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Posts Tagged ‘Welfare State’

Certain redistribution programs are called “entitlements” because anybody who meets various criteria is “entitled” to automatically get money or other benefits.

Economists worry that such programs (particularly the “means-tested” entitlements) create perverse incentives since some people will choose to work less and earn less in order to maximize the amount of handouts they receive. Such behavior is immoral, but understandable. People learn that if they make sacrifices and work more, the reward is taxation, whereas if they work less (or not at all), the reward is freebies from the government.

And the problem presumably is worse in places where there is a greater amount of redistribution (if you’re curious, here’s the data on which states and countries have the most profligate package of benefits).

But the problem goes beyond simply luring people into idleness with bad incentives. When politicians create programs that give away money, they also create opportunities for outright fraud. Which is a pervasive problem, as illustrated by these examples.

Let’s travel to Minnesota to get a sense of the magnitude of the problem.

Minnesota’s Pioneer Press reports on a government audit that found one-third of welfare recipients improperly received handouts.

A review by Minnesota’s legislative auditor has found that some of Minnesota’s welfare programs do a poor job of ensuring benefits don’t go to ineligible people… It found significant error rates in the Temporary Assistance For Needy Families program, which provides cash and other benefits to low-income families with children. …the audit found eight of 24 families it reviewed weren’t eligible for benefits they received.

That’s not a large sample size, so we don’t know if the actual overall error rate is higher or lower than 33 percent, but the audit certainly suggests that there is a major problem.

It’s also not clear how much of the problem is caused by accident and how much is caused by fraud. Presumably the latter, but it’s quite possible that some people aren’t knowingly bilking the system.

But in some cases, there’s no ambiguity. The Sun has a horror story about a stunning case of welfare fraud.

Fozia Dualeh, 39, was charged with felony theft in Anoka County District Court, as prosecutors say she received $118,000 in government aid over roughly an 18 month period. According to the complaint, Dualeh exploited three public benefit programs from January 2015 to August 2015 which included $24,176 in food support, $85,582 in child care assistance and $8,996 in medical assistance overpayments.

Wow, almost $120K over 1-1/2 years. That’s an impressive haul, though perhaps not too surprising given the dozens of handout programs that – when combined – make idleness relatively lucrative.

In any event, Ms. Dualeh claimed she was eligible for that huge package of handouts because her husband was no longer part of the family.

But that wasn’t true.

A search of the home by authorities in late October 2015 led to the discovery of Dualeh’s husband, who is also the children’s father, Abdikhadar Ismail, hiding under a blanket in the master bedroom, charges said. Several articles of mens clothing were found in a chest, as well as numerous documents and mail throughout the home belonging to Ismail. Ismail also listed the family’s address on two vehicles and with his employer, a residential health care business.

Given the large sums of money involved, the Center of the American Experiment probably deserves an award for most-understated headline on this issue.

Though at the risk of being a pedantic libertarian, I would prefer if the headline said “Lucrative” instead of “Profitable.” After all, as Walter Williams has explained that profit is a meritorious reward for serving others.

But we can all probably agree that Ms. Dualeh deserves membership in the Moocher Hall of Fame.

P.S. I wouldn’t be surprised if Ms. Dualeh was introduced to the welfare system thanks to America’s poorly designed refugee program.

P.P.S. On the broader issue of redistribution and economics, 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.

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The tax-and-transfer welfare state is in deep trouble. I explained last year that the United States faces a very serious long-run challenge.

Many of our entitlement programs were created based on the assumption that we would always have an expanding population, as represented by a population pyramid. …however, we’ve seen major changes in demographic trends, including longer lifespans and falling birthrates. The combination of these two factors means that our population pyramid is slowly, but surely, turning into a population cylinder. …this looming shift in America’s population profile means massive amounts of red ink as the baby boom generation moves into full retirement.

In other words, in the absence of genuine entitlement reform, America will have a Greek-style fiscal mess at some point in the future. Or, as I wrote yesterday, maybe we should call it a Japan-style mess.

Demographic 2030Simply stated, we’re going to have too many people collecting benefits and too few people generating income.

The outlook is even worse in Europe. Indeed, the fiscal crisis has already started in many nations in Southern Europe. And the crisis will spread to many countries in Northern Europe. And it will hit Eastern Europe as well, notwithstanding some good economic reforms in that region.

Unfortunately, most politicians are reluctant to undertake the entitlement reforms that would avert this crisis.

So what’s their alternative solution? In many cases, they don’t have one. In other cases, they act as if higher tax burdens can solve the problem, even though that probably means even more people will be discouraged from productive lives and instead decide to ride in the wagon of government dependency (higher taxes also would enable even more spending, but that’s a separate story).

Another potential answer is sex. To be more specific, governments around the world are urging people to procreate more so that there will be additional future taxpayers to finance the welfare state.

I’m not kidding.

Let’s start with the new effort in Spain.

Europeans across the continent are having so many fewer babies that national populations from Scandinavia to the Mediterranean are skewing towards the older end of the spectrum, with not enough young, productive people to keep economies thriving and to look after the rest of the aging population. Spanish women have 1.3 children on average. In 2015, Spain’s death rate outstripped the birth rate… Edelmira Barreira Diz was appointed as “commissioner for the demographic challenge” last month.

I think “sex commissioner” would have been a better title. Heck, that probably would have enticed a certain former American president to apply for the position.

Here’s a chart from the story showing declining fertility rates.

There’s a similar effort for government-encouraged babies in Italy.

Italy is facing a dramatic demographic change, with increasingly fewer children being born. So the Health Ministry recently launched an ad campaign to remind people of Sept. 22 being “fertility day.” …another ad claiming that fertility was “a common good” — a comparison that reminded some of fascist propaganda from the 1920s which urged women to have more babies to support the nation. …As a social welfare state, Italy’s pensions system and economy relies on a certain number of younger people joining the workforce every year.

The Danish government also wants women to think they have an obligation to produce future taxpayers.

In Denmark, for instance, schoolchildren are now taught in class that they should have more babies. “…we just thought, maybe we should actually also tell them about how to get pregnant,” Marianne Lomholt, national director of Sex and Society, told the New York Times. …Denmark’s Education Ministry now has teachers talk not only about the dangers of sex and pregnancies, but also about their benefits.

Also in Denmark, private companies are jumping on this bandwagon (sexwagon?) of more sex as a solution to demographic-entitlement crisis.

Denmark has a sex problem. …not exactly a sex problem, per se. It’s more like a baby problem. …Denmark’s perennially low birth rate…has left people worried… “We are concerned. The fewer Danes means fewer people to support the aging population…” …can vacation sex save the Kingdom of Denmark? Spies thinks it can, so the company has sweetened the deal. According to its promotion, the company will give prizes to couples who get pregnant while on vacations purchased through them.

Given the grim demographic outlook in Japan, nobody should be surprised that the government there is agitating for more future taxpayers.

A comprehensive plan to reverse Japan’s crashing population numbers was unveiled on Thursday by a government task force… Shigeru Ishiba, minister in charge of overcoming population decline and reviving local economies, was more blunt. “Japan will die off” without proper countermeasures, he warned. …The strategy outlined in the government plan is to encourage young people to relocate to areas outside the major metropolitan regions by fostering jobs and economic growth in small local communities that are now in danger of simply disappearing for lack of inhabitants.

Huh?!? Japan’s repeated forays into Keynesian economics haven’t generated good results nationally, so I’m not holding my breath that this new campaign will be “fostering jobs and economic growth” in targeted communities.

For a final example, let’s shift to China, where a government that formerly forced women to have abortions is suddenly looking at ways to subsidize an extra child.

China is considering introducing birth rewards and subsidies to encourage people to have a second child… the country issued new guidelines in late 2015 allowing all parents to have two children amid growing concerns over the costs of supporting an aging population. …China began implementing its controversial “one-child policy” in the 1970s in order to limit population growth, but authorities are now concerned that the country’s dwindling workforce will not be able to support an increasingly aging population.

Since coerced redistribution isn’t nearly as odious as coerced abortion, I guess this is another sign of progress in China.

But I’m not sure that will be enough to produce enough future taxpayers for China. Or any other nation.

The only sustainable welfare state, given modern demographics, is no welfare state.

Or, to be more accurate, the right approach is to start with the default assumption that people are responsible for saving and investing to support themselves in retirement. There are lots of nations that now have systems of personal retirement accounts, and this puts them in much stronger position than nations that rely solely on tax-and-transfer entitlement schemes. Hong Kong is a good example, as are Chile and Australia.

By the way, countries with private social security systems have safety-net programs for destitute seniors, but that’s far more affordable than automatic payments to everyone in retirement.

P.S. On a related note, there’s a big debate in academic circles about whether the welfare state (specifically young-to-old redistribution) actually sows the seed of its own destruction by inducing lower fertility rates. Ramesh Ponnuru of National Review summarized some of the evidence for this hypothesis back in 2012.

A 2005 paper for the National Bureau of Economic Research by economists Michele Boldrin, Mariacristina De Nardi, and Larry E. Jones points out that “the size and timing of the growth in government pension systems” matches up nicely with fertility trends in the U.S. and Europe. They expanded on both sides of the Atlantic Ocean, and fertility fell on both sides, after World War II; and they expanded more in Europe, where fertility fell further. In their model, entitlements account for roughly half of the decline in fertility, and 60 percent of the difference between European and American fertility. When a pension system expands by 10 percent of GDP, the average number of children per woman drops by 0.7 to 1.6. “These findings are highly statistically significant and fairly robust to the inclusion of other possible explanatory variables.” A 2007 paper by Isaac Ehrlich and Jinyoung Kim, also for the NBER, reached similar conclusions, finding that pension programs explained a little under half of the decline in fertility rates, and a little more than half of the decline in marriage rates, in developed countries between 1965 and 1989. One implication of this finding is that pension programs have contributed to their own financial woes by suppressing fertility.

Some researchers have concluded that other types of redistribution spending can boost fertility, though other scholars are more skeptical.

I haven’t studied this literature on subsidized babies enough to have a strong opinion.

For what it’s worth, I suspect the government can provide enough handouts to induce motherhood (heck, one of the motives for the welfare reform that was adopted during Bill Clinton’s presidency was a concern that the old system was encouraging women to have children out of wedlock).

But I’m very doubtful that such policies would fix the demographic/entitlement crisis that threatens most nations. In part, because I’m skeptical about the ability of governments to cause large shifts in fertility, but also because recreating a population pyramid only works if the additional children wind up being productive workers in the private sector.

In other words, the goal isn’t really a population pyramid as much as it’s a shift in the ratio of producers versus dependents in a nation.

As such, if many of the babies induced by handouts come from mothers that rely on welfare, and if those children are less likely to grow up to be net payers of tax rather than net consumers of tax, then baby subsidies are not going to solve the problem.

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When I warn about the fiscal and economic consequences of America’s poorly designed entitlement programs (as well as the impact of demographic changes), I regularly suggest that the United States is on a path to become Greece.

Because of Greece’s horrible economy, this link has obvious rhetorical appeal.

But there’s another nation that may be a more accurate “role model” of America’s future. This other country, like the United States, is big, relatively rich, and has its own currency.

For these and other reasons, in an article for The Hill, I suggest that Japan is the nation that may offer the most relevant warning signs. I explain first that Japan shows the failure of Keynesian economics.

…ever since a property bubble burst in the late 1980s, Japan’s economy has been in the doldrums, and its politicians deserve much of the blame. They’ve engaged in repeated binges of so-called Keynesian stimulus. But running up the national credit card hasn’t worked any better in Japan than it did for President Barack Obama. Instead of economic rejuvenation, Japan is now saddled with record levels of debt.

In other words, Japan already is a basket case and may be the next Greece. And all this foolish policy has been cheered on by the IMF.

I then highlight how Japan shows why a value-added tax is a huge mistake.

Japan’s politicians also decided to impose a value-added tax (VAT) on the nation. As so often happens when a VAT gets adopted, it turns into a money machine, as legislators start ratcheting the rate higher and higher. That happened in Europe back in the 1960s and 1970s, and it’s happening in Japan today.

And regular readers know my paranoid fear of the VAT taking hold in the United States.

But here’s the main lesson in the column.

The combination of demographic changes and redistribution programs is a recipe for fiscal crisis.

…the biggest economic threat to the country is the way Japan’s welfare state interacts with demographic changes. It’s not that the welfare state is enormous, particularly compared with European nations, but the system is becoming an ever-increasing burden because the Japanese people are living longer and having fewer children. …America faces some of the same problems. …if we don’t reform our entitlement programs, it’s just a matter of time before we also have a fiscal crisis.

To be sure, as I note in the article, Japan’s demographic outlook is worse. And that nation’s hostility to any immigration (even from high-skilled people) means that Japan can’t compensate (as America has to some degree) for low birth rates by expanding its population.

