The Myth Of Welfare Reform

by Hans Bader on April 3, 2013

in Deregulate to Stimulate, Economy, Employment, Features

Post image for The Myth Of Welfare Reform

Welfare reform is largely a myth. Many people who used to be on welfare have since gone onto Social Security Disability. That benefits states by shifting their welfare costs to the federal government. Moreover, people who were never on welfare in the past are now going onto Social Security Disability in droves, which makes the Obama administration happy, since it helps mask persistently high unemployment by reclassifying unemployed people as “disabled” instead. The number of people on Social Security Disability has skyrocketed, at tremendous cost, as an NPR report by Chana Joffe-Walt chronicles:

The federal government spends more money each year on cash payments for disabled former workers than it spends on food stamps and welfare combined. . .

A person on welfare costs a state money. That same resident on disability doesn’t cost the state a cent, because the federal government covers the entire bill for people on disability. So states can save money by shifting people from welfare to disability. And the Public Consulting Group is glad to help.

PCG is a private company that states pay to comb their welfare rolls and move as many people as possible onto disability.

In Cato’s Regulation magazine, Jagdeesh Gokhale writes that the Social Security Disability program is “facing insolvency in just three years.” Ronald Bailey, Reihan Salam, and Wynton Hall also recently discussed this phenomenon. As Hall notes, some of the left have resorted to attacking NPR for being the bearer of bad tidings. As Walter Olson notes, Heather Mac Donald prophetically predicted this massive problem 17 years ago.

Earlier, The Washington Post’s Robert J. Samuelson explained how vast numbers of Americans are going onto Social Security Disability. Carter and Reagan tried without success to reform this program, and were blocked by Congress. The current administration has no interest in reforming it, since it hides high unemployment. As Zero Hedge notes, exploding disability claims are credited “with distorting the unemployment rate and making it lower than most expect or believe.” It cites a study noting that “nearly 25% of those not actively seeking a job had applied for, and been accepted, by disability — mostly Social Security.”  JP Morgan Chase has observed that “once someone starts receiving these benefits, it’s almost impossible to take them off the program. In 2011 only 1% of the recipients lost their benefits because they were no longer deemed disabled. . .The cost to the federal budget of these programs has escalated along with the number of claimants, and now runs around $200 billion per year — more than the budgets of the Departments of Commerce, Energy, Homeland Security, Interior, Justice, and State combined. Thus a quarter of people who drop out of the workforce and come off the unemployment benefits, simply move to receiving disability payments. And most stay there until they roll into the social security program when they retire — from their disability.”

As Samuelson points out,

In 2010, Social Security’s disability program cost $124 billion plus another $59 billion for Medicare (after two years, disability recipients automatically qualify for Medicare). This exceeded $1,500 for every U.S. household. For the past two decades, disability spending has increased at a 5.6 percent annual rate, compared with 2.2 percent for the rest of Social Security.  . . .In 1988, 4 percent of men and 2 percent of women aged 40 to 59 received disability benefits. By 2008, the men’s rate was almost 6 percent and the women’s, 5 percent. . . .Now, mental problems (depression, personality disorder) and musculoskeletal ailments (back pain, joint stress) dominate (54 percent of awards in 2009, nearly double 1981’s 28 percent). The paradox is plain. As physically grueling construction and factory jobs have shrunk, disability awards have gone up.

The JP Morgan report suggests that Samuelson is actually understating things. The Obama administration is not the only enemy of reform. As Samuelson notes, disability lawyers also benefit from the status quo, and would “resist big changes.”

The Obama administration has blocked states’ attempts to fight food stamp fraud, as food stamp use has surged to record levels, with even non-poor people qualifying for food stamps in some states, due to changes backed by the administration. The stimulus package backed by President Obama also undermined welfare reform, and in 2012, the administration has opened the door to potential waivers of welfare reform’s already-limited work requirements.

Discouraged workers who are temporarily unemployed and facing the prospect of taking a job that pays far less than what they were accustomed to receiving are increasingly turning to Social Security Disability by citing vague psychological maladies. Their job prospects are poor partly because the Obama administration has created a political climate that discourages businesses from expanding and hiring new employees. Obamacare, which has already caused layoffs in the medical device industry, will wipe out as many as 800,000 jobs and turn other jobs into part-time jobs. The Dodd-Frank Act has also wiped out jobs and driven other jobs overseas. The Obama administration has discouraged investment by imposing costly, harmful new labor and employment rules on American manufacturers. Steve Wynn, a disenchanted liberal businessman, called Obama “the greatest wet blanket to business and progress and job creation in my lifetime.”

Comments on this entry are closed.

Previous post:

Next post: