welfare

In The Wall Street Journal, James Bovard, a former CEI Warren T. Brookes Journalism Fellow, takes aim at some of the billions in waste contained in President Obama’s recent “jobs” proposal, the “American Jobs Act,” which would fund proven government failures in the form of federal job “training.” Federal “job-training” programs, which Obama likes, are so dismally ineffective that they cause “significant earnings losses” for young people who participate in them, and result in participants ending up on food stamps at higher rates:

Last Thursday, President Obama proposed new federal jobs and job-training programs for youth and the long-term unemployed. The federal government has experimented with these programs for almost a half century. The record is one of failure and scandal.

In 1962, Congress passed the Manpower Development and Training Act (MDTA) . . . A decade after MDTA’s inception, GAO reported that it was failing to teach valuable job skills or place trainees in private jobs and was marred by an “overriding concern with filling available slots for a particular program,” regardless of what trainees actually needed.

Congress responded in 1973 by enacting the Comprehensive Employment and Training Act (CETA). . . CETA spent vastly more money. .  .[such as] providing nude sculpture classes (where, as the Pharos-Tribune of Logansport, Ind., explained, “aspiring artists pawed each others bodies to recognize that they had ‘both male and female characteristics’”), and conducting door-to-door food-stamp recruiting campaigns.

Between 1961 and 1980, the feds spent tens of billions on federal job-training and employment programs. To what effect? A 1979 Washington Post investigation concluded, “Incredibly, the government has kept no meaningful statistics on the effectiveness of these programs—making the past 15 years’ effort almost worthless in terms of learning what works.” CETA hirees were often assigned to do whatever benefited the government agency or nonprofit that put them on the payroll, with no concern for the trainees’ development. An Urban Institute study of the mid-1980s concluded that participation in CETA programs resulted in “significant earnings losses for young men of all races and no significant effects for young women.”

After CETA became a laughingstock, Congress replaced it in 1982 with the Job Training Partnership Act. JTPA spent lavishly—to expand an Indiana circus museum, teach Washington taxi drivers to smile, provide foreign junkets for state and local politicians, and bankroll business relocations. . .  young trainees were twice as likely to rely on food stamps after JTPA involvement than before since the “training” often included instructions on applying for an array of government benefits.

For years the Labor Department scorned the mandate in the 1982 legislation to speedily and thoroughly evaluate whether the programs actually benefitted trainees. Finally, in 1993, it released a study that showed participation in JTPA “actually reduced the earnings of male out-of-school youths.” Young males enrolled in JTPA programs had 10% lower earnings than a control group that never participated. . .

In his speech to Congress, Mr. Obama called for funding hundreds of thousands of summer jobs for teens, which he labeled “investing in low-income youth and adults.” Yet such programs have been blighting work ethics for decades.

The GAO warned in 1969 that many teens in federal summer jobs programs “regressed in their conception of what should reasonably be required in return for wages paid.” A decade later, it reported that most urban teens “were exposed to a worksite where good work habits were not learned or reinforced.” And in 1985, a National Academy of Science study found that government jobs and training programs isolated disadvantaged youth, thus making it harder for them to fit into the real job market.

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There are plenty of people below the poverty line who aren’t really poor, and some people above the poverty line who are indeed quite poor. The poverty line is a very arbitrary measure seemingly designed to justify lots of spending on welfare and social services for “disadvantaged” people who aren’t really poor, spending that generates jobs for government employees (and government-subsidized non-profits) who provide welfare and handouts.

Robert Rector of the Heritage Foundation explains how many people below the poverty line aren’t really poor at all:

There is a wide chasm between the public’s concept of poverty and “poverty” as it is defined by the Census Bureau. The public generally thinks of poverty as . . . homelessness, or malnutrition and chronic hunger. In reality, the vast majority of those identified as poor by the annual census report did not experience significant material deprivation.

In a recent Rasmussen poll, adults agreed (by a ratio of six to one) that “a family that is adequately fed and living in a house or apartment that is in good repair” is not poor. By that simple test, about 80 percent of the Census Bureau’s “poor” people would not be considered poor by their fellow Americans.

In the same Rasmussen poll, however, 73 percent said poverty was a severe problem. Why the disconnect? The answer: Public perception of poverty in the U.S. is governed by the mainstream media, which invariably depicts the Census Bureau’s tens of millions of poor people as chronically hungry and malnourished, homeless or barely hanging on in overcrowded, dilapidated housing.

The strategy of the media is to take the least fortunate 3 percent or 4 percent of the poor and portray their condition as representative of most poor Americans. . .[But] they are far from typical among the poor. . . a poor child in American is far more likely to have a widescreen plasma television, cable or satellite TV, a computer and an Xbox or TiVo in his home than he is to be hungry. . .In 2009, the U.S. Department of Agriculture asked parents living in poverty this question: “In the last 12 months, were [your] children ever hungry but you just couldn’t afford more food?” Some 96 percent of poor parents responded “no”: Their children never had been hungry because of a lack of food resources at any time in the previous year. . . .

Here are more surprising facts about Americans defined as “poor” by the Census Bureau. . .