Indeed, the demographic situation in Japan is so grim that social scientists have actually estimated the date on which the Japanese people become extinct.

Mark August 16, 3766 on your calendar. According to…researchers at Tohoku University, that’s the date Japan’s population will dwindle to one. For 25 years, the country has had falling fertility rates, coinciding with widespread aging. The worrisome trend has now reached a critical mass known as a “demographic time bomb.” When that happens, a vicious cycle of low spending and low fertility can cause entire generations to shrink — or disappear completely.

Though I guess none of us will know whether this prediction is true unless we live another 1750 years. But it doesn’t matter if the estimate is perfect. Japan’s demographic outlook is very grim.

By the way, the problem of aging populations and misguided entitlements exists in almost every developed nation.

But I mentioned in the article for The Hill that there are two exceptions. Hong Kong and Singapore have extremely low birthrates and aging populations. But neither jurisdiction faces a fiscal crisis for the simple reason that people largely are responsible for saving for their own retirement.

And that, of course, is the main lesson. The United States desperately needs genuine entitlement reform. While I’m not overflowing with optimism about Trump’s view on these issues, hope springs eternal.

P.S. In yesterday’s column about Germany, I listed bizarre policies in Germany in the postscripts. My favorite example from Japan is the regulation of coffee enemas. And the Japanese government has even proven incompetent at giving away money.

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Whenever mass shootings occur, some people quickly jump to conclusions before there’s any evidence.

Folks on the right are occasionally guilty of immediately assuming Islamic terrorism, which is somewhat understandable. Folks on the left, meanwhile, are sometimes guilty of instinctively assuming Tea Party-inspired violence (I’m not joking).

I confess that I’m prone to do something similar. Whenever there is a terrorist attack, I automatically wonder if we’ll find out welfare payments and other goodies from the government helped subsidize the evil actions.

In my defense, there’s a reason I think this way. Whether we’re talking about Jihadi John or the Tsarnaev brothers, there are lots of examples of dirtbag terrorists getting handouts from taxpayers.

It happens a lot in other nations. And it’s now happening with disturbing frequency in the United States.

It’s even gotten to the point where I’ve created a special terror wing in the Moocher Hall of Fame. And, as more evidence accumulates, the medieval savage who drove a truck through a Christmas market in Germany may be eligible for membership.

Here’s some of what we know, as reported by the Daily Caller.

Berlin truck attack terrorist Anis Amri used several different identities to claim multiple welfare checks simultaneously in different cities around Germany. Amri, the Tunisian refugee who killed 12 and injured 48 at a Christmas market in Berlin Dec. 19… The investigation was closed in November because Amri’s whereabouts were unknown. …Welfare is a common way for terrorists to fund their activities in Europe.

The U.K.-based Express reveals that the terrorist was very proficient at ripping off taxpayers before deciding to kill them.

Despite being shot dead in Italy just days after the attack, the Tunisian refugee is now under investigation for fraud after conning German authorities into handing over cash to fund his terror exploits. After travelling from Tunisia to Europe in 2011, he used up to eight different aliases and several different nationalities – at times even claiming to be from Egypt or Lebanon. Reports claim Amri carried several different false identity documents and used aliases to collect welfare in cities across Germany.

The story also has details on how welfare payments subsidized previous terrorist actions.

Welfare fraud was key to funding terror attacks in Brussels in March and in Paris last year. Terrorists collected around £45,000 in benefits which they used to pay for the brutal attacks in the major European cities. …Meanwhile, Danish authorities came under fire recently after it emerged 36 Islamic State fighters continued to receive benefits for months after leaving the country to join other members of the brutal regime in Syria and Iraq.

And while I’m not sure RT is a legitimate news source, it says Amri used 14 identities for mooching.

Anis Amri, the Tunisian man accused of driving a truck into a crowd of Christmas market shoppers in Berlin, used at least 14 different identities, a German police chief said. …Among other things, this allowed the man to receive social benefits under different names in different municipalities, the police chief said.

A close associate (and suspected co-conspirator) of Amri also was mooching off the system according to news reports.

