self sufficiency.

Recently released data show that the official poverty rate was 14.8% in 2014, only slightly below the 15% in poverty in 1970. And this is despite large increases in federal spending on anti-poverty programs.  Spending on these programs has increased almost tenfold in constant dollars since the early 1970s and increased from 1.0% of GDP in 1972 to 3.8% in 2012… Where does this leave us? If helping people achieve self-sufficiency and be free of government assistance is the goal, the safety net has largely failed. But if reducing material hardship is the goal, it performs well.

I would make a very important change to the above passage. Doar and Rachidi write that the poverty rate hasn’t declined “despite large increases” in supposed anti-poverty spending. Based on the evidence, it would be more accurate to say that poverty has stayed high “because of large increases.”

Simply stated, when you subsidize something, you get more of it.

Anyhow, all this matters for three reasons.

  • First, dependency is bad news for poor people, particularly when government subsidizes multi-generational poverty and unwed motherhood.
  • Second, the current welfare state is bad news for taxpayers, who are financing a $1 trillion income-redistribution system that fails in its most important task.
  • Third, the current system is bad news for the economy because millions of people are bribed to be out of the labor force, thus lowering potential output.

Let’s summarize what we know. The official poverty rate exaggerates the actual number of poor people by failing to properly measure income, but that may not matter much since proponents of more redistribution prefer to use dishonest numbers that are even more distorted.

And we also know that the welfare state is capable of redistributing lots of money, but also that it does a terrible job of promoting self sufficiency. Indeed, it’s almost certainly the case that massive levels of redistribution have had a negative effect.

So what’s the solution to this mess?

Folks on the left want even more of the same. But why should we expect that to have any positive effect? Indeed, it’s more likely that an expansion of the welfare state will simply lure more people into lives of sloth and dependency.

Some people on the right want to replace the welfare state with a guaranteed or basic income. This has some theoretical appeal, but it is based on the very shaky assumption that politicians could be convinced to completely repeal all existing redistribution programs.

Which is why the most prudent and effective step is to simply get the federal government out of the business of redistributing income and let state and local governments decide how best to deal with the issue.

This federalism-based approach has several advantages.

  1. Since redistributing income is not listed as an enumerated power, ending Washington’s role would be consistent with the Constitution.
  2. This federalism model already has been successfully tested with welfare reform in the 1990s and it also is the core feature of proposals to block grant Medicaid.
  3. A state-based model is far more likely to result in the degree of experimentation, diversity, and innovation needed to discover how best to actually promote self sufficiency.

By the way, this federalist system may begin with block grants from the federal government (i.e., transfers of cash to state and local governments), but the ultimate goal should be to phase out such subsidies so that state and local governments are responsible for choosing how to raise funds and how to allocate them.

And once welfare is truly a responsibility of state and local governments, we have good evidence that this will lead to better policy.

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Back in 2013, my colleagues at the Cato Institute, Michael Tanner and Charles Hughes, released a study looking at the value of welfare programs in various states.

The most shocking finding was that the overall package of welfare benefits was greater than the median salary in eight states!

And more than 80 percent of the median salary in half the states.

That sounds like a hammock, not a safety net. No wonder taxpayers feel like they’re getting ripped off.

This system has been bad for taxpayers and bad for poor people.

Now Mike and Charles have a new study that looks at excessive welfare handouts in Europe. They start with an elementary observation about how people can be trapped in dependency when government benefits are too high.

If welfare benefits become too generous, they can create a significant incentive that encourages recipients to remain “on the dole” rather than to seek employment. Benefits in European Union (EU) countries vary widely, but in many of them, benefits are high relative to what an individual could expect to earn from a low-wage or entry-level job.

And he highlights some of his main finding.

■ Welfare benefits in nine EU countries exceeded €15,000 ($18,200) per year. In six countries, benefits exceeded €20,000 ($24,300). Denmark offers the most generous benefit package, valued at €31,709 ($38,558).

■ In nine countries, welfare benefits exceeded the minimum wage in that country.

■ Benefits in 11 countries exceeded half of the net income for someone earning the average wage in that country, and in 6 countries it exceeded 60 percent of the net average wage income

Since poor people can be just as rational as rich people, think about the perverse incentive structure this creates. If you work, you give up leisure time and expose yourself to all sorts of additional costs, such as transportation, childcare, and taxes.

So why endure those headaches when you can relax on the dole?

Let’s look at some charts from the study. We’ll start with one on the overall fiscal burden of the welfare state.

As you can see, nations in Northern Europe generally have greater levels of income redistribution, measured as a share of GDP.

Very depressing numbers, particularly when you consider that European nations used to have small governments with very little redistribution.

But this data only tells us about the overall burden on taxpayers. It doesn’t give us much information about the incentives of poor people.

So now let’s look at a chart showing potential welfare benefits for a single parent with two children.

Wow, Denmark must be a paradise for slackers. No wonder “Lazy Robert” is so happy.

Though you have to wonder how long the system can survive. The number of people producing wealth has been stagnant while the number of people riding in the “party boat” has been climbing.

Sooner or alter, those trend lines will cause big problems.

You’ll notice that the United States also is included in the above chart and that handouts in America are not that different than they are on the other side of the Atlantic Ocean.

Indeed, the value of redistribution programs in the United States is greater than what’s provided in France and only slightly behind the value of such programs in Sweden.

The numbers are even more remarkable when you look at American states compared to European nations.

Wow, Lazy Robert should move to Hawaii!

But it’s not just Hawaii. Many other states, mostly from the northeast (and California of course), also provide excessive benefits.

No wonder a record number of Americans are trapped in poverty.

Let’s now shift gears and look at a very interesting finding from the Cato study. Mike and Charles uncovered an inverse relationship between handouts and labor regulations.

In looking at the relationship between welfare and work, one additional factor should be considered. There appears to be an inverse relationship between the generosity of welfare benefits and the rigidity of labor-market regulations. That is, those countries with high benefits tend to have more flexible labor markets, and vice versa. …Nordic countries, in addition to Germany, the Netherlands, and a few others, have chosen to pursue what is often referred to as the “Nordic,” “Danish,” or “flexicurity” model. That version of the welfare state combines a largely deregulated labor market, one that makes it easier to hire and fire workers, with a generous safety net to cushion workers from the consequences of those policies. …In contrast, in much of southern Europe, countries such as Italy, Portugal, and Spain have smaller safety nets but much more tightly regulated labor markets. They effectively shift much of the social cost to employers.

While these nations obviously have different approaches, the bottom line is still similar.

…in southern Europe, the welfare benefits may not deter work to the same extent, but finding a job may be more difficult. Then again, in countries with flexicurity, it might be easier to find a job, but benefits and effective marginal tax rates are high enough to discourage workers from doing so. The result in both models is that workers are more likely to remain on welfare and out of work for longer than they otherwise would.

P.S. I’m actually in Hawaii as I’m writing this, so the results from the last chart got me thinking. Hawaii is one of the worst states in the Moocher Index and it does have relatively high welfare benefits, so you won’t be shocked to learn there’s a very high tax burden. But a surprisingly small share of the population utilizes food stamps, and the number of welfare bureaucrats is amazingly low.

P.P.S. Left-wing international bureaucracies such as the Paris-based Organization for Economic Cooperation and Development fabricate deliberately dishonest numbers when advocating more welfare spending in the United States. But we’d be much better off if we learned from the success of welfare reform in the 1990s and got the federal government out of the business of income redistribution.

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At the risk of oversimplifying, there are two types of statists.

The first type is generally insincere and simply views bigger government and increased dependency as a strategy to obtain and preserve political power. Most inside-the-beltway leftists in Washington are in this category.

The second type genuinely cares about the less fortunate but makes the mistake of thinking that good intentions somehow lead to good results. You could call these people the Pope Francis leftists.

As you might imagine, there’s very little hope of persuading the first category of statists. You could show them all the data and evidence in the world, for instance, that a flat tax would boost prosperity, and they’ll simply shrug and tell you to jump in a lake because genuine tax reform would reduce the power and influence of Washington’s political elite.

But the second group of statists should be persuadable. That’s why I share so many comparisons of nations with smaller government and freer markets versus countries with bigger government and more intervention. I want open-minded folks on the other side to see how good policy leads to better economic performance, particularly since the poor will be big beneficiaries. That should be compelling, especially when combined with the data on how the welfare state simply traps poor people in government dependency.

I then try to augment that macro data with specific micro examples of how policies that seem compassionate actually backfire.

Is it compassionate, for instance, to increase the minimum wage if that means low-skilled workers can’t get jobs?

Alternatively, is it compassionate to extend unemployment benefits if that means people are less likely to get jobs?

Anyhow, all this discussion is simply to provide some context for a very good piece on the pitfalls of John Kasich and so-called compassionate conservatism.

In her Wall Street Journal column, Kimberly Strassel takes aim at Governor Kasich and other folks who think big government is somehow good for the poor.

…here’s one way to divide the arena: small-government reformers and big-government surrenderists. That debate is at the center of a bigger GOP meditation on how to better appeal to the poor and minorities. Mr. Kasich has emerged as the most eloquent and compelling spokesperson for the go-big camp. …his theme: that it’s OK to be “conservative” and have a “big heart.” It’s his way of excusing his decision to embrace ObamaCare’s expansion of Medicaid, putting that welfare program on track to consume 50% of Ohio’s operating budget in 2016.

Needless to say, Ms. Strassel doesn’t think Kasich’s embrace of Obamacare demonstrates a big heart.

Instead, it’s just the latest manifestation of the big-government conservatism that failed so badly last decade.

This is “compassionate conservatism”—or at least a bastardized version of it. George W. Bush first used that phrase to explain how conservative policies made everyone better off. But it would later turn into a license for Republicans to embrace government for their own conservative ends. Giant new education spending was needed to create school “accountability”; a new Medicare drug entitlement would create health-care “competition;” green-energy subsidies bolstered “national security.” …The philosophy got a revamp in the past year in the self-styled “reformicon” movement. …it’s Compassionate Conservatism 2.0.

And what happens when you cede the moral high ground and agree with the statists that bigger government somehow benefits people?

…underpinning the entire compassionate-conservative movement is a glum surrender to the entitlement state. The left has won; all that remains is to argue that conservative big-government is better managed than liberal big-government.

Ms. Strassel is much more impressed with what she calls the “small-government reformers.”

…there is another approach to compassion. It’s the version made popular by Jack Kemp, and embraced by House Ways and Means Chairman Paul Ryan—and a growing list of converts. It holds that there is nothing whatsoever compassionate about consigning low-income Americans to a government health-care system that delivers second-class outcomes. There’s nothing compassionate about making today’s working poor pay into a bleeding Social Security system… There’s nothing compassionate about propping up a federally run poverty industrial-complex that spends most of its money on itself. The Kemp-Ryan view knows that government is the problem, not the answer—not in any form. The answer is to devolve the money and power back to states and communities…spreading the gospel of smaller government, in the name of helping those most vulnerable.

Amen. Kemp was a hero in the battle to lower confiscatory tax rates, leading to a victory that was enormously successful in the 1980s. And Ryan deserves endless praise for his efforts to reform entitlement programs such as Medicare and Medicaid.

This is the approach that offers the most hope to the less fortunate because it enables growth and job creation.

Big-government conservatism, by contrast, undermines economic dynamism by acquiescing to the idea of an ever-growing state.

By the way, none of this suggests that John Kasich is universally bad on policy or that Paul Ryan is universally good. Kasich, after all, was Chairman of the House Budget Committee in the 1990s when genuine spending restraint led to a balanced budget. And Paul Ryan’s otherwise good ideas on tax reform have been marred by occasional flirtation with a value-added tax.

What ultimately matters is whether a politician is – on balance – pushing to shrink the size and power of the federal government. So ultimately it’s an imperfect process of deciding which lawmaker is 75 percent good and which one is 65 percent good (or, in too many cases, comparing one who is 10 percent good with one who is 5 percent good).

P.S. If “Libertarian Jesus” is correct and genuine compassion is defined as helping others with your own money, then Americans have much bigger hearts than their European counterparts.

P.P.S. Speaking of compassion, here’s an anti-Obama joke featuring some Pennsylvania cops.

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For both policy reasons and narcissism, I wish the most popular item ever posted on International Liberty was Mitchell’s Golden Rule.

But that guide to sensible fiscal policy isn’t even in the top 70.

Welfare State Wagon CartoonsInstead, my most-read post is a set of cartoons showing how the welfare state inevitably metastasizes as more and more people are lured into the wagon of government dependency.

I suspect these cartoons are popular because they succinctly capture and express a concern that is instinctively felt by many people.

But instinct isn’t the same as evidence.

So I’ve shared various estimates of America’s growing dependency problem, though I’ve also warned that these numbers don’t necessarily tell the full story.

Given my dissatisfaction with the current estimates, I was very interested to see a new attempt to measure the degree to which nations are undermined by ever-expanding redistribution. Writing for the Mises Institute and using Greece as an example, Justin Murray analyzes the dependency problem.

…without understanding how Greece got into this problem in the first place and identifying the root cause of an over-indebted society, any plan or solution has a high probability of failure. …Greece, being a nation with a high tax rate on production and a high subsidy rate on public assistance, will generate a population that finds greater preference toward public assistance and away from productive labor.

Mr. Murray puts together a new statistic called “implied public reliance,” which is designed to measure how many strangers each worker is supporting.

…we must identify a nation’s currently employed population. Next, all public sector employees are removed to obtain an adjusted productive workforce. …this productive population is divided into the nation’s total population to identify the total number of individuals a worker is expected to support in his country. …the average household size is subtracted from this result to get the final number of individuals that an individual must support that are not part of their own voluntary household. In other words, how many total strangers is this individual providing for? …Greece…is currently expecting each employed person to support 6.1 other people above and beyond their own families.

And here’s a chart from his article, showing the IPR measures for 18 countries.

I’m not surprised that Greece has the worst IPR number, and it’s also no surprise that nations such as Italy and France do poorly.

Though I am surprised that Canada scores so highly. And Denmark’s decent performance doesn’t make sense considering the data I shared a few months ago.

Mr. Murray then looks at this data from a different perspective.

To demonstrate how difficult it is to change these systems within a democratic society, we just have to look at the percentage of the population that is reliant on public subsidy.

And here are those numbers.

Wow. It’s hard to be optimistic after looking at these shocking numbers.

Moreover, I suspect we’ll remain pessimistic even if Mr. Murray’s initial numbers are revised as he refines his methodology.

And here’s the most depressing part of the analysis.

The numbers imply that 67 percent of the population of Greece is wholly reliant on the Greek government to provide their incomes. With such a commanding supermajority, changing this system with the democratic process is impossible as the 67 percent have strong incentives to continue to vote for the other 33 percent — and also foreign entities — to cover their living expenses.

From a public policy perspective, here’s the real challenge: How do you convince voters to back away from the public trough?

In my humble opinion, the only possible solution is to reject any and all bailouts and force Greece to balance its budget overnight. With luck, that may be such a sobering experience that the Greek people might learn that a society based on mooching and looting doesn’t work.

Not that I’m optimistic. Which is why I’ve been worried for more than five years that we’ll eventually see a loss of democracy in some European nations.

P.S. The second-most viewed post of all time is a parable about buying beer, which is actually a lesson about the dangers of so-called progressive taxation. And the third-most viewed post is a parable about applying socialist principles in a classroom, which is a lesson about the dangers about the dangers of redistribution.

P.P.S. On the topic of dependency, here’s what nursery tales would look like if they were written by statists.

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I’ve written over and over again that the federal government’s so-called War on Poverty has been a disaster.

It’s been bad news for taxpayers, of course, but it’s also been bad news for poor people since they get trapped in dependency.

So what’s the alternative? Well, we actually can learn a lot from history.

Let’s start on the other side of the Atlantic. Professor Tyler Cowen of George Mason University has a fascinating video (which is part of a must-watch series) looking at the English debate in the 1830s on how best to deal with poverty.

Now let’s cross the ocean and look at the American experience.

Professor Thomas West of Hillsdale College has researched welfare policies in the early days of the United States.

Here are some of his key findings.

…government-funded welfare, not to mention generous private charity, has existed throughout American history. …The real difference between the Founders’ welfare policies and today’s is over how, not whether, government should help those in need.

Government was involved, but only at the local level, and assistance was a two-way street.

From the earliest colonial days, local governments took responsibility for their poor. However, able-bodied men and women generally were not supported by the taxpayers unless they worked. They would sometimes be placed in group homes that provided them with food and shelter in exchange for labor. Only those who were too young, old, weak, or sick and who had no friends or family to help them were taken care of in idleness.

Here’s more.

Welfare is kept local so that the administrators of the program will know the actual situations of the persons who ask for help. This will prevent abuses and freeloading. …A distinction between the deserving and undeserving poor is carefully observed. Able-bodied vagabonds get help, but they are required to work in institutions where they will be disciplined. Children and the disabled, on the other hand, are provided for, not lavishly but without public shame. …Poor laws to support individual cases of urgent need were not intended to go beyond a minimal safety net. Benefit levels were low.

Interestingly, Professor West writes about Benjamin Franklin’s low opinion of England’s welfare system (as it existed before the 1830s, obviously), which was much more generous.

Here’s some of what Franklin wrote, as cited by West.

I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. In my youth I travelled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.

This was not an unusual perspective.

Franklin’s understanding of the welfare paradox—that aid to the poor must be managed carefully lest it promote indolence and therefore poverty—was shared by most Americans who wrote about and administered poverty programs until the end of the 19th century. …policies were intended to help the poor in ways that did not violate the rights of taxpayers or promote irresponsible behavior.

Thomas Jefferson definitely agreed, as seen in this quote included in Professor West’s analysis.

To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it.

If you remember the discussion of “indoor” and “outdoor” relief from the video about the English welfare system, you won’t be surprised to learn similar issues were present in the United States.

As the poor population grew, many concluded that “outdoor relief” was leading people to look on welfare as an entitlement and creating a class of permanent dependents. Consequently, the emphasis soon shifted to “indoor relief”—almshouses and workhouses.

Professor West also cites the strong role of private charity, which also was based on tough-love compassion.

After the Revolution and throughout the 19th century, hospitals for the poor, educational institutions, YMCAs, and Salvation Army branches were established in growing numbers all over America by public-spirited citizens. Like the public workhouses, these private charities distinguished between deserving and undeserving poor. Good character, it was thought, would enable most people to become self-sufficient. These agencies tried to build the character of their recipients through education, moral suasion, religious instruction, and work.

Now let’s see what West says about the effectiveness of the tough-love approach from America’s past with the entitlement approach used today.

If we rank poverty and welfare policies in terms of quantity of money and material goods given to people who are poor, then today’s policies are far more effective than the Founders’. Benefit levels are much higher, and far more people are eligible for support. …However, if poverty and welfare policies are judged by their effectiveness in providing for the minimal needs of the poor while dramatically reducing poverty in a society over time, then America before 1965 could be said to have had the most successful welfare policy in world history. By the same benchmark, post-1965 poverty programs have failed.

In other words, if the goal is to make people comfortable in dependency, the current system is a big success.

But if the goal is self reliance and reduced poverty, then the current system is a terrible failure.

Professor West has some great data on how a combination of long-run growth and a sensible welfare system combined to dramatically reduce destitution between the nation’s founding and the 1960s.

Two centuries ago, most Americans—at least 90 percent—were desperately poor by today’s standards. Most houses were small, ill-constructed, and poorly heated and insulated. Based on federal family income estimates, 59 percent of Americans lived in poverty as late as 1929, before the Great Depression. In 1947, the government reported that 32 percent of Americans were poor. 

This is fascinating and valuable information. At least for those of us with a wonky interest in public policy.

Back in 2010, I shared a chart based on far more limited data to show the poverty rate consistently falling after World War II.

But only up to a point. Once the federal government declared War on Poverty in the mid-1960s, we stopped making progress.

Now, based on Professor West’s data, I can create a chart going back to 1815.

I arbitrarily connected the data points with straight lines for lack of any other obvious alternative, but that’s not important. The key point of the graph is to see that the level of poverty declined dramatically before Washington got involved.

Professor West puts 2 and 2 together and gets 4.

…before the huge growth in government spending on poverty programs, poverty was declining rapidly in America. After the new programs were fully implemented, the poverty rate stopped declining.

Let’s begin to wrap up our discussion.

West points out that Benjamin Franklin’s criticisms of the English welfare system apply even more so to the mess we have in America today.

And this is a very costly mistake.

The incentive structure of the modern welfare state is similar to the one that Franklin condemned in old England, except that ours is more generous and more tolerant of single motherhood. Since 1965, when President Lyndon Johnson inaugurated the modern War on Poverty, total annual government welfare spending has grown from less than $9 billion (1.3 percent of gross domestic product) to $324 billion (5 percent of GDP) in 1993 to $927 billion (6 percent of GDP) in 2011. Between 1965 and 2013, the government spent $22 trillion (adjusted for inflation) on means-tested welfare programs—more than three times the costs of all military wars in the history of the United States. …These figures do not take into account state, county, and municipal benefits. Nor do they take into account the massive use of Social Security Disability as a de facto welfare program (as of 2005, 4.1 percent of Americans between the ages of 25 and 64 were enrolled).

We had successful welfare reform in the 1990s, to be sure, but it dealt with just one program.

The overall trend, as discussed two days ago, is ever-growing levels of dependency.

The basic problem—that government makes it affordable for women to bear and raise children without husbands while living independently in households of their own—is still there. …High benefit levels and irresponsible attitudes toward sex and marriage create a world in which many children have few or no ties to their fathers; in which mothers, increasingly unmarried, are more often abused and exploited; and in which many men join gangs and take up crime as a way of life. …The contemporary outlook on welfare has both propelled the family’s disintegration and promoted vast dependence. …antipoverty programs can easily have a corrupting effect if they are not set up in a way that promotes rather than breaks down the morality of self-restraint and self-assertion that is a necessary foundation of what Jefferson called “temperate liberty.”

I guess what we have now in America is intemperate dependence.

Hmmm, maybe the solution is to go back to the system that worked. And that means getting Washington out of the business of income redistribution.

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Based on a new report from the Congressional Budget Office, I wrote two weeks ago about America’s dismal long-run fiscal outlook. Simply stated, we face a Greek-style fiscal future because of changing demographics and poorly designed entitlement programs.

But I was just looking at big-picture fiscal aggregates.

And while that was discouraging, it gets downright depressing when you look behind the numbers and consider how a growing share of Americans are getting lured into government dependency.

Nicholas Eberstadt of the American Enterprise Institute has a very grim analysis on the growth of entitlement dependency in the United States.

The American welfare state today transfers over 14% of the nation’s GDP to the recipients of its many programs, and over a third of the population now accepts “need-based” benefits from the government. This is not the America that Tocqueville encountered.

It wasn’t always this way.

The article looks at the history of the welfare state in America.

 In 1961, at the start of the Kennedy Administration, total government entitlement transfers to individual recipients accounted for a little less than 5% of GDP, as opposed to 2.5% of GDP in 1931 just before the New Deal. In 1963 — the year of Kennedy’s assassination — these entitlement transfers accounted for about 6% of total personal income.

But things began to deteriorate under LBJ.

During the 1960s, …President Johnson’s “War on Poverty” (declared in 1964) and his “Great Society” pledge of the same year ushered in a new era for America, in which Washington finally commenced in earnest the construction of a massive welfare state. … Americans could claim, and obtain, an increasing trove of economic benefits from the government simply by dint of being a citizen; they were now incontestably entitled under law to some measure of transferred public bounty, thanks to our new “entitlement state.”

And guess what? Once we started rewarding dependency, more and more people decided they were entitled.

Over the half-century between 1963 and 2013, entitlement transfers were the fastest growing source of personal income in America — expanding at twice the rate for real per capita personal income from all other sources, in fact. Relentless, exponential growth of entitlement payments recast the American family budget over the course of just two generations. In 1963, these transfers accounted for less than one out of every 15 dollars of overall personal income; by 2013, they accounted for more than one dollar out of every six. The explosive growth of entitlement outlays, of course, was accompanied by a corresponding surge in the number of Americans who would routinely apply for, and accept, such government benefits.

And how many people have been lured into government dependency? A lot, and mostly because of welfare spending rather than age-related social insurance programs such as Social Security and Medicare.

…the government did not actually begin systematically tracking the demographics of America’s “program participation” until a generation ago. Such data as are available, however, depict a sea change over the past 30 years. …By 2012, the most recent year for such figures at this writing, Census Bureau estimates indicated that more than 150 million Americans, or a little more than 49% of the population, lived in households that received at least one entitlement benefit….Between 1983 and 2012, by Census Bureau estimates, the percentage of Americans “participating” in entitlement programs jumped by nearly 20 percentage points….Less than one-fifth of that 20-percentage-point jump can be attributed to increased reliance on these two “old age” programs. Overwhelmingly, the growth in claimants of entitlement benefits has stemmed from an extraordinary rise in “means-tested” entitlements.

Ugh. I’ve previously written that getting something from the government doesn’t automatically turn somebody into a moocher or a deadbeat.

Nonetheless, it can’t be good news that 49 percent of U.S. households are on the receiving end for goodies from Uncle Sam.

Here’s a table from his article that should frighten anyone who thinks work and self-reliance are worthwhile values.

There’s lot of information, so I recommend just focusing on the numbers in parentheses in the first two columns. Those show how dependency is increasing by significant amounts for many programs.

Eberstadt highlights some of the worst numbers, most notably the huge growth in food stamps and Medicaid dependency.

…the rolls of claimants receiving food stamps (a program that was officially rebranded the Supplemental Nutrition Assistance Program, or SNAP, in 2008 because of the stigma the phrase had acquired) jumped from 19 million to 51 million. By 2012 almost one American in six lived in a home enrolled in the SNAP program. The ranks of Medicaid, the means-tested national health-care program, increased by over 65 million between 1983 and 2012, and now include over one in four Americans. …Between 1983 and 2012, the number of Americans in households receiving Federal SSI more than sextupled; by 2012, over 20 million people were counted as dependents of the program.

As bad as these numbers are, the most worrisome part of the article is when Eberstadt writes about the erosion of America’s cultural capital.

Asking for, and accepting, purportedly need-based government welfare benefits has become a fact of life for a significant and still growing minority of our population: Every decade, a higher proportion of Americans appear to be habituated to the practice. … nearly half of all children under 18 years of age received means-tested benefits (or lived in homes that did). For this rising cohort of young Americans, reliance on public, need-based entitlement programs is already the norm — here and now. It risks belaboring the obvious to observe that today’s real existing American entitlement state, and the habits — including habits of mind — that it engenders, do not coexist easily with the values and principles, or with the traditions, culture, and styles of life, subsumed under the shorthand of “American exceptionalism.”

And the erosion of cultural capital is very difficult to reverse, thanks in large part to the welfare-aided erosion of traditional families and falling levels of work among males.

The corrosive nature of mass dependence on entitlements is evident from the nature of the pathologies so closely associated with its spread. Two of the most pernicious of them are so tightly intertwined as to be inseparable: the breakdown of the pre-existing American family structure and the dramatic decrease in participation in work among working-age men. …the rise of long-term entitlement dependence — with the concomitant “mainstreaming” of inter-generational welfare dependence — self-evidently delivers a heavy blow.

Since this has been an utterly depressing analysis so far, let’s close with a vaguely optimistic look at the future.

While it may not be easy to reverse the erosion of cultural capital, it is simple (at least in theory) to reverse bad policies.

All we need to do is enact genuine entitlement reform and devolve all means-tested redistribution spending to the states.

P.S. This is some great work by AEI, which follows on the stellar analysis that organization recently produced on income inequality. Makes me almost want to forgot that AEI put together a somewhat disappointing fiscal plan.

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Back during the 2012 presidential campaign, I criticized the view that America was divided between “makers” and “takers.”

But not because I disagreed with the notion that people trapped in government dependency have an unfortunate self-interest in supporting politicians who want a bigger welfare state. Indeed, I’ve explicitly warned that some statist politicians explicitly want to create more dependency to advance their power.

That being said, it’s important to understand the depth of the problem. It’s not accurate, as I’ve written, to assume that people who don’t pay tax are part of the moocher class.

…those people are not necessarily looking for freebies from government. Far from it. Many of them have private sector jobs and believe in self reliance and individual responsibility. Or they’re students, retirees, or others who don’t happen to have enough income to pay taxes, but definitely don’t see themselves as wards of the state.

Moreover, it’s not even accurate to say that households receiving benefits from the government are part of the dependency class.

…the share of households receiving goodies from the government...is approaching 50 percent and it probably is much more correlated with the group of people in the country who see the state as a means of living off their fellow citizens. But even that correlation is likely to be very imprecise since some government beneficiaries – such as Social Security recipients – spent their lives in the private sector and are taking benefits simply because they had no choice but to participate in the system.

If we really want to understand the depth of America’s dependency problem, it’s much better to look at the share of the population that gets money from anti-poverty programs.

The Census Bureau has just released a report looking at the share of the population receiving “means-tested” benefits, which is the term for programs targeting low-income recipients. Here are some of the highlights (or lowlights) from the accompanying release.

Approximately 52.2 million (or 21.3 percent) people in the U.S. participated in major means-tested government assistance programs each month in 2012, according to a U.S. Census Bureau report released today. Participation rates were highest for Medicaid (15.3 percent) and the Supplemental Nutrition Assistance Program, formerly known as the food stamp program (13.4 percent). The average monthly participation rate in major means-tested programs increased from 18.6 percent in 2009 to 20.9 percent in 2011. …The largest share of participants (43.0 percent) in any of the public assistance programs stayed in the programs between 37 and 48 months.

Perhaps more worrisome are the details on how some segments of the population are more likely to be trapped in government dependency.

In an average month, 39.2 percent of children received some type of means-tested benefit, compared with 16.6 percent of people age 18 to 64 and 12.6 percent of people 65 and older. …At 41.6 percent, blacks were more likely to participate in government assistance programs in an average month. …At 50 percent, people in female-householder families had the highest rates of participation in major means-tested programs.

Though perhaps “trapped” is too strong a word. As you can see from this table, less than 50 percent of recipients appear to be long-term dependents.

Looking at all this data, my conclusion is that we’re not in any immediate danger of hitting a “tipping point” of too much dependency. To be sure, the trends are not favorable, thanks to politicians like Obama, but 21 percent of the population receiving means-tested benefits is not nearly as bad as 47 percent.

Though it appears that the Census Bureau doesn’t count the “earned income credit” in its calculations. That’s an odd omission since it is a means-tested spending program (operated through the tax code). So the problem presumably is worse than what is stated in the report, but I’m assuming that there’s a big overlap between EIC recipients and those already counted by the Census Bureau. which means that the share of households getting money from Uncle Sam is still significantly less than 30 percent.

But that doesn’t mean we shouldn’t be worried. Indeed, the welfare state should be radically changed because we care about both taxpayers and poor people.

Writing for The Federalist, Robert Tracinski explores specific policies that would restrain and reduce the welfare state.

He lists seven ideas, which I’ve shared below (in very abbreviated form) followed by my two cents.

1) Repeal ObamaCare – If we want to roll back the welfare state, we will never have any better opportunity to start than by repealing ObamaCare—a program that is relatively new, has never been popular, and is in a slow process of imploding.

My response: Fully agree.

2) Health Savings Accounts – Scrapping ObamaCare would be a natural opportunity for Republicans to propose their own free-market health-care reforms. The centerpiece of that alternative should be Health Savings Accounts, which make it easier for individuals to save money in tax-free accounts which they can use for medical expenses.

My response: Not my preferred option. HSAs are a big improvement over the current system and presumably would help with the third-party payer problem, but fixing healthcare requires far bigger changes to Medicare, Medicaid, and the tax code’s fringe benefit loophole. And if you make those changes, HSAs wouldn’t really matter.

3) Means-test Social Security – Social Security is already a bad deal for the middle class, since the benefits are already skewed in such a way that they are equivalent to a tiny return, between 1 and 2 percent annually, on what might have been a private investment. By contrast, long-term returns on the stock market are about 7 percent annually. And in order to make Social Security sustainable, it will have to become a much worse deal.

My response: Also not my preferred option. Too many otherwise sensible people are giving up on personal retirement accounts.

4) Restart economic growth – the United States has slipped into the Obama rate of growth, a permanent state of semi-stagnation. We’ve been through market crashes and recessions before, but usually after a year or two of pain, we get a strong burst of growth to make up for it. …This low rate of growth makes the burden of the welfare state greater, because we can no longer grow our way out from under its expenses. …If we’re going to expect people to be more self-reliant, they must also have a sense of economic hope.

My response: Hard to argue with this suggestion, or the description of the problem.

5) Re-reform welfare – …the Obama administration has used the recession to gut the welfare reform of the 1990s, extending unemployment benefits and loosening work requirements. …the administration has used the state for the opposite purpose: to push people from self-reliance into dependence.

My response: Also hard to argue with this suggestion. It’s very worrisome how leftists are operating behind the scenes to push more dependency.

6) Save the cities – …the centers of economic inequality and racial conflict—the key issues on which Democrats always campaign—are places that are the sole property of Democrats, owned and run by them for about as long as anyone can remember. …If we want less class and racial conflict, if we want more people moving up into the middle class and no longer feeling the need for government support, if we want to compete for the vote in what are now deep centers of political support for the left—then we need to start targeting the cities for basic reforms that will improve the quality of life there and bring back the middle class.

My response: A very accurate description of the problem, but I suspect advocates of limited government won’t gain control of policy in big cities, so it might be better to first focus on rhetorical efforts to explain how statism leads to bad results.

7) Federalism – This is not a foolproof solution, because we’ll still occasionally get local handouts… But the general idea is that we can let New York and California set up more generous welfare states—if they want to pay for them. And they should let the hinterland scale back welfare. Then the states can compete to see whose approach is more successful and how many people vote with their feet for the small government model.

My response: Bingo!! This is far and away the right answer and it’s got plenty of intellectual firepower behind it.

America isn’t Europe, either in terms of policy or attitudes. But I worry that we’re heading that direction.

The Census Bureau gives us the data and Robert Tracinski has given us some good answers.

But will the solutions be implemented before too many people are riding in the wagon of government dependency? Because once you reach that point, there’s probably little hope.

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President Obama recently took part in a poverty panel at Georgetown University. By D.C. standards, it was ideologically balanced since there were three statists against one conservative (I’ve dealt with that kind of “balance” when dealing with the media, as you can see here and here).

You won’t be surprised to learn that the President basically regurgitated the standard inside-the-beltway argument that caring for the poor means you have to support bigger government and more redistribution.

Many observers were unimpressed. Here’s some of what Bill McGurn wrote for the Wall Street Journal.

The unifying progressive contention here is the assertion that America isn’t “investing” enough in the poor—by which is meant the government isn’t spending enough. …President Obama…went on to declare it will be next to impossible to find “common ground” on poverty until his critics accept his spending argument.

I think this argument is nonsense. We’re spending record amounts of money on means-tested, anti-poverty programs, yet the poverty rate hasn’t come down since the “War on Poverty” started.

Indeed, you can make a very persuasive case that government intervention has backfired since the poverty rate was falling before the federal government got involved. Yet now that Washington is paying people to be poor, progress has ground to a halt.

In his column, though, McGurn pointed out that it’s also important to look at how money is spent.

…it’s simply false to say that Republicans won’t make the public “investments” needed to help the poor. In New York in the 1990s, for example, Republican Mayor Rudy Giuliani not only invested in the police but sent them into the areas where they were most needed—primarily poor and minority neighborhoods. In too many other Democratic cities, by contrast, mayors in effect cede whole neighborhoods to the thugs and gangs. Republicans are also willing to spend on education. What they are not willing to do is dump ever more dollars down the same rathole of big-city public school systems that function more as jobs programs for city bureaucrats and members of the teachers unions.

And he challenged the view of some GOPers that government spending will promote stable families.

…it would similarly be good for Republicans to address the hard implications of their own message. If, for example, broken families are indeed driving modern American poverty, is the only answer despair—or praying for some miracle? And if you believe the government can’t help but bungle something as basic as food stamps, shouldn’t you bring this same skepticism to a “conservative” program that enlists the government to, say, discourage divorce or promote chastity?

I certainly agree with that point. President Bush’s program to encourage marriage certainly wasn’t a success.

But let’s focus on the present. Here’s some of what Thomas Sowell said about Obama’s performance. As you can see, he was not impressed with the President’s abuse of the English language.

One of the ways of fighting poverty, [the President] proposed, was to “ask from society’s lottery winners” that they make a “modest investment” in government programs to help the poor. …But the federal government does not just “ask” for money. It takes the money it wants in taxes, usually before the people who have earned it see their paychecks. …It seizes what it wants by force. If you don’t pay up, it can take not only your paycheck, it can seize your bank account, put a lien on your home and/or put you in federal prison. So please don’t insult our intelligence by talking piously about “asking.”

And Sowell closes his column by raising the fundamental question of whether it makes sense to let government consume a greater share of economic output.

The fact that most of the rhetorical ploys used by Barack Obama and other redistributionists will not stand up under scrutiny means very little politically. After all, how many people who come out of our schools and colleges today are capable of critical scrutiny? When all else fails, redistributionists can say, as Obama did at Georgetown University, that “coldhearted, free-market capitalist types” are people who “pretty much have more than you’ll ever be able to use and your family will ever be able to use,” so they should let the government take that extra money to help the poor. …The real question is whether the investment of wealth is likely to be done better by those who created that wealth in the first place or by politicians. The track record of politicians hardly suggests that turning ever more of a nation’s wealth over to them is likely to turn out well.

Amen. The academic evidence is very strong that nations with large public sectors suffer from economic anemia.

And since the poor are most dependent on growth to get a good foothold on the economic ladder, Prof. Sowell surely is right when he states that it’s better to leave resources in the productive sector of the economy. Moreover, he’s explained in the past that the welfare state certainly doesn’t help the poor.

P.S. Since today’s column ended with a discussion about whether government should be bigger or smaller, it’s appropriate to share this bit of humor concocted by the Princess of the Levant.

If you’re a new reader and don’t get the joke, Richard is famous for the Rahn Curve, though I think he overstates the growth-maximizing size of government. As such, I argue that we need to impose my (not nearly as famous) Golden Rule of spending restraint.

P.P.S. Shifting back to the topic of poverty and redistribution, we should all be very concerned that the Obama White is trying to manipulate the definition of poverty in order to justify ever-larger amounts of redistribution and dependency. And you won’t be surprised to learn that the OECD supports this dishonest and misleading initiative.

P.P.P.S. Here’s an image that accurately summarizes the left’s misguided view of redistribution.

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Let’s revisit the issue of urban unrest, with special attention to the challenges for both entrepreneurs and ordinary citizens.

While potential police misconduct may serve as a trigger for riots, the powder keg is already in place because of decades of bad government policy.

Jay Steinmetz, who runs a supply-chain management company in Baltimore, provides a real-world perspective on what it’s like to be an entrepreneur in a city run by kleptocrats. Here are some excerpts from his Wall Street Journal column.

When the building alarm goes off, the police charge us a fee. If the graffiti isn’t removed in a certain amount of time, we are fined. This penalize-first approach is of a piece with Baltimore’s legendary tax and regulatory burden.  …Maryland still lags most states in its appeal to companies, according to well-documented business-climate comparisons put out by think tanks, financial-services firms, site-selection consultants and financial media. Baltimore fares even worse than other Maryland jurisdictions, having the highest individual income and property taxes at 3.2% and $2.25 for every $100 of assessed property value, respectively.

Here’s what it means, in terms of lost revenue, to Mr. Steinmetz’s company.

The bottom line is that our modest 14,000-square-foot building is hit with $50,000 in annual property taxes. And when we refinanced our building loan in 2006, Maryland and Baltimore real-estate taxes drove up the cost of this routine financial transaction by $36,000. State and city regulations overlap in a number of areas, most notably employment and hiring practices, where litigious employees can game the system and easily find an attorney to represent them in court. Building-permit requirements, sales-tax collection procedures for our multistate clients, workers’ compensation and unemployment trust-fund hearings add to the expensive distractions that impede hiring.

So it’s no surprise to learn that the geese with the golden eggs (as well as the silver and bronze eggs) are flying away.

Our employees reduce their tax burden and receive better public services in the suburbs.  …The financial problem Baltimore does face is a declining tax base, the most pronounced in the state. According to the Internal Revenue Service, $125 million in taxable annual income in Baltimore vanished between 2009 and 2010.

I’m not sure why Mr. Steinmetz hasn’t left as well. I guess it’s both admirable and foolish for him to persevere is such a hostile environment.

Thomas Sowell, in an article published by National Review, demolishes the argument that criminal behavior can be blamed on racism or poverty.

He starts by drawing attention to the 1960s as a key turning point.

The “legacy of slavery” argument is not just an excuse for inexcusable behavior in the ghettos. …Anyone who is serious about evidence need only compare black communities as they evolved in the first 100 years after slavery with black communities as they evolved in the first 50 years after the explosive growth of the welfare state, beginning in the 1960s.

Prof. Sowell then makes the obvious point that blacks faced much harsher conditions before the 1960s, yet crime was much lower.

And the black family was much more stable before the so-called war on poverty in the 1960s.

We are told that such riots are a result of black poverty and white racism. But in fact — for those who still have some respect for facts — black poverty was far worse, and white racism was far worse, prior to 1960. But violent crime within black ghettos was far less. Murder rates among black males were going down — repeat, down — during the much-lamented 1950s, while it went up after the much celebrated 1960s, reaching levels more than double what they had been before. Most black children were raised in two-parent families prior to the 1960s. But today the great majority of black children are raised in one-parent families.

Sowell’s point is that the welfare state created incentives for dysfunctional behavior.

And he stresses that this isn’t a racial issue.

Such trends are not unique to blacks, nor even to the United States. The welfare state has led to remarkably similar trends among the white underclass in England over the same period. …You cannot take any people, of any color, and exempt them from the requirements of civilization — including work, behavioral standards, personal responsibility, and all the other basic things that the clever intelligentsia disdain — without ruinous consequences to them and to society at large. Non-judgmental subsidies of counterproductive lifestyles are treating people as if they were livestock.

I particularly appreciate his point about the importance of social capital, what he calls the requirements of civilization.

But this doesn’t mean black citizens don’t have some legitimate grievances. Radley Balko of the Washington Post explains that African-Americans are getting abused by greedy governments, just like Mr. Steinmetz.

He starts his article by sharing some good news on falling crime rates and big reductions in police deaths. But for our purposes today, the most powerful and relevant part of his story deals with one citizen’s interaction with government.

Antonio Morgan [is] a 29-year-old resident of Hazelwood, Missouri. He owns his own small business, a car repair and body shop he’d been saving up to buy since he was a teenager. He has also been arrested more than 20 times. All but two of those arrests were for misdemeanors. Morgan saved up for his business by fixing cars in his mother’s driveway. That required him to occasionally park cars on the street. That earned him parking tickets. He paid them when he could, but he occasionally missed deadlines. And that would lead to an arrest warrant. All of this also put Morgan on the radar of local police.

As you continue reading, keep in mind he was “on the radar” even though he did nothing to infringe on the life, liberty, and property of other citizens.

His unpaid parking tickets led not just to arrest warrants, but to the occasional suspension of his license. That led to more citations, although like many in the area, Morgan was sometimes pulled over and issued only a ticket for driving on a suspended license, or driving a car that wasn’t registered to him. (Morgan sometimes drove his clients’ cars to test them.) But there was no underlying traffic violation — which raises the question of why the officer pulled Morgan over in the first place, if it wasn’t to profile him. Those citations then led to more arrests.

It certainly seems as if St. Louis County in Missouri has been treating Mr. Morgan as a revenue-generating milk cow, much as Baltimore has been squeezing Mr. Steinmetz.

Different approach, but same result.

Cops would show up at his garage and cite his employees for operating without a business license. Morgan has a license; his employees didn’t need one. But to get the citations dismissed, Morgan and his employees would have to go to court, which was held once a month, at night. If they missed their court date, they too would be hit with an arrest warrant. Wealthy people can hire an attorney to go in their stead, and to negotiate their way out of a citation. But neither Morgan nor his employees were wealthy.

Some of you may be wondering about the two ostensibly more serious arrests on his record.

Radley’s column discusses both, and it certainly looks like Mr. Morgan has been mistreated by the justice system.

Here’s the first arrest. And remember it only occurred because he had to be in court to deal with ridiculous fines and petty harassment.

As Morgan walked toward the courthouse a police officer asked him the kids in the truck were his. He replied that they were. The officer asked him why he had left them alone. Morgan replied that he hadn’t, and that the woman parked next to him had agreed to watch them. ..Morgan pleaded with the police officer to flag down his friends, who he said would vouch for him. He says the officer then threatened to Taser him. Morgan put up his hands. The officer then arrested him for child endangerment. …The incident still upsets Morgan — not even the arrest so much as that his children had to see it. “I’m a good father,” he says. “I own my own business. I provide for my kids. Do you know what it’s like for your own children to see you get arrested? For a cop to say, right in front of them, that he’s arresting you because you’re a bad parent?”

I’m not someone who sees racism under every bed and behind every tree, but you can’t help but wonder whether this incident would have even happened if he was a white guy in a business suit.

The second arrest is equally dubious.

…the officer confronted Morgan because he was “trespassing” on a neighbor’s lawn. Morgan responded that he wasn’t trespassing, because the neighbors didn’t mind. Morgan says the cop moved to arrest him, and he lost his cool. He claims he never struck the police officer, but he does admit that he screamed at him. Once he did, he was hit with a Taser and arrested for assaulting a police officer. That charge was later dropped. (The neighbors back Morgan’s account of the entire incident, including his assertion that he never touched the cop.)

It’s always a smart idea to act servile and obsequious when dealing with cops, so Mr. Morgan obviously didn’t play his cards right.

But imagine if you had been endlessly harassed. Wouldn’t you be angry? Radley sure would have been.

I was stunned. But not because Morgan lost his cool with the cop. I was stunned that it had taken him so long to do so. And that even then, he’d manage to restrain himself from physical violence. I’m not sure I’d have been able to say the same.

Here’s the bottom line. Or, to be more accurate, two bottom lines.

First, we should sympathize with Mr. Morgan just as we should sympathize with Mr. Steinmetz. Actually, we should sympathize more with Morgan.

Morgan is no one’s definition of a “thug.” He’s a guy who breaks his back to keep up the business that supports his family, despite obstacles that, frankly, most white business owners don’t have to endure. For all he’s been through, he is remarkably composed. He deals with the daily harassment in a remarkably manner-of-fact way. …Morgan isn’t a drug pusher. He isn’t an absentee father. He isn’t in a gang. He’s a guy trying to do right by his family.

Second, we should recognize that one “root cause” of the problem is greedy government.

The primary source of revenue for the local towns is sales tax. But the poorer (which means blacker) towns don’t generate enough income from sales taxes. So they turn to municipal fines to keep themselves from going under. The poorer the town and its residents, the more likely the town relies on fines for a greater percentage of its annual revenue. Which means that the blacker the town, the more likely its residents are getting treated like ATMs for the local government.

None of this justifies rioting. And I have to imagine that Mr. Morgan would be one of the good guys during any unrest (much like Stretch and his friends in Ferguson).

But stories like this should make all of us appreciate how some communities may have a very sour impression of the police.

Let’s close with some economic analysis of riots (hey, I’m a policy wonk, so bear with me).

Here’s some of what Professor Edward Glaeser of Harvard wrote a few years ago for Bloomberg.

…public disturbances are a classic example of tipping-point phenomena, which occur when there is some positive feedback mechanism that makes an activity more attractive, or less costly, as more people do it. …There is a tipping point in rioting because the cost of participating — the risk of going to jail — gets lower as the number of people involved increases. …riots occur when the shear mass of rioters overwhelms law enforcement.

He then looks at the more challenging issue.

But how do these mass events get started? In some cases, …such as the 1965 Watts Riot, a peaceful crowd provides cover for initial lawlessness. Sporting events, such as Game 7 of the Stanley Cup Finals in Vancouver this year, can easily produce the crowds that allow a riot to start. Most strangely, riots can follow an event that creates a combination of anger and the shared perception that others will be rioting. The acquittal of police officers in the Rodney King case seems to have created these conditions in Los Angeles in 1992.

The left-wing excuse for rioting doesn’t seem to have much merit.

…across U.S. cities, there has never been much of a link between unrest and either inequality or poverty. In fact, the riots of the 1960s were actually slightly more common in cities that had more government spending.

But economic analysis gives us good clues, both about how to deter riots and who is most victimized when they occur.

Light penalties widely applied and serious penalties applied to a few can both deter unlawful behavior. This is a central conclusion of Gary Becker’s path-breaking economic analysis of crime and punishment. …Even when they are connected to understandable grievances, they do great harm, particularly to the poorest residents.

The moral of the story is that we should be tough on crime, but that doesn’t mean mistreating people like Antonio Morgan.

Instead, the legal system should focus on trying to deter bad behavior, which is when genuinely bad people infringe on the life, liberty, and property of others.

But how do we get politicians and bureaucrats to properly focus?

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Okay, I’ll admit right away that the title of this column is an exaggeration.

But if you’re a public policy wonk and you worry about the rising level of government dependency and the erosion of self reliance, then you’ll understand why the chart below, which was presented earlier today at the Copenhagen conference of the Free Market Road Show, is so disturbing.

It was part of a presentation by Anders Krab-Johansen, the CEO and Editor-in-Chief of Børsen, which is the leading business newspaper in Denmark. It shows his nation’s dependency ratio, and it reveals that the number of people getting money from the government has more than doubled while the number of people in the economy’s productive sector is stagnant.

It’s very hard to be optimistic about Denmark given the trend line (and, please, no complaints about Mr. Krab-Johansen writing “of” instead of “off” since his English proficiency is 99 percent, which is far above my 0.0 percent Danish proficiency).

No wonder my Danish friend, Mads Lundby Hansen of the Center for Politiske Studier (CEPOS), put together the “party boat” to show that far too many of his countrymen are living off the labor of an ever-shrinking number of producers in the private sector.

It seems that “Lazy Robert” has lots of company.

You won’t be surprised to learn that a massive level of dependency necessarily means an onerous burden of government spending.

In his presentation, Mr. Krab-Johansen shared this chart looking at consumption spending by governments in the developed world.

For further elaboration, there are different types of government spending,

Spending on core public goods, such as provision of the rule of law, is associated with good economic performance.

Other types of government spending, such as outlays for physical capital and human capital, have a mixed record. Some of the spending on things like roads and education is productive, but some of it is wasteful and counterproductive.

The bulk of government spending, however, is for transfers and consumption, and those outlays are associated with weaker economic performance.

The bottom line is that it’s a very bad sign for Denmark to have the developed world’s second-highest burden of public consumption outlays.

And if there’s an excessive burden of government spending, you won’t be surprised to learn that the tax burden is onerous.

I’ve previously joked that the tax system is so onerous that birthers should accuse Obama of being born in Denmark.

So it’s no surprise that business entrepreneurs identified tax-related issues as being two of their three biggest challenges.

 

It’s also worth noting that bureaucracy and regulation also are listed as problems.

P.S. This set of cartoons is the American version of Denmark’s party boat.

P.P.S. If anyone cares, my speech at the Copenhagen conference focused on the importance of policies that enable labor, capital, and entrepreneurship to generate economic growth.

P.P.P.S. I don’t want to leave readers with a totally grim perspective on Denmark. Yes, the fiscal burden is terrible, but the country actually is very free market in other areas. And the government is even taking some modest steps to reduce dependency, so policy makers realize there’s a problem.

