Retreating to Welfarism

In June of 2018 I wrote the column that follows. I “bumped” into it when I was doing some research. That research came on the heels of an article in Saturday’s Wall Street Journal noting the dramatic growth in jobs for June. While the growth in jobs was dramatic this past month, the previous months’ growth have been anemic and commentators generally agree they have not kept pace with the “reopening” of our economy, and that the enhanced unemployment benefits bear a large part of the reason for the sluggishness.

What follows here, although penned in the early days of economic growth during the Trump administration in the aftermath of the economic anemia during the Obama administration, is as equally applicable today as it was three years ago. We have begun to backslide towards a welfare state instead of progressing towards a “full employment” growth economy.

Work is Losing to Welfare

Last week The Wall Street Journal reported that, based on information from the Bureau of Labor Statistics, the United States passed a threshold for the first time in recorded history – there were more jobs available than there were people looking for jobs. While The Wall Street Journal highlighted the unique accomplishment of a reinvigorated economy, much of the mainstream media gave it brief attention or buried it in the deep recesses of their papers or broadcasts – God forbid that they should ever acknowledge good economic news occasioned during the administration of President Donald Trump. (There are still those pundits who are blinded by the truth and still try to attribute the recent job growth and economic expansion to the policies of former President Barack Obama.)

And even though this is a unique accomplishment that bodes well for the recovery of an economy made anemic by Mr. Obama for eight years, there is still a message missing from these numbers. That message is contained in the also reported Labor Force Participation Rate tables. The Labor Force Participation Rate is calculated by adding the number of persons actually working to those actively seeking work divided by the total number of working age people (excluding homemakers and those unable to work). That figure has stubbornly remained at approximately 62.7 percent since the commencement of Mr. Trump’s presidency. (For those forced to endure a teachers union led education in the Portland Public Schools, that means that only 62.7 percent of the work-capable population of the America is actually working or actively seeking work). During Mr. Obama’s administration that figure dropped dramatically from 66.2 percent to as low as 62.3 percent during the seventh year of his presidency. [The Labor Force Participation Rate under President Joe Biden is an abysmal 61.6 percent as of May, 2021.]

So at a period of time when there are more jobs available than job seekers, what does this stubborn resistance to improvement in the labor force participation rate mean? In large part it means that the government is competing with employers for the attention of these people. And how does the government compete? Through the welfare system. When the government provides welfare assistance that approximates the wages for entry-level positions, it competes.

Just in case there are some of the liberal/progressive persuasion that are about to have the vapors over this assertion, let’s recall what the welfare system is for. It is to provide a safety net for those who cannot work. The reasons for being unable to work are many – illness (both physical and mental), handicaps, parental responsibility, temporary unemployment due to job loss, etc.

Welfare was never meant to provide an alternative and multi-generational life style. But the administration of welfare benefits in America has, in fact, created that alternative life style and it is that segment of the welfare state that competes with private enterprise for employees. A 2012 report (midway through Mr. Obama’s administration) from the United States Senate Budget Committee noted the following:

“Based on data from the Congressional Research Service, cumulative spending on means-tested federal welfare programs, if converted into cash, would equal $167.65 per day per household living below the poverty level. By comparison, the median household income in 2011 of $50,054 equals $137.13 per day. Additionally, spending on federal welfare benefits, if converted into cash payments, equals enough to provide $30.60 per hour, 40 hours per week, to each household living below poverty. The median household hourly wage is $25.03. After accounting for federal taxes, the median hourly wage drops to between $21.50 and $23.45, depending on a household’s deductions and filing status. State and local taxes further reduce the median household’s hourly earnings. By contrast, welfare benefits are not taxed.

“The universe of means-tested welfare spending refers to programs that provide low-income assistance in the form of direct or indirect financial support—such as food stamps, free housing, child care, etc.—and which the recipient does not pay into (in contrast to Medicare or Social Security). For fiscal year 2011, CRS identified roughly 80 overlapping federal means-tested welfare programs that together represented the single largest budget item in 2011—more than the nation spends on Social Security, Medicare, or national defense. The total amount spent on these federal programs, when taken together with approximately $280 billion in state contributions, amounted to roughly $1 trillion. Nearly 95 percent of these costs come from four categories of spending: medical assistance, cash assistance, food assistance, and social / housing assistance. Under the President’s [Mr. Obama’s] FY13 budget proposal, means-tested spending would increase an additional 30 percent over the next four years.” [Bracketed words added]

Please note that the Senate committee’s findings specifically removed Social Security and Medicare from its findings because each is a program into which the beneficiaries pay. In May of 2005 I posted a column in the Medford Mail Tribune demonstrating that had I been permitted to invest my Social Security taxes in the Standard & Poor’s 500 Index Fund rather than the unfunded, unsecured and non-collateralized Social Security system, at age 65 my benefits would have been three times what Social Security has paid. For most of us Social Security benefits are a return on an investment even though it is a really poor investment.

The point here is that the multitude of welfare programs as administered currently has created a disincentive to work. Many entry-level jobs are physically hard, monotonous, and/or grim. Because welfare benefits exceed the pay for many of these jobs, able-bodied people opt to remain idle and collect welfare. The problem is compounded by the lack of integrity in the administration of these welfare programs. Even though citizenship is a requirement for many welfare programs, government workers are instructed to either not ask about citizenship or do nothing to verify it; while advocates for the illegals routinely tell them to lie about their status and assure them that the government will never check.

The result is that welfare distorts the employment picture. It is simply wrong to say that there are more jobs than there are people available for work unless you count those who are able bodied but decline to work – choosing welfare over work. So what is the solution? It can be brutal.

America is a prosperous country. We can well afford to care for those in need and unable to provide for themselves. The solution is simple: limit welfare to those in need that are unable to provide for themselves and those who are temporarily unemployed or unemployable. Beyond that able bodied people should face the stark reality that if they do not work they will starve. Mechanisms should be put in place to help recover those who initially refuse to work but there needs to be a short limitation on the duration and frequency of such recovery – basically three strikes and your out. Training programs should be made available to ensure that those willing to work possess the necessary skills. It is entirely possible that even those who are working cannot earn enough to care for a family and in such cases welfare programs should serve as a supplement to working – not a substitute. There are already mechanisms in place to determine whether a welfare recipient is capable of work – that should be not only used but reinforced with sufficient personnel to implement them.

There will be times when another Barack Obama may become president and the economy returns to a weakened status. If there are insufficient jobs to employ the able-bodied then welfare is an appropriate albeit temporary means of assistance. But sustained periods of welfare create multi-generational dependency, contribute to the breakdown of the family unit and bolster the concept of class welfare pitting those who work and pay against those who are idle and receive.

The whole point here is that when there are more people riding in the carts than those pulling the carts, society breaks down. Welfare reform is one of the most critical elements to secure long term economic growth and reduce the burgeoning national debt. And welfare reform begins with ensuring that its application is limited to those in need who are unable to provide for themselves. To quote [former] Rep. Martha McSally (R-AZ) “grow a pair of ovaries” and get on with it.