A spokeswoman for the office of Germany’s chief prosecutor on Wednesday said authorities have taken a second Tunisian suspect into custody following raids in Berlin on Tuesday. …However, she added that there was insufficient evidence to charge the suspect. In a separate statement, the federal prosecutor’s office announced the man had been charged with committing social welfare fraud and would remain in custody. …the suspect had previously been detained on suspicion of supplying explosives intended for a prospective attack in Dusseldorf. …The 26-year-old suspect allegedly had dinner with Amri at a restaurant the night before the attack, according to Köhler. The suspect allegedly met Amri in late 2015. “Süddeutsche Zeitung” reported that the two men traveled together from Italy to Germany that year.

Gee, sounds like a model citizen. Merkel must be proud of her caring and sharing welfare state.

Last but not least, a story in the U.K.-based Telegraph has some added details on the sordid history of welfare-funded terrorism in Europe.

The jihadists suspected of carrying out the bomb and gun attacks in Paris and Brussels used British benefits payments to fund international terrorism, a court has heard. …Zakaria Bouffassil, 26, from Birmingham is accused of handing over the cash which had been withdrawn from the bank account of Anouar Haddouchi, a Belgian national, who had been claiming benefits while living in the West Midlands with his wife. Kingston Crown Court heard how thousands of pounds of taxpayers’ money continued to be paid into Haddouchi’s bank account, even after he had left Britain for Syria and had begun fighting for Islamic State in Iraq and Levant (Isil). …On the opening day of their trial, jurors heard how some of the most notorious and wanted terrorists in Europe had used British taxpayers’ money to fund their activities in Syria and elsewhere.

Though I suppose I shouldn’t say “sordid history.” This is more like societal suicide.

After all, we’re not talking about welfare payments for a tiny fraction of terrorists. It really is a theme.

I linked to some examples above, and if you want more evidence, click here, here, here, here, and here.

By the way, I’m not claiming that welfare causes terrorism. Though I do wonder if Mickey Kaus has a point when he does make that link.

…extreme anti-social terrorist ideologies (radical Islam, in particular) seem to breed in “oppositional” cultures supported by various government welfare benefits. …The social logic is simple: Ethnic differences make it easy for those outside of, for example, French Arab neighborhoods to discriminate against those inside, and easy for those inside to resent the mainstream culture around them. Meanwhile, relatively generous welfare benefits enable those in the ethnic ghetto to stay there, stay unemployed, and seethe. Without government subsidies, they would have to overcome the prejudice against them and integrate into the mainstream working culture. Work, in this sense, is anti-terrorist medicine.

I don’t particularly like government-provided welfare of any kind, but I definitely think there should be strict rules against handouts for immigrants. And if that makes them less susceptible to terrorist ideologies, that’s a big fringe benefit.

P.S. It goes without saying that politicians aren’t trying to subsidize terrorism. It’s just a byproduct of bad policy. They do, however, explicitly and deliberately subsidize terrorism insurance for big companies. A rather unique example of corporate welfare.

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Learning from the tremendous success of welfare reform during the Clinton Administration, the entire Washington-based welfare state should be junked.

It’s a complicated and costly mess that traps poor people in dependency while ripping off taxpayers and creating very comfortable lives for “poverty pimps.”

It would be much simpler (and more effective) to simply take all the money that’s now being spent on these programs and send it to the states as part of a “block grant” and let them figure out how best to help poor people without some of the negative consequences caused by the current plethora of programs.

I’ve previously written about how this would be a very desirable reform of Medicaid. Today, let’s build upon some previous analysis and explain why it would be good to get Washington out of the business of Food Stamps.

Let’s start with the fact that the program subsidizes purchases that have nothing to do with avoiding genuine hunger and deprivation. Indeed, as documented in a story in The Federalist, Food Stamps subsidize a considerable amount of unhealthy food.

New data from the U.S. Department of Agriculture reveals food stamp recipients spent more money on sweetened beverages than they did on fruits, vegetables, bread, cereal, or milk. The USDA analyzed transactional data from a leading grocery store in 2011 and found that Supplemental Nutritional Assistance Program (SNAP) households spent a greater percentage of money on unhealthier foods than those who didn’t use taxpayer funds to pay for their groceries. …The recent USDA study only looked at data from one grocery store retailer. It did not examine how SNAP funds were spent at convenience stores, which presumably would have significantly increased the amount of unhealthy foods purchased with taxpayer dollars.

Here are some of the details.

…The second largest expenditure for SNAP households was sweetened beverages, whereas the second largest expenditure for non-SNAP households was vegetables. …SNAP households spent 7.2 percent of their money on vegetables, while non-SNAP households spent 9.1 percent of their grocery money on this category of food. When comparing fruit purchases, the gap widens slightly: SNAP households spent 4.7 percent on fruits, and non-SNAP households spent an averages of 7.2 percent in the same category.