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I wrote back in 2010 that riots in Europe were a harbinger of future unrest in the United States.

Given the chaos in Baltimore, I’m tempted to claim profound wisdom and great foresight.

But I’ll reluctantly confess that my main point five years ago was to warn about the long-run consequences of poorly designed entitlement programs and unfavorable demographics (leading to the outcome illustrated by this set of cartoons).

Simply stated, Margaret Thatcher was right when she warned that the problem with big government is that “eventually you run out of other people’s money.”

The riots in Baltimore, by contrast, are a short-run phenomenon exacerbated by factors such as a loss of social capital and potential police misconduct.

But we can still learn something by looking at the dysfunctional consequences of big government in Baltimore and other big cities in America.

Here’s some of what’s been written by my colleague, Michael Tanner.

…there are lessons to be learned about the failures of government and how those failures can create a climate of anger and frustration that just awaits a spark to ignite the flames of violence and destruction. …the powder keg was put in place by decades of big-government liberalism, both in the city of Baltimore and in the state of Maryland. …Maryland has one of the most generous welfare systems in the nation. A mother with two children participating in seven common welfare programs — Temporary Assistance for Needy Families (TANF), food stamps (SNAP), Medicaid, housing assistance, Supplemental Nutrition for Women, Infants, and Children (WIC), energy assistance (LIHEAP), and free commodities — could receive benefits worth more than $35,000. Yet, nearly a quarter of the people in Baltimore still live in poverty. In 1960, Baltimore’s poverty rate was just 10 percent. …while Baltimore’s high welfare benefits haven’t reduced poverty, they may well have exacerbated other social problems. For example, some studies have long shown that high welfare benefits correlate with high out-of-wedlock birth rates. It should not come as a surprise, then, that two-thirds of births in the city are to unmarried mothers, and almost 60 percent of Baltimore households are headed by single parents.

While the politicians subsidize bad things in Maryland, they penalize good things.

…while Baltimore’s high welfare benefits haven’t reduced poverty, they may well have exacerbated other social problems. For example, some studies have long shown that high welfare benefits correlate with high out-of-wedlock birth rates. It should not come as a surprise, then, that two-thirds of births in the city are to unmarried mothers, and almost 60 percent of Baltimore households are headed by single parents. …if that were not bad enough, the city of Baltimore adds one of the highest property taxes among comparable cities…a tax rate more than twice the rate of most of the rest of the state.

Mike has lots of additional information, including revelations about bad education policies, dangerous anti-gun laws, and counterproductive drug prohibition.

But let’s now shift to a Wall Street Journal editorial on the same subject.

…what went up in flames in Baltimore Monday night was not merely a senior center, small businesses and police cars. Burning down was also the blue-city model of urban governance. …let’s not forget who has run Baltimore and Maryland for nearly all of the last 40 years. The men and women in charge have been Democrats, and their governing ideas are “progressive.” This model, with its reliance on government and public unions, has dominated urban America as once-vibrant cities such as Baltimore became shells of their former selves. …the main failures are three: high crime, low economic growth and failing public schools that serve primarily as jobs programs for teachers and administrators rather than places of learning. …of late the progressives have been making a comeback, led by Bill de Blasio in New York and the challenge to sometime reform Mayor Rahm Emanuel in Chicago. This week’s nightmare in Baltimore shows where this leads. It’s time for a new urban renewal, this time built on the ideas of private economic development, personal responsibility, “broken windows” policing, and education choice.

One would think that Detroit – and now Baltimore – show the dangers for cities of big government and dependency.

Unfortunately, the election of Mayor de Blasio in New York City suggest many voters are incapable of learning any lessons from the real world.

Last but not least, here’s some of Kevin Williamson’s column for National Review.

American cities are by and large Democratic-party monopolies, monopolies generally dominated by the so-called progressive wing of the party. The results have been catastrophic, and not only in poor black cities such as Baltimore and Detroit. …Would any sentient adult American be shocked to learn that Baltimore has a corrupt and feckless police department enabled by a corrupt and feckless city government? …While the progressives have been running the show in Baltimore, police commissioner Ed Norris was sent to prison on corruption charges (2004), two detectives were sentenced to 454 years in prison for dealing drugs (2005), an officer was dismissed after being videotaped verbally abusing a 14-year-old and then failing to file a report on his use of force against the same teenager (2011), an officer was been fired for sexually abusing a minor (2014), and the city paid a quarter-million-dollar settlement to a man police illegally arrested for the non-crime of recording them at work with his mobile phone. There’s a good deal more.

And who should be blamed for this horrible track record?

No Republican, and certainly no conservative, has left so much as a thumbprint on the public institutions of Baltimore in a generation. Baltimore’s police department is, like Detroit’s economy and Atlanta’s schools, the product of the progressive wing of the Democratic party enabled in no small part by black identity politics. This is entirely a left-wing project, and a Democratic-party project. …Community-organizer — a wretched term — Adam Jackson declared that in Baltimore “the Democrats and the Republicans have both failed.” Really? Which Republicans? Ulysses S. Grant? Unless I’m reading the charts wrong, the Baltimore city council is 100 percent Democratic. …The evidence suggests very strongly that the left-wing, Democratic claques that run a great many American cities…are incompetent, they are corrupt, and they are breathtakingly arrogant. Cleveland, Philadelphia, Detroit, Baltimore — this is what Democrats do.

My one contribution to the wise words in the three articles excerpted above is to point out that the troubles in Baltimore are somewhat similar to riots we’ve seen in Greece and the United Kingdom. There’s no racial or ethnic component to the chaos we’ve seen in most of the European riots, so the analogy is far from exact, but the events are alike in that a big part of the problem is a failure of government and a concomitant erosion of social or cultural capital.

Simply stated, too many people on both sides of the Atlantic now think they are entitled to a life based on freebies from government. This almost surely erodes any sense of self worth and breeds anger and resentment.

Putting the toothpaste of self-reliance back into the societal tube doubtlessly will not be easy. Here’s some of what Jay Nordlinger wrote today.

The young rioters have…been brought up to regard themselves as entitled and victimized, at the same time. In truth, they are among the luckiest people in the whole world: to have been born American. Millions, probably billions, would be happy to trade places with them. The rioters are free to make of life what they will. Their shackles are mental and spiritual. …These young people have been grossly mistaught — misled — by the “grievance industry” (to use shorthand). Just about the worst thing you can do to a child is tell him he’s a victim — when it’s not true. Even when it is true, it may be unwise. It is surely damnable when it’s not true.

While I’m sometimes pessimistic about certain societal trends, one part of the answer is easy.

Stop creating new entitlements (such as Obamacare) that alter the already perverse tradeoff between work and leisure. Then people might feel a greater incentive to get jobs.

And stop imposing punitive taxes, particularly on the investors and entrepreneurs that are willing to put capital at risk to create jobs and wealth for the rest of us.

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A nation’s prosperity is determined by the quantity and quality of labor and capital that are productively utilized.

Which means that it doesn’t make sense to have policies that penalize either saving and investment or working.

Yet that seems to be the favorite hobby of the political class.

And there are real consequences. A new study by a pair of economists, published by the National Bureau of Economic Research, has some interesting findings on the link between redistribution programs and labor supply.

It’s a bit wonky, given the way academics write, but they produce some important data on the negative unintended consequences of government dependency.

…we find that the decline in desire to work since the mid-90s lowered the unemployment rate by about 0.5 ppt and the participation rate by 1.75 ppt. This is a large effect… Our estimates imply that changes in the provision of welfare and social insurance (notably disability insurance) explain about 50 percent of the decline in desire to work, which suggest a possible role for the major welfare reforms of the 90s – the 1993 Earned Income Tax Credit (EITC) expansion and the 1996 reform of the Aid to Families with Dependent Children (AFDC) program…the possibility that changes in the provision of social transfers can affect desire to work and thereby the aggregate unemployment and participation rates echoes Juhn, Murphy and Topel (2002) and Autor and Dugan (2003) who argue that the growing attractiveness of disability benefits relative to work increased the number of individuals outside the labor force. …Most strikingly, receiving…disability insurance substantially reduces the probability to want to work by 17 percentage points (ppt), consistent with the fact that an impairment should preclude any work activity and thus lower desire to work.

The authors openly warn that it’s difficult to separate out the effects of various redistribution programs.

The mid-1990s welfare reform apparently helped labor supply by pushing recipients to get a job.

Disability programs, by contrast, strongly discourage productive behavior, while wage subsidies such as the earned-income credit ostensibly encourage work but also can discourage workforce participation for secondary earners in a household.

Here are more of their findings.

…the Earned-Income Tax Credit (EITC) program, a program aimed at o§setting the social security payroll tax for low-income families with children, was expanded in order to encourage work effort (Rothstein and Nichols, 2014). …After controlling for characteristics, we find that the EITC explains 71 percent of the decline in low-educated married mothers’ desire to work between 1988-1993 and 1994-2010. …While the “welfare to work” reform was designed to do bring welfare recipients into the labor force, the reform could have had the opposite effect on the “weaker” nonparticipants by shifting them from a program with some connection to the labor force (welfare) to a program with no connection to the labor force (disability insurance). …Our cross-sectional estimates imply that changes in the provision of welfare and social insurance explain about 60 percent of the decline in desire to work among prime-age females, while the difference-in-difference estimates attribute between 50 and 70 percent of the decline in mothers’ desire to work to the welfare reforms. We conjecture that two mechanisms could explain these results. First, the EITC expansion raised family income and reduced secondary earners’ (typically women) incentives to work.

For non-academic readers, these two charts from the NBER study will be easier to understand.

The first chart shows what should be good news. Welfare reforms in the 1990s led to a big drop in dependency.

But now it’s time for the bad news.

Welfare reform reduced one type of dependency, but other redistribution programs have ballooned.

So no wonder there’s now research showing unfortunate results.

Writing for Investor’s Business Daily, John Merline addresses the same issue, but looking at different redistribution programs.

…the share of 25- to 54-year-olds who are active in the labor market has steadily fallen, to the point where just over 80% of this age group is either working or looking for work. …University of Chicago economics professor Casey Mulligan…posits that the root cause was an attempt by Congress to help people displaced by the recession. Democrats who controlled Congress at the time made several changes to anti-poverty subsidies, adding things like mortgage assistance programs, the benefits of which are phased out as income rises. ObamaCare provides still another one, by offering insurance subsidies that also phase out. …these programs…add to what is already a steep effective marginal tax rate for those in the phase-out range.

In other words, the redistribution programs alter incentives to work since people implicitly calculate the costs and benefits of productive behavior.

Mulligan figures the top rate for these families eligible for various federal aid programs went from 40% to 48% in the immediate aftermath of the recession. In other words, for every extra dollar someone eligible for various aid programs makes, they lose 48% from taxes and benefit reductions. …Mulligan says. “The more you help low-income people, the more low-income people you’ll have. The more you help unemployed people, the more unemployed people you’ll have.”

John is right to cite Prof. Mulligan’s work.

I cited his work last year showing how Obamacare undermined incentives to work. And other academics have reached the same conclusion.

Regarding the broader issue of redistribution and dependency, I argue that federalism is the best approach, both because states will face competitive pressure to avoid excessively generous benefits and because states will learn from each other about the best ways to help the truly needy while minimizing the negative impact of handouts on incentives for productive behavior.

Or we could just keep the current system, which is bad for both poor people and taxpayers.

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

P.P.S. If you want some jokes referencing the disability program, we have the politically correct version of The Little Red Hen, as well as two very similar jokes about Jesus performing miracles and how liberals differ from conservatives and libertarians.

P.P.P.S. Switching to a different topic, the IRS is whining that it needs to a bigger budget to better “service” taxpayers.

The Washington Examiner has a great editorial on the topic. Here are some of the better passages.

Oh, those poor dears at the IRS. They wasted $50 million on 225 conferences between 2010 and 2012, including a single $4.1 million conference in Anaheim, Calif. They wasted $50,000 creating bad videos on the clock, including one of the worst Star Trek parodies in the history of the Internet. They gave raises and bonuses to employees who hadn’t paid their own taxes. They were caught targeting applicants for nonprofit status based on their ideology and potential opposition to President Obama. They lied to Congress about being unable to recover emails from those involved.

Yet the bureaucracy still wants more money.

IRS Commissioner John Koskinen warned that taxpayers would suffer… But according to a new report by the House Ways and Means Committee, these inconveniences were the result of IRS malingering – of budgetary choices made within the agency itself….“Spending decisions entirely under the IRS’s control led to 16 million fewer taxpayers receiving IRS assistance this filing season,” said the report. “Other spending choices, including prioritizing employee bonuses and union activity on the taxpayer’s dime, used up resources that otherwise could have been used to assist another 10 million taxpayers.” This is a classic example of how federal bureaucrats take revenge when their budgets are cut. Instead of prioritizing limited resources in order to fulfill their agencies’ missions, they find ways to transfer the maximum amount of pain directly to taxpayers, so as to teach the country a lesson about how indispensable they are.

In other words, a classic example of the “Washington Monument ploy.”

Though not as outrageous as the crass behavior of the politicized National Park Service.

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As shown by this graphic, why are so many people in Maine taking advantage of the food stamp program? As shown by this map, why does Oregon have such a high level of food stamp dependency?

These are just rhetorical questions since I don’t have the answers. But if we can come up with good answers, that could lead to better public policy.

After all, if we want a self-reliant citizenry, it would be better if people were more like those in Nevada and less like the folks in Vermont, at least based on the infamous Moocher Index.

But one thing we can say with certainty is that the food stamp program has morphed into a very expensive form of dependency.

Jason Riley of the Wall Street Journal opines on the importance of reforming this costly entitlement.

Officially known as the Supplemental Nutrition Assistance Program, or SNAP, the food-stamp program has become the country’s fastest-growing means-tested social-welfare program. …Between 2000 and 2013, SNAP caseloads grew to 47.6 million from 17.2 million, and spending grew to $80 billion from $20.6 billion… SNAP participation fell slightly last year, to 46.5 million individuals, as the economy improved, but that still leaves a population the size of Spain’s living in the U.S. on food stamps. …The unprecedented jump in food-stamp use over the past six years has mostly been driven by manufactured demand. The Obama administration has attempted to turn SNAP into a middle-class entitlement by easing eligibility rules and recruiting new food-stamp recipients. …Democrats tend to consider greater government dependence an achievement and use handouts to increase voter support. The president considers European-style welfare states a model for America.

Making America more like Greece, however, is not good news for taxpayers.

But the program also has negative effects on recipients. Contrary to the left’s narrative, we don’t have millions of starving people in America.

…it now operates more like an open-ended income-supplement program that discourages work. Some 56% of SNAP users are in the program for longer than five years, which suggests that the assistance is being used by most recipients as a permanent source of income, not as a temporary safety net. …“Today, instead of hunger, the central nutritional problem facing the poor, indeed all Americans, is not too little food but rather too much—or at least too many calories,” Douglas Besharov, who teaches courses on poverty alleviation at the University of Maryland, told the House Agriculture Committee last month. “Despite this massive increase in overweight and obesity among the poor, federal feeding programs still operate under their nearly half-century-old objective of increasing food consumption.

So why don’t we try to help both taxpayers and low-income Americans by reforming the program, specifically by “block-granting” it to the states?

Uncle Sam picks up almost all of the bill. That means states have little incentive to control costs. Republicans argue that shifting to block grants would not only save money but also encourage states to increase the labor-participation rate of low-income populations. A state that has only so much money to work with is more likely to promote self-sufficiency in the form of employment, job-search and job-training requirements for able-bodied adults on the dole.

Decentralization, Riley explains, worked very well in the 1990s with welfare reform.

…1996 reforms…imposed more stringent time limits and work requirements on welfare recipients enrolled in programs like Temporary Assistance for Needy Families, or TANF. Welfare rolls subsequently plunged. By 2004, caseloads had fallen by 60% overall and by at least 30% in nearly every state. Child poverty, black child poverty and child hunger also decreased, while employment among single mothers rose. This was a welcome outcome for taxpayers, poor people and everyone else—except those politicians with a vested interest in putting government dependence ahead of self-sufficiency to get elected and re-elected.

So kudos to Republicans on Capitol Hill for proposing to put the states in charge of food stamps.

Just like they also deserve applause for working to block-grant the Medicaid program.

This is something that should happen to all mean-tested programs. Once they’re all back at the state level, we’ll get innovation, experimentation, and diversity, all of which will help teach policy makers which approaches are genuinely in the best interests of both taxpayers and poor people (at least the ones seeking to escape dependency).

Though I can’t resist adding one caveat. The ultimate goal should be to phase out the block grants so that states are responsible for both raising and spending the money.

Let’s close with a few real-world horror stories of what we’re getting in exchange for the tens of billions of dollars that are being spent each year for food stamps.

With stories like this, I’m surprised my head didn’t explode during this debate I did on Larry Kudlow’s show.

P.S. Shifting to another example of government waste, let’s look at the latest example of overspending and mismanagement by the Department of Veterans Affairs.

Nothing, of course, can compare with the horrible outrage of bureaucrats awarding themselves bonuses after putting veterans on secret waiting lists and denying them care.

But having taxpayers pay nearly $300,000 just so a bureaucrat can move from one highly paid job in DC to another highly paid job in Philadelphia should get every American upset. Here are some of the sordid details from a local news report.

Rep. Jeff Miller (R., Fla.), who chairs the House Veterans Affairs Committee, has also raised questions about the salary and “relocation payments” to the new director of the Philadelphia office, Diana Rubens. Rubens, who was a senior executive in the D.C. office when she was tapped in June to take over the troubled Philadelphia branch, received more than $288,000 in relocation expenses. “The government shouldn’t be in the business of doling out hundreds of thousands in cash to extremely well-compensated executives just to move less than three hours down the road,” Miller said. …Under federal regulations, an agency can pay a variety of costs associated with reassigning an employee, including moving, closing costs, and a per-diem allowance for meals and temporary lodging for the employee’s household.

I’m baffled at how somebody could run up such a big bill. Did she use the space shuttle as a moving van?

Did she have to stay six months at a 5-star resort while waiting for her new house to be ready?

Does a per-diem allowance allow three meals a day at the most expensive restaurant in town?

This is either a case of fraud, which is outrageous, or it’s legal, which means it’s an outrageous example of government run amok.

Regardless, it underscores what I wrote back in 2011.

I will never relent in my opposition to tax increases so long as the crowd in Washington is spending money on things that are not appropriate functions of the federal government. …I will also be dogmatic in my fight against higher taxes so long as there is massive waste, fraud, and abuse in federal programs.

Not to mention that we should never allow tax hikes when it’s so simple to balance the budget with modest spending restraint.

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Sweden is an odd country, at least from the perspective of public policy.

On the positive side, it has private Social Security accounts. It has an admirable school choice system. And it was a good role model of spending restraint back in the 1990s.

But on the negative side, Sweden has one of the world’s biggest welfare states. Even after the spending restraint of the 1990s, the public sector consumes about 50 percent of economic output. And that necessitates a punitive tax code.

There’s also a truly perverse fixation on equality. And you won’t be surprised to learn that the government-run healthcare system produces some unpleasant outcomes.

Today, let’s build on our understanding of Sweden by looking at how the country’s welfare state interacts with the immigration system.

Writing for CapX, Nima Sanandaji discusses these issues in his adopted country of Sweden.

Sweden has had an unusually open policy towards refugee and family immigrants. The Swedish Migration Agency estimates that around 105,000 individuals will apply for asylum only this year, corresponding to over one percent of Sweden’s entire population.

This openness is admirable, but is it successful? Are immigrants assimilating and contributing to Sweden’s economy?

Unfortunately, the answer in many cases is no.

…the open attitude towards granting immigrants asylum is not matched by good opportunities on the labor market. An in-depth study by the daily paper Dagens Nyheter shows that many migrants struggle to find decent work even ten years after entering the country. …The median income for the refugees in the group was found to be as low as £880 a month. The family immigrants of refugees earned even less. Ten years after arriving in the country, their median income was merely £360 a month. These very low figures suggest that a large segment of the group is still relying on welfare payments. Dagens Nyheter can show that at least four out of ten refugees ten years after arrival are supported by welfare. The paper acknowledges that this is likely an underestimation.

So what’s the problem? Why are immigrants failing to prosper?

Nima suggests that government policies are the problem, creating perverse incentives for long-term dependency.

To be more specific, the country’s extravagant welfare state acts as flypaper, preventing people from climbing in the ladder of opportunity.

The combination of generous benefits, high taxes and rigid labour regulations reduce the incentives and possibilities to find work. Entrapment in welfare dependency is therefore extensive, in particular amongst immigrants. Studies have previously shown that even highly educated groups of foreign descent struggle to become self-dependent in countries such as Norway and Sweden. …The high-spending model is simply not fit to cope with the challenges of integration.

The part about “highly educated groups” is particularly important since it shows that the welfare trap doesn’t just affect low-skilled immigrants (particularly when high tax rates make productive activity relatively unattractive).

So what’s the moral of the story? Well, the one obvious lesson is that a welfare state is harmful to human progress. It hurts taxpayers, of course, but it also has a harmful impact on recipients.

And when the recipients are immigrants, redistribution is especially perverse since it makes it far less likely that newcomers will be net contributors to a nation.

And that then causes native populations to be less sympathetic to immigration, which in unfortunate since new blood – in the absence of bad government policy – can help boost national prosperity.

Though let’s at least give Sweden credit. I’m not aware that its welfare programs are subsidizing terrorism, which can’t be said for the United Kingdom, Australia, France, or the United States.

P.S. Here’s my favorite factoid about Sweden.

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Bad ideas definitely have the ability to cross borders.

The income tax first appeared in England, on a temporary basis during the Napoleanic wars and then permanently in 1842. It then spread like a cancer to other parts of the world, eventually reaching – and plaguing – the United States starting in 1913.

Government-run Social Security schemes were started by the Germans in 1889 under Chancellor Otto von Bismarck. Similar programs then were adopted elsewhere, including the United States as part of FDR’s misguided New Deal in 1935.

Now we have another example.

I wrote last month about how the State Department’s refugee program is a trainwreck because it is bringing Somalis (many of whom have an anti-Western ideology) to America and trapping them in government dependency with a plethora of handouts (and also creating a breeding ground for terrorists).

Well, our cousins in the United Kingdom also have a refugee program that is similarly counterproductive.

I don’t know which country was dumb enough to first create its program, but the Brits win the prize for subsidizing the most infamous terrorist (and new member of the Moocher Hall of Fame).

Here are some excerpts from a story in the U.K.-based Daily Mail.

Jihadi John and his asylum-seeking family have milked the British benefits system for 20 years, the Mail can reveal today. Housing the Islamic State executioner and his relatives in affluent parts of London has cost taxpayers up to £400,000. One landlord said Mohammed Emwazi’s family were ‘parasites’ and ‘tenants from hell’. Incredibly, they are still believed to be pocketing £40,000 a year in handouts despite there being no sign of them in Britain. …Westminster City Council is still paying the rent on the family’s £600,000 flat even though the rules say housing benefit should normally be stopped after 13 weeks.

So did all these handouts to the Emwazi family turn them into good citizens?

Hardly. One of the kids, Mohammed Emwazi has gone to the Middle East to fight for ISIS and is now infamous at “Jihadi John,” the psychopath that beheads innocent people.

MPs said they were horrified that the child of a family given refugee status, citizenship and benefits had returned the favour by orchestrating the murder of two of its citizens. …In sickening propaganda videos, his son led the beheadings of Britons Alan Henning and David Haines.

But even if Jihadi John hadn’t turned into a nutjob, British taxpayers still got a very bad deal from the Emwazi clan.

The family apparently is still on the dole, continuing an unbroken 20-year tradition of mooching off British taxpayers.

During their time in Britain, neither Jasem nor Ghaneya officially worked. …With a 12-year-old daughter, Hana, they are still believed to be claiming an estimated £7,821 a year in child benefits and child tax credits. That is on top of annual claims of about £23,400 in housing benefit, £678 in council tax support and £5,929 in jobseeker’s allowance.

Looking at this result, logical people might be tempted conclude that it’s time to rethink refugee programs.

Or, at the very least, change the rules that funnel these people into government dependency.

But since many politicians aren’t logical, there are probably British versions of Barack Obama who are urging job training programs or similar nonsense (for a humorous take on that topic, see the cartoons at the bottom of this post).

P.S. Jihadi John featured in one of the most effectively snarky anti-Obama cartoons I’ve ever seen, which is at the end of this post.

P.P.S. Switching to a different topic, I’ve written (some would say ad nauseam) about disproportionately generous pay and benefits for government bureaucrats. Particularly for the gilded class in Washington.

I think the evidence for excessive bureaucratic compensation is ironclad, particularly if you look at “quit rates” by sector.

But now we have yet another piece of evidence that the federal workforce is living on Easy Street. Check out this new polling data from Gallup.

Remember, this is polling data with federal workers describing their own status, not what taxpayers think.

So let’s give 44 percent of bureaucrats credit for honesty, which is ironic because bureaucrats in polls have acknowledged they’re more likely to be dishonest! And lazy as well.

Though the real moral of the story is not compensation. As I explain at the end of this video, the real problem is that many government jobs shouldn’t exist in the first place.

P.P.P.S. If you want to enjoy bureaucrat humor, click here, here, here, here, here, here, here, here, here, and here.

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While immigration is a very contentious issue for the politicians in Washington, there’s actually some level of agreement among people in the real world.

Almost everybody agrees that it would be foolish and short-sighted not to allow some immigration, particularly from young, educated people with valuable skills.

Similarly, there is widespread agreement that you can’t have completely open borders, particularly for those who are unlikely to be net contributors to the economy.

So the real debate (and this is where there is a lot of room for disagreement) is who gets to come to America and under what conditions.

I don’t raise this issue because I have any wise words – much less proposed solutions – on the overall issue of immigration.

Instead, let’s look at the profoundly perverse way that the federal government is using the refugee program to expand the problem of dependency.

Here are some excerpts from a disturbing story in the Washington Times.

The State Department has helped to relocate tens of thousands of refugees from the war-torn African nation of Somalia to Minnesota, where they can take advantage of some of America’s most generous welfare and charity programs. …Most of Minnesota’s Somali population started off as legal refugees through a program administered by the U.S. State Department through the Bureau of Population, Refugees, and Migration. Minnesota was selected among the nation’s states for relocation primarily because of its robust entitlement offerings.

Gee, isn’t that wonderful. We’re bringing people into the country and settling them where they can get the largest amount of handouts.

And apparently that’s Minnesota, the France of America.

“Minnesota is exceptional in many ways but it’s the closest thing in the United States to a true social democratic state,” said Ahmed Samatar, a professor of international studies at Macalester College, in St. Paul. “That translates into the way Somali refugees have been received here they’ve been given a secure environment, housing, education, health care, perhaps even some minimum income to sustain them until they can stand on their own feet. That’s all provided by Minnesota,” said Mr. Samatar, who has tracked the State Department’s refugee program. Outside Alaska, Minnesota spends more per low-income person on public welfare than any other state in the U.S., according to a report by the Center for the American Experiment, a think tank located in Minneapolis. The report found Minnesota outspent its average peer state in welfare subsidies by nearly $4,000.

Oh, just in case you’re thinking that maybe the situation isn’t so bad because at least private charities are involved, it turns out that those organizations are simply contractors for the government.

…the…charitable organizations operating within the state with which the State Department contracts …In addition to its generous welfare subsidies, Minnesota also has a number of charitable organizations that contract with the State Department like Lutheran Social Services, Catholic Charities, and World Relief Minnesota.

In other words, taxpayers are getting hit twice, once for official welfare payments and once for coerced “charity” laundered through groups jostling for space at the public trough.

At this point, you may be wondering whether all this spending is having a desirable effect?

As taxpayers, are we getting value for our money?

Yes, but only if you define dependency and unemployment as valuable.

Even though Minnesota has a good job market, that doesn’t seem to have translated into jobs for the Somali refugees. Minnesota’s state demographer’s office reports that only 41 percent of Somali men are working and 54 percent of Somali women are employed, meaning many may rely on the state’s handouts to survive, and are more susceptible to extremists pull. “It seems safe to assume that if they’re not working, then they’re likely receiving public welfare benefits,” said Peter Nelson, director of public policy at the Center of the American Experiment.

Amazingly, the left-wing governor of the state has doubled down on failure, expanding handouts.

Gov. Mark Dayton has expanded the state’s entitlement programs, although he remains mum on the state’s expense at doing so.

Though, to be fair, maybe he doesn’t care because Uncle Sam is the sugar daddy, picking up a big part of the tab.

“The state of Minnesota receives funding through the federal Department of Health and Human Services, Office of Refugee Resettlement to promote the successful resettlement and integration of refugees in Minnesota,” said a spokeswoman at the state’s Department of Human Services. …Minnesotans have also welcomed them onto their entitlement rolls, with the state’s cash assistance and food stamp programs, skyrocketing in recent years. The number of Somali adults and children who participated in the Minnesota’s family cash assistance program jumped 34 percent from 2008 to 2013, according to the state’s statistics. Likewise, Minnesota’s food assistance participation increased 98 percent, to 17,300 adults and children, which does not include U.S.-born Somalis, in the same timeframe.

At this point, you’re probably very upset. At least if you’re a taxpayer.

After all, haven’t we learned from painful experience that redistribution subsidizes poverty?

But I’ve saved the “best” for last.

…the effort is having the unintended consequence of creating an enclave of immigrants with high unemployment that is both stressing the state’s safety net and creating a rich pool of potential recruiting targets for Islamist terror groups. This population is…being targeted by Islamist terror organizations like the Islamic State and al-Shabab, a Somalia-based group with links to al Qaeda, according to U.S. officials. Among Minnesota-based Somali-Americans, American converts to Islam or Somali refugees, there have been numerous convictions for various levels of collaboration with Islamist terror groups, plus reports of fighting with al-Shabab or other Islamist groups.

Yup, tax dollars for terrorists.

It seems that these bums want a little excitement in their lives.

So they’re joining al-Shabab.

Since 2008, as many as 40 men from Minneapolis have joined Islamist groups after being pulled in by jihadists through social media, federal officials say. Last year, an American youth named Douglas McAuthur McCain died in Syria fighting for the Islamic State. Mr. McCain was recruited in Minnesota, where he lived. In 2009, another Minnesota youth, Troy Kastigar posted a recruiting video for al-Shabab before he was killed fighting for the terrorist group in Somalia. Kastigar and McCain are thought to have been friends. That same year a Somali man who left Minneapolis joined al-Shabab and blew himself up in a suicide bombing at an Ethiopian consulate in Somalia, killing 24 people.

Just like the Tsarnaev brothers. Just like the deadbeat scrounger from Australia, the nutjob moocher from the United Kingdom, and the wacko sponge in France.

So now let’s circle back to our main question. Why is the federal government bringing people into the country, luring them into dependency, and subsidizing terrorism?

Leftists sometimes like to tell us that “Government is simply the name for the things we do together.”

Well, “we” do some really stupid stuff when we act “together” through government.

Instead of a misguided refugee program that steers dodgy people into dependency, why not – with a condition of no handouts or dependency – open the door to Chinese engineers? Romanian software experts? Or Indian scientists? How about Nigerian businessmen? Maybe French doctors?

But I guess people who would assimilate and contribute to our economy aren’t as attractive as welfare recipients who despise our culture.

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Since I’m in the United Kingdom, it’s appropriate to announce that another Briton has been elected to the Moocher Hall of Fame.

Ms. Kay Bird deserves this “honor” because it takes a very reprehensible entitlement mentality to brag about taking a global holiday with welfare cash.

And we’re talking about a global holiday that appears to be far more extravagant than the foreign trips enjoyed by Natalija, another member of the Moocher Hall of Fame.

Here are some of the jaw-dropping details from a report in the U.K.-based Daily Mail.

A single mother on benefits has admitted spending £3,000 of taxpayers’ cash on a dream round-the-world trip to far flung destinations with her 10-month-old baby daughter. ...she still receives more than £8,500 a year in child benefit, income support and tax credits as it is considered that she has a low income. …she visited places such as Australia, Bali and Dubai. Miss Bird says she could work but chooses not to… She said: ‘No, I don’t need the money as such and I didn’t need to go travelling either but I wanted to so I did. ‘If someone’s offering you free money and telling you to take it, you’d have to be a fool not to – that’s all I did. …‘I don’t feel guilty and I don’t regret it. It started off just as a ­holiday to Athens, then things started to fall into place.

Let’s think through her statement about “free money.” Is she really so clueless that she doesn’t realize that her handouts are only possible because other people are actually working and producing?

She says “I don’t feel guilty,” which is remarkable because I doubt taxpayers who financed her jaunt have ever been to Dubai and Bali.

‘Each time some more money landed in my account, I booked something. ‘I started booking flights and accommodation in Europe in October and was booking something with every payment until a few days before I went.’ …She also visited Athens, Istanbul, Dubai, Colombo in Sri Lanka, Kuala Lumpur, Jakarta, Bali and Darwin before returning home via Amsterdam. In total, she spent four months worth of her benefits cash on the trip, paying for 13 flights, travel visas, accommodation and spending money. Her benefits continued to be paid into her bank account while she was away and she returned to the UK just before the five-week travel limit imposed on people claiming Jobseekers’ Allowance.

I have to confess that I’m mystified how someone who chooses not to work can get a handout called “jobseekers’ allowance.” I wonder if MHoF members Danny and Gina are benefiting from the same scam?

In any event, the bureaucrats seem more concerned with enabling welfare fraud than in protecting the interests of taxpayers.

She added: ‘I went to the job centre and told them I wanted to go travelling and they told me there was a five-week limit. I came home just within those five weeks so my benefits didn’t get cut off.’ …she was claiming £90 a week income support, £90 a month child benefit and £230 a month in tax credits. She said: ‘I told them I wanted to register back in the country and they told me I was already eligible for Jobseekers’ Allowance. ‘Then a couple of weeks later they said I could switch to income support which meant I didn’t even have to apply for jobs. ‘Then I was told I could get tax credits, too. I was really shocked at how generous it was but I wasn’t going to turn it down.’

I’m sure British taxpayers will be delighted to learn that Ms. Bird is already planning her next welfare-financed overseas holiday.