Here’s the comparison of purchases from those with food stamps and those using their own money.

As one might suspect, the problem has gotten worse during the profligate Bush-Obama era.

During President Obama’s tenure, the numbers and percentages of Americans using taxpayer’s money to buy their groceries has drastically increased. SNAP participation has increased 78 percent in the past ten years and remains near its all-time high… Food stamp usage also dramatically increased during President George W. Bush’s tenure… That’s because Bush signed a dramatic expansion of food welfare inside a farm bill. This expansion, among other things, made it easier to sign up and made non-citizens eligible to use U.S. taxpayers’ funds to fund grocery excursions.

By the way, I think poor people (indeed, all people) should be able to eat anything they want. That being said, there’s something perverse about subsidizing and encouraging unhealthy patterns.

Particularly when obesity is one of the biggest health problems in low-income communities.

The program also has always had major problems with fraud, as illustrated by a recent scandal in Florida.

The U.S. Attorney for the Southern District of Florida announced the largest food stamp fraud bust in U.S. history Wednesday afternoon. …500 people had their identities stolen in Palm Beach County to be used to get fake Electronic Benefit Transfer cards which were then exchanged for cash… Federal charges were filed against 22 retail store owners or operators in connection with schemes to illegally redeem food stamp benefits for cash, the Justice Department said. Indictments allege the retailers received more than $13 million in federal payments.

Even millionaires bilk the system.

A Geauga County millionaire—who comes from royalty—has been indicted on charges he illegally received food stamps and medicaid assistance. Ali Pascal Mahvi is facing four felony counts which could put him behind bars for more than four years if convicted. …Meyer informed Mahvi of the indictment at Mahvi’s 8,000 square foot home. …Prosecutors say Mahvi defrauded Medicaid out of $45,000 and about $8,400 in food stamps. Mahvi, who is the son of an Iranian prince, estimates his worth at about $120 million. His $800,000 home features five bedrooms and five bathrooms, an in-ground swimming pool, and stable with horses. Mahvi, who says he owns 70 percent of a resort in St. Lucia, says he’s played by the rules.

And some scammers become millionaires from the other end of the system.

Convenience store owner Vida Ofori Causey out of Worcester, Mass. was charged in federal court Monday after pleading guilty to $3.6 million worth of food stamp fraud. …“Causey purchased the benefits at a discounted value of approximately fifty cents for every SNAP dollar,” a press release from Department of Justice stated. “By so doing, Causey caused the USDA to electronically deposit into a bank account controlled by her the full face value of the SNAP benefits fraudulently obtained.” As a result, recipients had cash on hand to buy restricted items. The restricted items could include alcohol, cigarettes and even drugs.

Stories like this reinforce the argument that states should be in charge of the program, if for no other reason than there will be fiscal pressure not to waste so much money.

Moreover, there’s considerable evidence that states are more sensible in their approach. I’ve already written about good reforms in Maine and Wisconsin. Well, the Daily Caller has encouraging news that the good news in those states is part of a national trend.

The number of people receiving food stamps has declined sharply due in part to the reinstatement of work requirements earlier this year, according to a report Wednesday. …“Caseloads fell sharply in April, especially in states reinstating a three-month time limit for unemployed childless adults without disabilities, new Agriculture Department data show,” CBPP detailed in its report. “The data, covering the first month in which most of the roughly 20 states that imposed the time limit in January began cutting people off.” The USDA has required food stamp work requirements since an overhaul of the program in 1996. Able-bodied adults without children are required to work at least 20 hours a week or else lose their benefits after three months. …Work requirements have now been restored in a total of 40 states compared to 44 states this past June that had either a waiver or a partial waiver.

And let’s look specifically at some positive developments in Kansas.

…before Kansas instituted a work requirement, 93 percent of food stamp recipients were in poverty, with 84 percent in severe poverty. Few of the food stamp recipients claimed any income. Only 21 percent were working at all, and two-fifths of those working were working fewer than 20 hours per week. Once work requirements were established, thousands of food stamp recipients moved into the workforce, promoting income gains and a decrease in poverty. Forty percent of the individuals who left the food stamp ranks found employment within three months, and about 60 percent found employment within a year. They saw an average income increase of 127 percent. Half of those who left the rolls and are working have earnings above the poverty level. Even many of those who stayed on food stamps saw their income increase significantly. …Furthermore, with the implementation of the work requirement in Kansas, the caseload dropped by 75 percent. Previously, Kansas was spending $5.5 million per month on food stamp benefits for able-bodied adults; it now spends $1.2 million.