Now she says she is planning her next luxury trip for herself and daughter which will be to New Zealand. …She explained: ‘I’m not your regular single mum on benefits who spends it all in McDonald’s and never leaves the town they were born in. ‘I’m changing the image of what it is to be a benefits mum and proving that if you do it the right way, you can have ­anything you want. …’Of course people are negative and many people get very jealous. ‘But I had only been out of Europe once before I went on benefits and now I’ve had the chance to see some incredible things from tropical beaches to the ­skyscrapers of Dubai. ‘I never would have been able to afford it without benefits.’

Gee, doesn’t that warm your heart. She’s a trailblazer, showing other deadbeats how you can live like a jet-setter with other people paying the bills!

Yes, Ms. Bird definitely deserves to be in the Moocher Hal of Fame.

P.S. Since we’re talking about reprehensible welfare moochers, let’s shift from the U.K. to Australia.

It appears that there are lots of Aussie Muslims who want to join the “Terror Wing” of the Moocher Hall of Fame.

Here are some excerpts in a story from the Aussie-based Daily Telegraph.

A federal investigation into the welfare status of Australian foreign fighters, prompted last year by revelations in The Telegraph, shows 96 per cent had been on welfare benefits when they fled to the Middle East. Most had continued to collect payments from Australian taxpayers while training with Islamic State to become terrorists intent on wanting to kill Australians. The investigation has captured the records of 57 Australians who left the country before October last year to fight with the Islamic State. Of that number 55 have been confirmed to have been on welfare payments.

Wow, 96 percent of the identified terrorists who came from Australia were subsidized by taxpayers.

And there are more welfare-fueled terrorists on the way, perhaps recruited by Abdul, who’s been sponging off Australian taxpayers for about two decades.

Since then, an estimated 50 more Australians have ­illegally travelled to the Middle East to join IS, with most believed to have been claiming some form of benefit. A subsequent audit of this group confirmed that most had been at one time in ­receipt of benefits such as Newstart, sickness, youth and carer’s allowances, as well as the Disability Support Pension.

So let’s summarize. Able-bodied young men who are healthy enough to join a fight in the Middle East somehow were somehow so helpless that they needed welfare handouts to survive in Australia.

In reality, of course, these low-life deadbeats surely were capable of working, but they doubtlessly thought it was wonderful that the people they hate were subsidizing their sloth.

All the more reason why policymakers in all nations should reduce the size of the welfare state.

But it’s equally important to decentralize so that local and regional governments are responsible for redistribution programs. Under such an approach, I suspect we’d be far more likely to see the imposition of standards to preclude mooching by able-bodied adults, whether they’re run-of-the-mill moochers or terrorists-in-training.

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There’s a famous quote, commonly  attributed to Alexis de Tocqueville, about the American character.

America is great because America is good. If America ever stops being good, it will stop being great.

What makes this quote so popular (even though Wikipedia says it’s not actually from de Tocqueville) is the instinctive understanding that a society’s success is at least in part driven by the moral character of its people.

And even if the quote is incorrectly attributed, it clearly is something that could have come from de Tocqueville. In his writings, he openly acknowledged that good laws were only part of what’s needed for a successful society.

The best laws cannot make a constitution work in spite of morals; morals can turn the worst laws to advantage.

This is spot on. A nation is far more likely to be successful if people have the right attitudes, what’s variously referred to as social capital, national character, cultural capital, civics, or tradition.

Here’s what I wrote about the topic last year.

…social capital…refers to the attitudes of a country’s people….Do the people of a nation believe in the work ethic? Or would they be comfortable as wards of the state, living off others? Are they motivated by the spirit of self-reliance? Would they be ashamed to go on welfare? Do they think the government is obligated to give them things? The answers to these questions matter a lot because a nation can’t prosper once you reach a tipping point of too many people riding in the wagon and too few people producing.

I fear that many nations, such as France and Greece, have already reached the point of no return. And I’m worried America is on the same path.

That’s the main reason I created the Moocher Hall of Fame. Yes, taxpayers should get outraged how their money is being wasted, but the far bigger problem is the mentality, present is an ever-growing number of people, that there’s nothing wrong with living off the government.

Sort of as depicted by this Lisa Benson cartoon.

Though it would be more accurate to say that too many people are opting to live off the work of others. After all, the government doesn’t have money to redistribute unless it is taxed or borrowed from those who earned it.

But enough of my amateur commentary, which only scratches the surface of this issue. For those who want deep expertise and knowledge on the topic, I’m delighted (in a very pessimistic and dour sense of the word) to share some excerpts from a superb article in National Affairs by Nicholas Eberstadt, who is a scholar at the American Enterprise Institute.

He starts by explaining that an ever-growing share of the population is receiving handouts and that this pattern is a threat to American exceptionalism.

Asking for, and accepting, purportedly need-based government welfare benefits has become a fact of life for a significant and still growing minority of our population: Every decade, a higher proportion of Americans appear to be habituated to the practice. If the trajectory continues, the coming generation could see the emergence in the United States of means-tested beneficiaries becoming the majority of the population. …nearly half of all children under 18 years of age received means-tested benefits (or lived in homes that did). For this rising cohort of young Americans, reliance on public, need-based entitlement programs is already the norm — here and now. It risks belaboring the obvious to observe that today’s real existing American entitlement state, and the habits — including habits of mind — that it engenders, do not coexist easily with the values and principles, or with the traditions, culture, and styles of life, subsumed under the shorthand of “American exceptionalism.” Especially subversive of that ethos, we might argue, are essentially unconditional and indefinite guarantees of means-tested public largesse.

For those who prefer hard numbers, here is a chart from his article.

There’s so much interested data and analysis in the article, that it’s difficult to choose only a few things to highlight. But these passages are particularly depressing.

The corrosive nature of mass dependence on entitlements is evident from the nature of the pathologies so closely associated with its spread. Two of the most pernicious of them are so tightly intertwined as to be inseparable: the breakdown of the pre-existing American family structure and the dramatic decrease in participation in work among working-age men. When the “War on Poverty” was launched in 1964, 7% of children were born outside of marriage; by 2012, that number had grown to an astounding 41%, and nearly a quarter of all American children under the age of 18 were living with a single mother. …As for men of parenting age, a steadily rising share has been opting out of the labor force altogether. Between 1964 and early 2014, the fraction of civilian men between the ages of 25 and 34 who were neither working nor looking for work roughly quadrupled, from less than 3% to more than 11%. In 1965, fewer than 5% of American men between 45 and 54 years of age were totally out of the work force; by early 2014, the fraction was almost 15%. …mass gaming of the welfare system appears to be a fact of modern American life. The country’s ballooning “disability” claims attest to this. Disability awards are a key source of financial support for non-working men now, and disability judgments also serve as a gateway to qualifying for a whole assortment of subsidiary welfare benefits. Successful claims by working-age adults against the Social Security Disability Insurance (SSDI) program rose almost six-fold between 1970 and 2012 — and that number does not include claims against other major government disability programs, such as SSI.

Ugh. It’s almost as if this Chip Bok cartoon is becoming a depiction of American reality.

To close, here are some excerpts that put the issue of dependency in broader context.

The burning personal ambition and hunger for success that both domestic and foreign observers have long taken to be distinctively American traits are being undermined and supplanted by the character challenges posed by the entitlement state. The incentive structure of our means-based welfare state invites citizens to accept benefits by showing need, making the criterion for receiving grants demonstrated personal or familial financial failure, which used to be a source of shame. …The entitlement state appears to be degrading standards of citizenship in other ways as well. For example, …The late senator Daniel Patrick Moynihan once wrote, “It cannot too often be stated that the issue of welfare is not what it costs those who provide it, but what it costs those who receive it.” The full tally of those costs must now include the loss of public honesty occasioned by chronic deception to extract unwarranted entitlement benefits from our government…collusive bipartisan support for an ever-larger welfare state is the central fact of politics in our nation’s capital today, as it has been for decades. Until and unless America undergoes some sort of awakening that turns the public against its blandishments, or some sort of forcing financial crisis that suddenly restricts the resources available to it, continued growth of the entitlement state looks very likely in the years immediately ahead.

So what’s the answer to this mess?

Without question, the first step is to get Washington out of the business of imposing a one-size-fits-all system on the country.

Simply stated, take the money in Washington that is spent on all redistribution programs, lump those funds into a block grant, and then turn the money over to the states and give them free rein to decide how best to alleviate poverty without creating discomfort.

Republicans, to their credit, already have proposed that solution for Medicaid. But they need to expand that legislation to other means-tested programs.

The real key to success, though, is slowly but surely phasing out the block grant. It’s good to give states flexibility in spending money, but you won’t get responsible decisions unless states – at some point – are also responsible for raising the money.

In other words, the answer is federalism. And because this means jurisdictional competition, we’re quite likely to get better policy. After all, if crazy states such as California, New York, and Illinois want to impose high tax rates to fund overly generous handout, they’ll quickly learn why that’s a bad idea since productive people will emigrate and welfare recipients will immigrate.

Ideally, state lawmakers will decide that welfare programs should focus on people with genuine material deprivation and not ….

Writing about Eberstadt’s article, George Will highlights the fact that you no longer have to be poor to get freebies from federal anti-poverty programs.

Between 1983 and 2012, the population increased by almost 83 million — and people accepting means-tested benefits increased by 67 million. So, for every 100-person increase in the population there was an 80-person increase in the recipients of means-tested payments. Food stamp recipients increased from 19 million to 51 million — more than the combined populations of 24 states. What has changed? Not the portion of the estimated population below the poverty line (15.2 percent in 1983; 15 percent in 2012). Rather, poverty programs have become untethered from the official designation of poverty: In 2012, more than half the recipients were not classified as poor but accepted being treated as needy.

And as you read that passage, keep in mind that the poverty line in America is well above the average level of income in most parts of the world.

But the left wants to redefine poverty in ways that enable redistribution to people who aren’t poor.

P.S. Here’s a great video on differences between the United State and Europe. And here’s a video that is best described as the result of an affair between Dr. Seuss and a think tanker.

P.P.S. Here’s a superb Chuck Asay cartoon on how government undermines social capital. And here’s a Michael Ramirez cartoon making the same point.

P.P.P.S. If you enjoy satire, here’s a book of left-wing nursery rhymes.

P.P.P.P.S. And if you want to know one of my fantasies (which deals with the entitlement mindset), click here.

P.P.P.P.P.S. Last but not least, here’s the famous set of cartoons showing the rise and (inevitable) fall of the welfare state.

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If the Moocher Hall of Fame ever moves from the virtual world to brick-and-mortar reality, it’s going to need a lot of space.

That’s because, to use a politically correct term, many of the featured freeloaders are plus-sized.

Stanley looks like a rather robust eater, which is somewhat disturbing on more than one level since he gets disability checks that allow him to fulfill his fantasy of wearing diapers and being an “adult baby.”

Lazy Robert doesn’t look like he misses many meals, and he obviously has plenty of time to enjoy fine dining in Copenhagen since he proudly brags that he’s been living off Danish taxpayers for about 15 years.

Christina’s handouts are so generous that she’s had enough money to eat her way into a size-26 dress, yet she has the gall to complain that taxpayers won’t subsidize a gym membership.

 Now we have another plus-sized honoree. Or, in this case, honorees.

That’s because the U.K.-based Telegraph is reporting on a mother-daughter team that is living large at taxpayer expense.

A mother and daughter who get £34,000 a year in handouts because they are too fat to work say they’d rather be happy and on benefits than depressed and thin. Janice and Amber Manzur weigh a total of 43 stone and are so overweight they have to use mobility scooters to get around.But both women refuse to diet… Ms Manzur lives in a three-bedroom house that has been customised by the council to accommodate her disability and drives a Fiat Quibo disability car worth around £15,000. …The two women, from Kirkcaldy, Fife, jointly receive close to £33,600 benefits a year. That’s the equivalent of a £46,000 salary before tax. …She gets £400 Employment and Support Allowance a month and £430 to cover the rent on her flat. Miss Manzur also gets disability allowance because she is obese and has recurring problems with her leg.

The entitlement mentality is what makes this pair special.

She said: “People shouldn’t judge me or my mum for how big we are because it’s in our genes. “I’ve never been on a diet or to a gym and I don’t even eat that much junk food. It’s my natural build to be this big and I’m happy to not work anymore. We can’t help it, so why bother fighting it?” …Ms Manzur started claiming benefits in 2006 when she left her job as a manager in a call centre because of weight-related health problems. She was forced to argue her case for disability pay after a tribunal claimed if she wanted to work she could lose weight. Ms Manzur won and now gets £620 Employment and Support Allowance and £320 Disability Living Allowance a month. …Miss Manzur’s council-paid flat has been modified to cater for her disability. It has no stairs, a low front door so she can drive her disability scooter inside and a bath with a seat for easy access. The two women are able to spend much of their free time together. Janice said: “We live less than a mile apart. I have the car, so I drive round to her or pick her up. We spend a lot of time together and often go out on our matching mobility scooters. “I watch telly a lot and I also like reading and I recently brought a Kindle with my benefits.”

I’m sure British taxpayers are happy that they’re subsidizing matching scooters, kindles, special cars, redesigned flats, and other goodies that enable the Manzurs to live an unhealthy lifestyle.

By the way, my concern isn’t that the Manzurs eat a lot. As far as I’m concerned, people should eat as much or as little as they like and be whatever size floats their boat. Moreover, I’m in no position to throw stones since I should drop at least 15 pounds.

But I do get very agitated when bad government policies subsidize bad behavior. And the bad behavior I’m referring to is indolence, not over-eating.

Though it’s easy to see why the Manzurs got sucked into a welfare lifestyle. They’re getting the equivalent of more than $50,000 per year to “watch telly” and eat.

But if they chose productive behavior, they would get hit with punitive taxes and have less disposable income (we have the same self-destructive policy in America, and it’s getting worse thanks to Obamacare).

In other words, the Manzurs are responding to bad incentives. You get to live a better lifestyle if you goof off all day.

P.S. The Brits actually have a reality-TV program called Benefits Street, which shows how redistribution ruins lives and creates inter-generational dependency.

P.P.S. British taxpayers at least can be thankful that the U.S. government wasn’t in charge of procuring the kindle for Ms. Manzur.

P.P.P.S. And British taxpayers can also be thankful that the government has recently implemented some welfare reforms that are encouraging work over dependency.

P.P.P.P.S. Though to end on a grim note, the government-run healthcare system in the United Kingdom remains unchanged and is the source of numerous horror stories.

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The modern welfare state is a disaster. But rather than go into lengthy details, let’s simply look at some very powerful images (click for enlarged view).

Probably the most damning evidence is that the poverty rate in America was steadily falling after World War II. But then Lyndon Johnson declared a “war on poverty” and got Washington more involved in the business of income redistribution. So what happened? The poverty rate stopped falling.

But it’s also sobering to see how much money is being spent on income-redistribution programs. Taxpayers at the federal, state, and local level are coughing up more than $1 trillion every year to subsidize poverty. To give an idea of how much inefficiency and waste permeates the system, this is enough to give every poor household $60,000.

Poor people are among the biggest victims of the welfare state. Redistribution programs create a dependency trap because of very high implicit tax rates on productive behavior. Simply stated, handouts are so generous that poor people who enter the labor force generally will have lower living standards than those who remain wards of the state.

 So what’s the solution to this mess?

Fortunately, we have a case study that points us in a productive direction.

The Bill Clinton-era welfare reforms, pushed through by Republicans in Congress, were a big success. Here are some excerpts from an article written by an expert at the Brooking Institution.

Between 1994 and 2004, the caseload declined about 60 percent, a decline that is without precedent. The percentage of U.S. children on welfare is now lower than it has been since at least 1970. …More than 40 studies conducted by states since 1996 show that about 60 percent of the adults leaving welfare are employed at any given moment and that, over a period of several months, about 80 percent hold at least one job. …Again, these sweeping changes are unprecedented. …Equally important, with earnings leading the way, the total income of these low-income families increased by more than 25 percent over the period (in constant dollars). Not surprisingly, between 1994 and 2000, child poverty fell every year and reached levels not seen since 1978. In addition, by 2000, the poverty rate of black children was the lowest it had ever been.

This is an older article from 2006, so there was obviously some movement in the wrong direction after the recent recession.

Nonetheless, the big message from welfare reform in the 1990s is that blank-check welfare entitlements are greatly inferior to a federalism-based approach that allows states to innovate and experiment to see what works best.

That’s the good news.

The bad news is that the Clinton welfare reforms only addressed a minor part of the welfare state. Moreover, the Obama Administration has undermined some of the modest progress that was achieved in the 1990s.

So we need a new offensive to deal with the broader deficiencies of the current system, which is a disaster for both taxpayers and poor people.

But if we use Clinton’s welfare reforms as a model, there is considerable progress that can be achieved. Diana Furchtgott-Roth of Economics 21 has a new study on precisely this topic.

She identifies some of the major redistribution programs in Washington.

This paper examines the evolution of major U.S. welfare programs since 1998—shortly after the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), the 1996 federal welfare reform signed into law by President Clinton, went into effect. The paper chronicles the average amount of aid provided, as well as length of time on public assistance, focusing on the following programs: SNAP; Temporary Aid to Needy Families, or TANF (established by PRWORA); Medicaid; and Section 8 Housing Choice Vouchers (HCV).

And she points out these programs are an expensive failure, but proposes a way to address the problem.