P.S. In the long run, the block grant should be phased out so the federal government isn’t involved at all in the business of income redistribution. If we care about the limits on federal power in Article 1, Section 8, then states should be responsible for choosing how much to raise in addition to choosing how to spend.

P.P.S. Just in case you think fraud and waste is a rare problem in the program, here are some other examples.

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

P.P.P.S. While I periodically mock California, folks in the Golden State deserve praise for being the least likely to use Food Stamps. Their neighbors in Oregon, by contrast, are very proficient at mooching.

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I’m in Sweden today, where I just spoke before Timbro (a prominent classical liberal think tank) about the US elections and the implications for public policy.

My main message was pessimism since neither Donald Trump nor Hillary Clinton support genuine entitlement reform.

But I’ve addressed that topic many times before. Today, motivated by my trip, I want to augment my analysis about Sweden from 10 days ago.

In that column, I highlighted some research from Professor Olle Kranz showing that Sweden became a rich nation during a free-market era when government was relatively small. And as you can see from his chart (I added the parts in red), this is also when per-capita economic output in Sweden caught up with – and eventually surpassed – per-capita GDP in other advanced countries.

Then Sweden began to lose ground. Some of this was understandable and inevitable. Sweden didn’t participate in World War II, so its comparative prosperity during the war and immediately afterwards was a one-time blip.

But the main focus of my column from last week was to show that Swedish prosperity began a sustained drop during the 1960s, and I argued that the nation lost ground precisely because statist policies were adopted.

In other words, Sweden enjoyed above-average growth when it relied on policies I like and then suffered below-average growth when it imposed the policies (high tax rates, massive redistribution, etc) that get Bernie Sanders excited.

Today, let’s build upon Professor Kranz’s analysis by extending his calculations. He did his research in the early part of last decade, and we now have many years of additional data that can be added to the chart.

But before doing that, it’s worth noting that the years of additional data basically coincide with a period of market-oriented reforms in Sweden. A study from the Reform Institute in Stockholm explains some of what happened, starting with the stagnation caused by the era of big government.

The seventies and eighties saw Sweden’s tax burden rise from an average European level to the world’s highest. The public sector expanded vastly. All facets of the welfare system were made more generous in international comparison. Meanwhile, labour market regulation increased… Throughout these years, Swedes’ individual after-tax real income stagnated, private sector job creation ceased, and public debt spiralled higher. This culminated in a severe economic crisis in the early 1990s. By then, Sweden had fallen to 14th place in the GDP per capita rankings of OECD countries.

That’s the bad news.

The good news is that this economic misery led to market-oriented reforms.

When the onset of the financial crisis coincided with election of a market-oriented centre-right government in 1991, the reform process began in earnest. Most emphasis at the time was placed on reforms that opened significant sectors in the economy to greater competition. Moreover, an important feature of these regulatory reforms was that the crisis spurred local authorities to implement less burdensome regulation. …significant changes were introduced to the tax system, macroeconomic policy framework, and social insurance system. …every aspect of the Swedish economy has changed due to implementation of reforms. …public sector employment has declined.

To be sure, none of the means Sweden became Hong Kong. It is currently ranked only #38 by Economic Freedom of the World, and its score only improved from 6.92 in 1990 to 7.46 today, hardly a huge jump.

But we nonetheless can now check whether this period of modest reform yielded any dividends. And, looking at an updated and extended version of Professor Kranz’s chart, there certainly seems to be a clear relationship between pro-market policy and Swedish prosperity.

Call me crazy, but it seems like there’s a lesson here about the right recipe for growth.

P.S. The 16 countries in the comparison are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Japan, Sweden, Switzerland, the United Kingdom, and the United States.

P.P.S. If you’re so disposed, you can watch my speech in Stockholm on Timbro’s Facebook page. If you prefer YouTube, the folks at CEPOS in Denmark saw the same speech (I only oppose wasteful forms of recycling) and they posted it yesterday.

P.P.P.S. If you’re interested in more information about market-oriented reforms in Sweden, check out Lotta Moberg’s video and Johan Norberg’s video.

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Sweden punches way above its weight in debates about economic policy. Leftists all over the world (most recently, Bernie Sanders) say the Nordic nation is an example that proves a big welfare state can exist in a rich nation. And since various data sources (such as the IMF’s huge database) show that Sweden is relatively prosperous and also that there’s an onerous fiscal burden of government, this argument is somewhat plausible.

A few folks on the left sometimes even imply that Sweden is a relatively prosperous nation because it has a large public sector. Though the people who make this assertion never bother to provide any data or evidence.

I have five responses when confronted with the why-can’t-we-be-more-like-Sweden argument.

  1. Sweden became rich when government was small. Indeed, until about 1960, the burden of the public sector in Sweden was smaller than it was in the United States. And as late as 1970, Sweden still had less redistribution spending than America had in 1980.
  2. Sweden compensates for bad fiscal policy by having a very pro-market approach to other areas, such as trade policy, regulatory policy, monetary policy, and rule of law and property rights. Indeed, it has more economic freedom than the United States when looking an non-fiscal policies. The same is true for Denmark.
  3. Sweden has suffered from slower growth ever since the welfare state led to large increases in the burden of government spending. This has resulted in Sweden losing ground relative to other nations and dropping in the rankings of per-capita GDP.
  4. Sweden is trying to undo the damage of big government with pro-market reforms. Starting in the 1990s, there have been tax-rate reductions, periods of spending restraint, adoption of personal retirement accounts, and implementation of nationwide school choice.
  5. Sweden doesn’t look quite so good when you learn that Americans of Swedish descent produce 39 percent more economic output, on a per-capita basis, than the Swedes that stayed in Sweden. There’s even a lower poverty rate for Americans of Swedish ancestry compared to the rate for native Swedes.

I think the above information is very powerful. But I’ll also admit that these five points sometimes aren’t very effective in changing minds and educating people because there’s simply too much information to digest.

As such, I’ve always thought it would be helpful to have one compelling visual that clearly shows why Sweden’s experience is actually an argument against big government.

And, thanks to the Professor Deepak Lal of UCLA, who wrote a chapter for a superb book on fiscal policy published by a British think tank, my wish may have been granted. In his chapter, he noted that Sweden’s economic performance stuttered once big government was imposed on the economy.

Though the Swedish model is offered to prove that high levels of social security can be paid for from the cradle to the grave without damaging economic performance, the claim is false (see Figure 1). The Swedish economy, between 1870 and 1950, grew faster on average than any other industrialised economy, and the country became technologically one of the most advanced and richest in the world. From the 1950s Swedish economic growth slowed relative to other industrialised countries. This was due to the expansion of the welfare state and the growth of public – at the expense of private – employment.57 After the Second World War the working population increased by about 1 million: public employment accounted for c. 770,000, private accounted for only 155,000. The crowding out by an inefficient public sector of the efficient private sector has characterised Sweden for nearly half a century.58 From being the fourth richest county in the OECD in 1970 it has fallen to 14th place. Only in France and New Zealand has there been a larger fall in relative wealth

And here is Figure 1, which should make clear that what’s good in Sweden (rising relative prosperity) was made possible by the era of free markets and small government, and that what’s bad in Sweden (falling relative prosperity) is associated with the adoption and expansion of the welfare state.

But just to make things obvious for any government officials who may be reading this column, I augment the graph by pointing out (in red) the “free-market era” and the “welfare-state era.”

As you can see, credit for the chart actually belongs to Professor Olle Krantz. The version I found in Professor Lal’s chapter is a reproduction, so unfortunately the two axes are not very clear. But all you need to know is that Sweden’s relative economic position fell significantly between the time the welfare state was adopted and the mid 1990s (which presumably reflects the comparative cross-country data that was available when Krantz did his calculations).

You can also see, for what it’s worth, that Sweden’s economy spiked during World War II. There’s no policy lesson in this observation, other than to perhaps note that it’s never a good idea to have your factories bombed.

But the main lesson, which hopefully is abundantly clear, is that big government is a recipe for comparative decline.

Which perhaps explains why Swedish policymakers have spent the past 25 years or so trying to undo some of those mistakes.

Addendum on November 3, 2016: A Swedish researcher kindly sent me a clear copy of Professor Kranz’s chart, so the axes are now very clear.

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