…while the U.S. economy has since improved, participation in such programs has generally not declined. This paper concludes that there is ample scope for states to reform welfare, and it proposes two substantial changes: (1) cap welfare spending at the rate of inflation and the number of Americans in poverty; and (2) allow states to direct savings from welfare programs to other budget functions. …this paper finds that federal savings through 2013 would, after accounting for inflation and the number of Americans in poverty, total $1.3 trillion had welfare funding remained at 1998 levels.

The key is federalism.

States should have the freedom to experiment to see what policies are most effective. Under such conditions, successful states would serve as models for other states—and, possibly, models for further federal welfare reform. Indeed, successful welfare reforms have already been observed in North Carolina, New York, Indiana, and Rhode Island. …Providing states increased flexibility to adjust resource levels between welfare programs offers numerous advantages. For instance, states with low food prices but high housing costs might shift resources from SNAP to housing programs. In addition, states could divert funding from existing programs to new ones, such as community-based programs that prove successful.

Her bottom line is that the status quo is a failure.

Antipoverty programs should be judged by how successfully they help lift people out of poverty. By this measure, the country’s welfare programs performed poorly during the Great Recession and its aftermath: welfare costs and eligibility have, as this paper has documented, largely expanded, with few gains in poverty reduction. …The status quo is plainly unacceptable. New solutions, not more funding, are the answer. …empower states to choose welfare policies that best serve their most vulnerable families, as well as those that best fit their political demands.

An excellent study and a very sound proposal.

Though I would make one very important modification.

It’s clearly a step in the right direction if the federal government turns all income-redistribution programs into a block grant so that states can decide how to allocate the money and address poverty.

But the long-run goal should be to eliminate any role for Washington, even as a provider of block grants.

In an ideal world, the block grant should be immediately capped and then gradually phased out. Let state and local governments decide how to tax and spend in this arena.

P.S. Some folks on the right want to replace the current welfare state with a government-guaranteed minimum income. But that approach is very inferior to genuine federalism.

P.P.S. The bureaucrats at the OECD (subsidized by our tax dollars) are pushing a new definition of poverty that is really a stalking horse for more income redistribution.

P.P.P.S. In the spirit of political correctness, here’s the modern version of the Little Red Hen and the modern version of the fable about the ant and the grasshopper.

P.P.P.P.S. For American readers, click here to see the extent to which your state makes welfare more attractive than work.

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Exactly one year ago, we looked at the best and worst policy developments of 2013.

Now it’s time for a look back at 2014 to see what’s worth celebrating and what are reasons for despair.

Here’s the good news for 2014.

1. Gridlock – I’ve been arguing for nearly three years that divided government is producing better economic performance. To be sure, it would have been difficult for the economy to move in the wrong direction after the stagnation of Obama’s first two years, but heading in the wrong direction at a slower pace is better than speeding toward European-style statism.

Indeed, the fact that policy stopped getting worse even boosted America’s relative competitiveness, so there’s a lot to be thankful for when politicians disagree with each other and can’t enact new laws.

David Harsanyi explains the glory of gridlock for The Federalist.

Gross domestic product grew by a healthy 5 percent in the third quarter, the strongest growth we’ve seen since 2003. Consumer spending looks like it’s going to be strong in 2015, unemployment numbers have looked good, buying power is up and the stock market closed at 18,000 for the first time ever. All good things. So what happened? …the predominant agenda of Washington was doing nothing. It was only when the tinkering and superfluous stimulus spending wound down that fortunes began to turn around. …spending as a percent of GDP has gone down. In 2009, 125 bills were enacted into law. In 2010, 258. After that, Congress, year by year, became one of the least productive in history. And the more unproductive Washington became, the more the economy began to improve. …Gridlock has caused an odd, but pervasive, stability in Washington. Spending has been static. No jarring reforms have passed — no cap-and-trade, which would have artificially spiked energy prices and undercut the growth we’re now experiencing. The inadvertent, but reigning, policy over the past four years has been, do no harm.

Amen. Though I should hasten to add that while gridlock has been helpful in the short run (stopping Obama from achieving his dream of becoming a second FDR), at some point we will need unified government in order to adopt much-needed tax reform and entitlement reform.

The key question is whether we will ever get good politicians controlling both ends of Pennsylvania Avenue.

2. Restrained Spending – This is the most under-reported and under-celebrated news of the past few years, not just 2014.

Allow me to cite one of my favorite people.

In fiscal year 2009, the federal government spent about $3.52 trillion. In fiscal year 2014 (which ended on September 30), the federal government spent about $3.50 trillion. In other words, there’s been no growth in nominal government spending over the past five years. It hasn’t received nearly as much attention as it deserves, but there’s been a spending freeze in Washington. …the fiscal restraint over the past five years has resulted in a bigger drop in the relative size of government in America than what Switzerland achieved over the past ten years thanks to the “debt brake.” …The bottom line is that the past five years have been a victory for advocates of limited government.

And this spending restraint is producing economic dividends, though Paul Krugman somehow wants people to believe that Keynesian economics deserves the credit.

3. Limits on Unemployment Benefits – Although the labor force participation rate is still disturbingly low, the unemployment rate has declined and job creation numbers have improved.

The aforementioned policies surely deserve some of the credit, but it’s also worth noting that Congress wisely put a stop to the initiative-sapping policy of endlessly extending unemployment benefits. Such policies sound compassionate, but they basically pay people not to work and cause more joblessness.

Phil Kerpen of American Commitment elaborates, citing recent research from the New York Fed.

According to empirical research by the Federal Reserve Bank of New York: “most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility.” Those benefits finally ended at the end of 2013, triggering a sharp rise in hiring… Specifically, they found that the average extended unemployment benefits duration of 82.5 weeks for four years had the impact of raising the unemployment rate from 5 percent to 8.6 percent. …Good intentions are not enough in public policy.  It might seem kind and compassionate to spend billions of taxpayer dollars on “emergency” unemployment benefits forever, but the effect is to keep millions of people unemployed.  Results matter.

Phil’s right. If you pay people not to work, you’re going to get foolish results.

But the three above stories are not the only rays of sunshine in 2014. Honorable mention goes to North Carolina and Kansas for implementing pro-growth tax reforms.

I’m also pleased that GOPers passed the first half of my test and told the Democrat appointee at the Congressional Budget Office that he would be replaced. Now the question is whether they appoint someone who will make the long-overdue changes that are needed to get better and more accurate assessments of fiscal policy. That didn’t happen when the GOP had control between 1995 and 2007, so victory is far from assured.

And another honorable mention is that Congress has not expanded the IMF’s bailout authority.

Now let’s look at the three worst policy developments of 2014.

1. Obamacare Subsidies – Yes, Obamacare has been a giant albatross for the President and his party. Yes, the law has helped more and more people realize that big government isn’t a good idea. Those are positive developments.

Nonetheless, 2014 was the year when the subsidies began to flow. And once handouts begin, politicians get very squeamish about taking them away.

This is why I wrote back in 2012 that Obamacare may have been a victory (in the long run) for the left, even though it caused dozens of Democrats to lose their seats in the House and Senate.

I think the left made a clever calculation that losses in the last cycle would be an acceptable price to get more people dependent on the federal government. And once people have to rely on government for something like healthcare, they are more likely to vote for the party that promises to make government bigger. …This is why Obamacare – and the rest of the entitlement state – is so worrisome. If more and more Americans decide to ride in the wagon of government dependency, it will be less and less likely that those people will vote for candidates who want to restrain government.

Simply stated, when more and more people get hooked on the heroin of government dependency, I fear you get the result portrayed in this set of cartoons.

2. Continuing Erosion of Tax Competition – Regular readers know that I view jurisdictional competition as a very valuable constraint on the greed of the political class.

Simply stated, politicians will be less likely to impose punitive tax policies if the geese with the golden eggs can fly away. That’s why I cheer when taxpayers escape high-tax jurisdictions, whether we’re looking at New Jersey and California, or France and the United States.

But this also helps to explain why governments, either unilaterally or multilaterally, are trying to prevent taxpayers from shifting economic activity to low-tax jurisdictions.

And 2014 was not a good year for taxpayers. We saw further implementation of FATCA, ongoing efforts by the OECD to raise the tax burden on the business community, and even efforts by the United Nations to further erode tax competition.

Here’s an example, from the Wall Street Journal, of politicians treating taxpayers like captive serfs.

Japan could become the latest country to consider taxing wealthy individuals who move abroad to take advantage of lower rates. The government and ruling party lawmakers are considering an “exit tax”… Such a rule would prevent wealthy individuals moving to a location where taxes are low–such as Singapore or Hong Kong… some expats in Tokyo are concerned the rule could make companies think twice about sending senior professionals to Japan or make Japanese entrepreneurs more reluctant to go abroad.

My reaction, for what it’s worth, is that Japan should reduce tax rates if it wants to keep people (and their money) from emigrating.

3. Repeating the Mistakes that Caused the Housing Crisis – A corrupt system of subsidies for Fannie Mae and Freddie Mac, combined with other misguided policies from Washington, backfired with a housing bubble and financial crisis in 2008.

Inexplicably, the crowd in Washington has learned nothing from that disaster. New regulations are being proposed to once again provide big subsidies that will destabilize the housing market.

Peter Wallison of the American Enterprise Institute warns that politicians are planting the seeds for another mess.

New standards were supposed to raise the quality of the “prime” mortgages that get packaged and sold to investors; instead, they will have the opposite effect. …the standards have been watered down. …The regulators believe that lower underwriting standards promote homeownership and make mortgages and homes more affordable. The facts, however, show that the opposite is true. …low underwriting standards — especially low down payments — drive housing prices up, making them less affordable for low- and moderate-income buyers, while also inducing would-be homeowners to take more risk. That’s why homes were more affordable before the 1990s than they are today. … The losers, as we saw in the financial crisis, are borrowers of modest means who are lured into financing arrangements they can’t afford. When the result is foreclosure and eviction, one of the central goals of homeownership — building equity — is undone.

Gee, it’s almost as if Chuck Asay had perfect foresight when drawing this cartoon.

Let’s end today’s post with a few dishonorable mentions.

In addition to the three developments we just discussed, I’m also very worried about the ever-growing red tape burden. This is a hidden tax that undermines economic efficiency and enables cronyism.

I continue to be irked that my tax dollars are being used to subsidize a very left-wing international bureaucracy in Paris.

And it’s very sad that one of the big success stories of economic liberalization is now being undermined.

P.S. This is the feel-good story of the year.

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Selection to the Moocher Hall of Fame is a special award that is bestowed upon “the individuals who best exemplify the culture of loafing, laziness, and dependency that is being subsidized by our vote-buying political class.”

But it’s not limited to Americans. Previous winners of this prestigious award include Brits, Austrians, Greeks, and Danes.

Now it’s time to pick a new honoree. But we’re going to make this a contest. We have two families living in the United Kingdom, both of which impose a big fiscal burden on taxpayers, but only one of which gets to join the Moocher Hall of Fame.

Here’s contestant number one. As reported by a British tabloid, a Romanian couple, along with their 15 kids, are imposing a very heavy cost on British taxpayers.

Mihai Toma and his brood live in a three-bed home after moving to soft-touch Britain two years ago. They rake in £2,500 a month in tax credits, £1,400 in housing benefits and £700 in child benefit… That adds up to £55,200 a year in handouts – the equivalent of a £90,000 salary… It means Mihai is making more than many doctors, senior police officers and MPs. …the Toma family want even more. They are demanding to be moved to a bigger taxpayer-funded house for their children aged four months to 19. And they cannot understand why so many hard-working Brits unable to afford their own homes are angry. Mum Veronica, 37, said: “…People will judge us but we have not done bad because we have come here to get a better life than in Romania.” …The Tomas are among thousands of immigrant families who have flocked to Britain as “welfare tourists”.

I have nothing against big families, but demanding a bigger house that will be financed by other people definitely rubs me the wrong way.

And here’s contestant number two, as described in another story also from the Daily Star. The Sisarovas are a Slovakian family with 11 kids.

Katerina Sisarova, 43, left Slovakia in 2007 and has worked for just one month after settling here. …But with her £23,000 annual income from handouts, gypsy Katerina doesn’t want a job. She said her life was “very nice” and she’ll never go home. Katerina bragged: “We have a good life here. We have everything that we want. …Her husband Peter, who has not worked for two years, added: “I like England. England give me house, give me doctor, give school, benefit. England good, thank you so much England.” …Her daughter Petra, 20, lives in a council house nearby with her son Peter, three. She also lives on handouts, collecting £650 a month, and said: “I get child benefit, tax credit, housing benefit. I’ve got a better life here than in my country.

So which family is more deserving of entering the Moocher Hall of Fame?

It’s a judgement call, but my vote goes to the Sisarova family. The Toma family is disqualified because Mihai actually does something productive. He earns “£1,800-a-month wage as an electrician.”

To put this in American terms, the Sisarova family is akin to a household where everyone goofs off while collecting welfare (and assorted additional benefits based on no income).

In the Toma family, by contrast, someone is working, so that makes them akin to an American household that is eligible for the earned-income credit (and assorted additional benefits based on modest income).

And the difference is that welfare is money you get from the government for doing nothing while the EITC is money you get from the government for working.

Getting back to our contest, Mihai’s decision to be partially self-sufficient means he and his family don’t get to join the Moocher Hall of Fame.

By the way, there’s also a Terrorist Wing of the Moocher Hall of Fame. It features repugnant people like the Tsarnaev family in the United States, as well as Abdul, the million-dollar moocher from Australia.

We don’t have any new nominees for the Terrorist Wing, but here are a couple of stories that should probably be in the honorable mention category.

First, the Daily Telegraph from the U.K. reports that home-grown terrorists are using government handouts to wage jihad.

Terri Nicholson, from the Metropolitan Police’s counter-terrorism command unit, said that taxpayers’ money was being claimed fraudulently and used by terrorists in countries such as Iraq and Syria. She said there had been “a number of cases” recently of terrorists making fraudulent student loan claims to fund their activities. …“We are seeing a diverse fraud, including substantial fraud online, abuse of the benefits system, abuse of student loans, in order to fund terrorism,” she said.

I’m particularly struck by the use of student loans. Many of the people I knew in college used such payments for beer, but they obviously weren’t thinking big enough.

I guess we should count fighting for ISIS with taxpayer money as some sort of self-directed independent study.

We have similar problems in the United States.

I’ve already mentioned the Tsarnaev brothers, but we also have two men who wanted to blow up the Gateway Arch in St. Louis and kill two officials. But they had one small problem. They couldn’t afford to buy the bombs they wanted until one of their girlfriends received her next installment of handouts from Uncle Sam.

Two men indicted last week on federal weapons charges allegedly had plans to bomb the Gateway Arch — and to kill St. Louis County Prosecuting Attorney Robert McCulloch and Ferguson Police Chief Tom Jackson — the Post-Dispatch has learned. …the two allegedly did buy what they thought was a pipe bomb in an undercover law enforcement sting. The men wanted to acquire two more bombs, the sources said, but could not afford to do it until one suspect’s girlfriend’s Electronic Benefit Transfer card was replenished.

Gee, if only handouts were even more generous. Then those two guys could have planned more efficiently.

Though I shouldn’t joke. If these guys hadn’t been such morons, some people might now be dead.

Let’s close on a more serious note about public policy. It should go without saying that the vast majority of welfare recipients aren’t terrorists, or even criminals. And most of them presumably don’t have the extreme entitlement mentality illustrated by the Sisarova family.

But that doesn’t mean welfare should be an acceptable way of life. It’s bad for taxpayers when that happens, of course, but it’s also bad for recipients.

And this is becoming apparent even to some foreign politicians who are far from being libertarian. Here are some excerpts from a story published by the Independent in Ireland.

Social welfare has become a “lifestyle choice” for many leaving school, a situation which is totally unacceptable and will no longer be tolerated, Social Protection Minister Joan Burton has said. “What we are getting at the moment is people who come into the system straight after school as a lifestyle choice. This is not acceptable, everyone should be expected to contribute and work,” Ms Burton said. Speaking to the Sunday Independent, Ms Burton said those who failed to cooperate with her department by not taking job or training opportunities would lose up to €44 a week.

My gut reaction is that they should lose everything, but I guess this is a big step from a Labour Party politician.

It appears Ms. Burton recognizes that people can be trapped into a life of dependency if the welfare system is too generous.

Which is a revelation that also has occurred to at least one American leftist.

P.S. Guess what happened when politicians in Washington declared “war on poverty” and started spending lots of money?

P.P.S. On the other hand, guess what happened while politicians in the U.K. decided to make dependency a less attractive lifestyle?

P.P.P.S. Here’s a map showing which states have the biggest welfare benefits.

P.P.P.P.S. I can’t help but wonder if the British press focuses on immigrant households that collect welfare while paying inadequate attention to the equally disturbing anecdotes of home-grown welfare families. The problem is welfare, income redistribution, and dependency, not the race or nationality of the recipients.

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I wrote the other day about the importance of “social capital,” which is a catch-all phrase for a society’s attitudes about things such as the work ethic, a sense of self-reliance, and the spirit of independence.

Today we’re going to look at the flip side of social capital. I’m not sure whether this is an example of “anti-social capital” or “social anti-capital,” but our newest entrant in the Moocher Hall of Fame is symbolic of what’s wrong with the mental attitude of too many people in today’s welfare states.

Here are some details from a story about Christina in the U.K.-based Daily Mail. As you read the story, keep in mind that a “stone” is 14 pounds and £20,000 equals more than $31,000.

An obese mother-of-two who lives on benefits says she needs more of taxpayers’ money to overhaul her unhealthy lifestyle. Christina Briggs, 26, from Wigan, says she hates being 25 stone but she can’t do anything about it because she can only afford junk food. Meanwhile, exercise is out of the question because she doesn’t have the funds to join a gym. …’I tried swimming but it cost £22 a month and it meant I had to cut back on my favourite pizza and Chinese takeaways.’ Unemployed Christina gets £20,000 in benefits a year and lives in a council house with her two children by different fathers, Helena, 10, and Robert, two. …The family feast everyday on takeaways, chocolate and crisps as Christina says they can’t afford low fat foods. As a result, the mother is currently a dress size 26. …But she insists ‘it’s not my fault – healthy food is too expensive’. She feels her only hope is for the government to give her more money so she can afford to buy fruit and vegetables and join a gym. …She told the magazine: ‘I need more benefits to eat healthily and exercise. It would be good if the government offered a cash incentive for me to lose weight. I’d like to get £1 for every pound I lose, or healthy food vouchers…” She added that she can’t get a job to gain more money because she’s needed at home to care for her children… She explained: ‘There’s no way I could get a job. I don’t feel bad about the taxpayer funding my life…because I don’t treat myself or buy anything excessive.

Wow. Maybe we should add gym memberships to our satirical list of government-manufactured “human rights.”

But the bigger issue is that this story shows the destructive impact of the welfare state. From the perspective of taxpayers, redistribution programs are a rip-off.

However, even from the perspective of recipients, the welfare state is bad news. Christina is not a sympathetic character, to be sure, but one can’t help but think that she would have become a much better person if she hadn’t been seduced into a life of government dependency.

In other words, big government is causing an erosion of social capital.

Just as it has for other British members of the Moocher Hall of Fame, such as  NatailijaTraceyAnjem, Gina, and Danny.

Heck, there’s even a TV show called “Benefits Street” on British TV. Though “poverty porn” would be a better description.

P.S. The Princess of the Levant gets credit for today’s blog post since she sent me the story about Christina.

And she also sent me this cartoon, which is a very good advertisement for the libertarian philosophy.

Sort of like this cartoon, but even better since it accurately identifies the hypocrisy that is found with some left wingers and some right wingers.

By the way, you may recognize the woman on the left. She’s already appeared in one of my posts mocking the statist mentality on gun control.

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When discussing how to boost growth, economists often discuss the importance of human capital and physical capital.

Those are key factors driving economic performance. After all, improvements in human capital mean a more productive workforce. And improvements in physical capital mean greater output per hour worked.

So you can see why I want lower tax rates and less intervention. Simply stated, we’re far more likely to increase – and effectively utilize – human and physical capital when markets allocate resources rather than politicians.

But there’s another form of capital that’s also important. It’s difficult to measure, but I suspect it also plays a huge role in determining a nation’s long-run prosperity.

For lack of a better term, let’s call it societal capital, and it refers to the attitudes of a country’s people. I’m not sure how to define social capital, but here are a series of questions that capture what I’m trying to describe: Do the people of a nation believe in the work ethic? Or would they be comfortable as wards of the state, living off others? Are they motivated by the spirit of self-reliance? Would they be ashamed to go on welfare? Do they think the government is obligated to give them things?

The answers to these questions matter a lot because a nation can’t prosper once you reach a tipping point of too many people riding in the wagon and too few people producing.

Here’s what I wrote earlier this year.

…a nation is doomed when a majority of its people decide that it is morally and economically okay to live off the labor of others and want to use the coercive power of government to make it happen. For lack of a better term, we can call this a country’s Dependency Ratio, and it’s a measure of eroding social capital. To what degree, in other words, has the entitlement mentality replaced the work ethic and the spirit of self reliance?

I raise this issue because I want to share two items.

First, here’s some very good news about the United States. According to a new poll from YouGov about attitudes in the United States and United Kingdom, Americans are far more likely to believe they have a moral right to their earnings. Brits, by contrast, overwhelmingly believe that government has a greater moral claim to people’s earnings.

Makes me proud to be American, just as I was back in 2011 when reporting on some Pew research that also showed Americans had a greater spirit of self reliance.

The Brits, by contrast, seem to be moving in the wrong direction. Some of the blame belongs to supposedly right-wing politicians such as David Cameron, George Osborne, and David Gauke, all of whom have argued that people have a moral obligation to pay more to the state than is legally required.

In any event, it’s disturbing to see that people in the United Kingdom have such a warped moral perspective. Which raises the question of whether it’s possible to restore social capital once it’s been eroded?

Or is that a futile task once people have learned a dependency mindset, sort of like trying to put toothpaste back in a tube.

We have some research from Germany that offers guidance on these questions, which is the second item I want to share. Here are excerpts from a story in the Boston Globe.

…If you were a researcher trying to determine how a political system affects people’s values, beliefs, and behavior, you would ideally want to take two identical populations, separate them for a generation or two, and subject them each to two totally different kinds of government. Then you’d want to measure the results… Ethically, such a study would be unthinkable even to propose. But when the Berlin Wall went up in 1961, it created what London School of Economics associate professor Daniel Sturm calls a “perfect experiment.” The two halves of the country were like a pair of identical twins separated at birth and raised by two very different sets of parents.

And what did this experiment produce?

The bad news is that living in a statist regime did erode societal capital.

…the researchers didn’t know what to expect. On the one hand, East Germans might be resentful of the system that had constrained their lives; on the other hand, it was also plausible that they had become comfortable with the notion that a government would provide for basic needs at the expense of an open society. Alesina and Fuchs-Schundeln used data from a German survey administered in 1997, and split the respondents into two groups based on where they had lived before reunification. What they found was that, at that point, people from the East still tended to believe in the social-service model. They were also more likely to support a robust government program to help the unemployed…

But the good news is that at least some of the toothpaste of self reliance can be put back in the tube.

It goes the other way too, if slowly: When Alesina and Fuchs-Schundeln looked at survey results from 2002, they found that the two groups of Germans had begun to converge politically. Based on the data, they estimated that it would take between one and two generations—20 to 40 years— for the gap to fully close, and “for an average East German to have the same views on state intervention as an average West German.” …In a separate but related study, it was shown that watching Western TV had actually shaped East Germans’ views about work and chance, making them “more inclined to believe that effort rather than luck determines success in life.”

So what’s the moral of the story?

I guess I’m a tad bit optimistic after learning about this research. I was worried that societal capital couldn’t be restored.

So maybe if we force everyone in Greece and Italy to watch my video on free markets and small government, there’s a chance those societies can be salvaged! (But let’s not show it to the French since we’ll always need bad examples.)

P.S. These two cartoons show the dangers of the entitlement mentality.

November 4, 2018 addendum: To be more precise, I’m now trying to use “societal capital” rather than “social capital.”

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I’ve always objected when leftists engage in moral preening about how they supposedly are more compassionate.

Europeans statists, for instance, claim to be more compassionate because their governments have greater levels of coercive redistribution. But I ask them why they think it’s compassionate to give away other people’s money. Then I shame them by showing data on how Americans are far more generous in terms of trying to help others with their own money.

I have the same debate in America. Take the issues of unemployment benefits. My leftist friends say that compassionate people should favor extended benefits. To which I reply by asking them why it’s good to pay people to not work and assert instead that genuine compassion should be defined by policies that enable people to find jobs and become self reliant.

I raise this topic because the Pope recently made news by urging more compassion for the less fortunate, and he specifically said that raising the issue will lead some to think he’s a communist.

Here are some excerpts from a news report in the U.K.-based Independent.

In one his longest speeches as Pope, the Holy See outlined his views on a wide range of issues– from poverty and the injustices of unemployment to the need to protect the environment. …Anticipating how his letter would be received by his critics, Francis declared that “land, housing and work are increasingly unavailable to the majority’ of the world’s population,” but said “If I talk about this, some will think that the Pope is communist.” “They don’t understand that love for the poor is at the centre of the Gospel,” he said. “Demanding this isn’t unusual, it’s the social doctrine of the church.”

Several people have asked my opinion about what the Pope said.

My initial instinct was to be very critical. After all, various news reports interpreted the Pope’s statement as an attack on capitalism and an embrace of the welfare state.

But since I know that the establishment media is biased and would want to portray the Pope’s comments as being supportive of statism, I didn’t want to make any unwarranted assumptions. So I tracked down a transcript of the speech. That’s the good news. The bad news is that it’s only available (at least as of this writing) in Portuguese, Spanish, Italian, and French.

But with the help of Google Translate, I looked at what the Pope actually said. And if the translation software is accurate, I can now offer my opinion about the Pope’s views: To be succinct, I have no idea what he thinks. And if you want me to elaborate, all I can say is that he calls for lots of action to help the poor, but he doesn’t endorse government coercion to make it happen

On the other hand, he doesn’t say that government shouldn’t be involved. And the tone of the speech certainly seems left wing, but that may simply be a result of me hearing a lot of statists making similar remarks and then calling for government-coerced redistribution policies.

The bottom line, as I suggested above, is that the Pope may be wrong…or he may be right. Which seems inconsistent but accurate. After all, the Vatican sometimes has been very good on economic issues and at times very disappointing.

But I will say something definitive. If anybody, including the Pope, thinks that bigger government is the way to help the poor, they are very misguided.

I’ve already shared some powerful data to show that poverty was falling in America after World War II, but then the progress came to a halt once the federal government launched a “War on Poverty” and dramatically expanded the welfare state.

Let’s augment that data today with a specific look at what happened when the federal government decided to “help” folks in Appalachia. Here are some excerpts from a very compelling National Review column.

Appalachian whites suffer from many of the same social ills as working-class blacks: broken families, substance abuse, poor health, and high poverty. …Early anti-poverty efforts focused largely on the white population. …It was, as Ira Katznelson argued in an explosive book, a type of affirmative action — for white people. …Two federally chartered organizations — the Depression-era Tennessee Valley Authority (TVA) and Johnson’s Appalachian Regional Commission (ARC) — pumped millions of development dollars into predominantly white rural locales. …The aid came not just in the form of direct welfare payments, but also as government jobs. The country-music anthem “Song of the South” tells a familiar tale: “Papa got a job with the TVA; we bought a washing machine and then a Chevrolet.” …From 1965 until 1981, when the federal government began to scrutinize the cash flowing to Appalachia, federal appropriation to the ARC exceeded $1 billion (in today’s dollars) every single year. Even today, Congress sends about $80 million to the ARC; no other regionally focused entity spends more. As late as 2000, Appalachians received more federal money per capita than average, despite their minimal cost of living and the low number of federal employees in the region.

So has all this federal largesse helped?

Well, not exactly.

…there are now precious few jobs in Tennessee valleys and too few drivers on those wide mountain roads. If Papa bought a washing machine and then a Chevrolet, Junior is buying oxy or meth: West Virginia leads the nation in drug-overdose deaths, with Kentucky third and Tennessee eighth. …Today, the inheritors of Katznelson’s affirmative action for whites occupy the lowest rungs of the socioeconomic ladder. West Virginia, Kentucky, northern Georgia, and South Carolina all nabbed more than their fair share of federal aid, but now they are among the poorest parts of the country. …Residents of these states suffer the worst consequences. In many Appalachian counties, inhabitants can expect to live only 67 years, more than a decade less than the average American. …Alongside the grim statistics is a spiritual poverty more difficult to measure but easier to see. There’s the high-school teacher who has only once had a class without a pregnant student. …Young students in eastern Kentucky sometimes tell their teachers that they hope to “draw” when they grow up. But they’re not talking about a career as an artist; they’re talking about drawing a government check. These kids weren’t programmed like that at birth; they were taught something destructive by their communities.

There are some lessons to be learned.

…the failure of the effort gives us ample reason to question the wisdom of federally led development efforts no matter the intended beneficiaries. Government cannot create a sustainable economy, no matter how hard it tries. And traditional welfare, while defensible as a way of alleviating immediate deprivation, too often fails to place people on the road to self-sufficiency. …encouraging family stability — or at least not discouraging it through the tax code or needless incarceration — promotes upward mobility more effectively than transfer payments…if the failures of Appalachia are any guide, a narrower policy agenda might actually serve the poor — white and black alike.

Amen. If you want to help the poor, push for economic growth rather than redistribution.

There are even some honest liberals who now admit that big government promotes long-run dependency.

P.S. Since the first part of this post dealt with religion and compassion, it’s time to share Libertarian Jesus as well as the thoughts of Cal Thomas on whether Jesus was a socialist.

P.P.S. Since the last part of this post dealt with Appalachia, I guess it’s appropriate to share this redneck joke.

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Back in 2010, I shared some wise words from Walter Williams and Theodore Dalrymple about how society can become unstable when people figure they can “vote themselves money.”

On a related note, I shared the famous “riding in the wagon” cartoons in 2011 and the “Danish party boat” image in 2014. Both of these posts highlighted the danger that exists when societies reach a tipping point, which occurs when too many people vote themselves into dependency and expect (and vote) for never-ending handouts.

Indeed, this is why I’m very pessimistic about the future of welfare states such as Greece.

And, depending what happens in an upcoming run-off election, I probably won’t be very optimistic about Brazil.

Investor’s Business Daily has shared some fascinating – and disturbing – data from that country’s recent election.

A Brazilian economist has shown a near-exact correlation between last Sunday’s presidential election voting choices and each state’s welfare ratios. Sure enough, handouts are the lifeblood of the left. …Neves won 34% of the vote, Rousseff took 42% and green party candidate Marina Silva took about 20% — and on Thursday, Silva endorsed Neves, making it a contest of free-market ideas vs. big-government statism. But what’s even more telling is an old story — shown in an infographic by popular Brazilian economist Ricardo Amorim. …Amorim showed a near-exact correlation among Brazil’s states’ welfare dependency and their votes for leftist Workers Party incumbent Rousseff. Virtually every state that went for Rousseff has at least 25% of the population dependent on Brazil’s Bolsa Familia welfare program of cash for single mothers… States with less than 25% of the population on Bolsa Familia overwhelmingly went for Neves and his policies of growth. …Fact is, the left cannot survive without a vast class of dependents. And once in, dependents have difficulty getting out.So Brazil’s election may come down to a question of whether it wants to be a an economic powerhouse — or a handout republic.

Here’s the map from IBD showing the close link between votes for the left-wing candidate and the extent of welfare dependency.

It’s not a 100 percent overlap, but the relationship is very strong.

Sort of like the maps I shared on language and voting in Ukraine.

That being said, I’m a policy wonk who wants economic liberty, not a political hack with partisan motives. So let’s look at the implications of growing dependency.

As IBD explains, the greatest risk is that people get trapped in dependency. We see that in advanced nations like the United States and United Kingdom (and the Nordic nations) so is it any surprise that it’s also a problem in a developing country like Brazil (or South Africa)?

Problem is, “some experts warn that a wide majority cannot get out of this dependence relationship with the government,” as the U.K. Guardian put it. And whether it’s best for a country that aspires to become a global economic powerhouse to have a quarter of the population — 50 million people — dependent on welfare and producing nothing is questionable.

I especially appreciate the last part of this excerpt. Economic output is a function of how capital and labor are productively utilized.

In other words, a welfare state imposes a human cost and an economic cost.

Now let’s consider possible implications for the United States. A few years ago, I put together a “Moocher Index” to show which states had the highest percentage of non-poor households receiving some form of redistribution.

Do the moocher states vote for leftists? Well, it we use the 2012 presidential election as a guidepost, 7 of the top 10 moocher states voted for Obama.  That suggests that there is a relationship.

But if you look at the states with the lowest levels of dependency, they were evenly split, with 5 for Obama and 5 for Romney. So perhaps there aren’t any big lessons for America, though Obama’s margins in Ohio, Florida, Virginia, Colorado, and Nevada were relatively small.

For what it’s worth, I’m far more worried about these economic numbers, not the aforementioned political numbers.

P.S. I probably shouldn’t assume that a leftist victory automatically means more statism in Brazil. After all, keep in mind that we got more economic freedom during the Clinton years and bigger government during the Bush years. Moreover, it was a left-leaning Brazilian president who had the wisdom to acknowledge that you can’t redistribute unless someone first produces.

P.P.S. At least one honest leftist admits there is a heavy cost to government dependency.

P.P.P.S. If you live in a nation that already has passed the tipping point of too much dependency and you want to live more freely, you can always escape. As reported by the U.K.-based Independent.

Up to 2.5 million French people now live abroad, and more are bidding “au revoir” each year. …the “lifeblood” of France are leaving because of “the impression that it’s impossible to succeed”… There is “an anti-work mentality, absurd fiscal pressure, a lack of promotion prospects, and the burden of debt hanging over future generations,” he told Le Figaro. …while the figure of 2.5 million expatriates is “not enormous”, what is more troubling is the increase of about 2 per cent each year. “Young people feel stuck, and they want interesting jobs. Businessmen say the labour code is complex and they’re taxed even before they start working. Pensioners can also pay less tax abroad,” she says. France’s unemployment rate is hovering around 10 per cent. As for high-earners, almost 600 people subject to a wealth tax on assets of more than €800,000 (£630,000) left France in 2012, 20 per cent more than the previous year.

The good news is that some people escape. The bad news is that the political environment becomes even worse for those remaining.

P.P.P.P.S. And don’t forget that the Obama campaign celebrated dependency during the 2012 campaign.

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