Eighty percent of poor households have air conditioning. By contrast, in 1970, only 36 percent of the entire U.S. population enjoyed air conditioning. Fully 92 percent of poor households have a microwave; two-thirds have at least one DVD player and 70 percent have a VCR. Nearly 75 percent have a car or truck; 31 percent have two or more cars or trucks. . .Nearly two-thirds have cable or satellite television. Half have a personal computer; one in seven have two or more computers. More than half of poor families with children have a video game system such as Xbox or PlayStation. . . A third have a widescreen plasma or LCD TV. . .

At a single point in time, only one in 70 poor persons is homeless. The vast majority of the houses or apartments of the poor are in good repair; only 6 percent are over-crowded. The average poor American has more living space than the average non-poor individual living in Sweden, France, Germany or the United Kingdom. . .Forty-two percent of all poor households own their home; on average, it’s a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio. . . among the lowest-income fifth of households, inflation-adjusted consumer spending actually increased modestly during the recession.

Given these facts, how does the Census Bureau conclude that more than 40 million Americans are poor? They identify a family as poor the family’s cash income falls below specific thresholds. For example, in 2009 a family of four was “poor” if annual cash income fell below $21,954.

But in counting income, the Census Bureau ignores almost the entire welfare state. This year, government will spend over $900 billion on means-tested anti-poverty programs that provide cash, food, housing, medical care and targeted social services to poor and near-poor Americans. . .This means-tested welfare spending comes to around $9,000 for each poor or low-income American — virtually none of which is counted by census officials for purposes of calculating poverty or inequality.

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In the Daily Caller, Chris Edwards has an interesting article about why government spending doesn’t “stimulate” the economy over the short-run or the long-run. Rather than growing the economy, stimulus packages are typically wasteful wealth transfers akin to a “leaky bucket,” which harm the economy in the long run, whether or not there are any short-run stimulus effects.

As Edwards notes, “Despite ongoing federal deficits of more than $1 trillion a year, many liberals are calling for more government spending to ‘create jobs.’” But if government spending creates jobs, it’s hard to understand why unemployment has soared, even as government spending has exploded in recent years: “Federal spending has soared over the past decade. As a share of gross domestic product, spending grew from 18 percent in 2001 to 24 percent in 2011.” As he notes, “government spending and taxing creates ‘deadweight losses,’ which result from distortions to working, investment and other activities. The CBO says that deadweight loss estimates ‘range from 20 cents to 60 cents over and above the revenue raised.’ Harvard University’s Martin Feldstein thinks that deadweight losses ‘may exceed one dollar per dollar of revenue raised.’” Due partly to this “leaky-bucket” effect, Texas A&M economist Edgar Browning concluded that “It costs taxpayers $3 to provide a benefit worth $1 to recipients,” and that “today’s welfare state reduces GDP — or average U.S. incomes — by about 25 percent.”

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The Congressional Budget Office says the stimulus package will cost $43 billion more than estimated. The stimulus package is full of waste, fraud, and abuse. As Michelle Malkin notes:

Last week, the Treasury Department inspector general found that the tax police have failed to prevent fraud in the stimulus law’s energy tax credit program. Some $6 billion in stimulus energy credits for homeowners have been claimed — but the inspector general’s audit found that 30 percent of credit-claimers had no record of homeownership. The recipients included prisoners and minors. “I am troubled by the IRS’s continued failure to develop appropriate verification methods for distributing Recovery Act credits,” the Treasury Inspector watchdog said.  Moreover, when the IRS wasn’t falling down on its job policing outside fraud, its own workers were committing their own stimulus fraud — by cheating the system and claiming a first-time homebuyer tax credit included in the 2008 and 2009 economic stimulus packages. At least 128 IRS employees claimed the credit, according to a recent Treasury Department audit, yet weren’t first-time buyers or violated other basic eligibility criteria.

Moreover, the stimulus package has also “redistributed wealth to prison inmates, flaky researchers, social justice boondoggles, infrastructure to nowhere, foreign companies, dead people and ghost congressional districts — not to mention $20 million in chump change to pay for campaign-style stimulus-hyping road signs across the country emblazoned with the shovel-ready logo.”

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There has been a lot of news coverage recently about how 3,700 tax cheats got $24 billion in stimulus money. But the stimulus package wasted money in far worse ways. I explain at the Washington Examiner. Unemployment is much higher now than the Obama administration said it would be if the stimulus were enacted. Indeed, it’s higher than Obama administration officials said it would be if Congress had refused to pass the stimulus. (The Obama administration said unemployment would hit 9 percent if Congress refused to pass the stimulus, but not go beyond 8 percent if it did pass the stimulus. But unemployment reached 10.3 percent by October 2009.)

As the failure of the stimulus has become increasingly apparent, the Obama administration has touted its creation of imaginary jobs in non-existent congressional districts.

The stimulus actually provided incentives not to work, since it largely repealed welfare reform and provided incentives for states to increase their welfare caseloads.

 

On Wednesday, President Obama renominated four radicals to federal judgeships, even though their nominations previously died in the Senate. A week earlier, he made six controversial recess appointments. Those sharply partisan and ideological acts contradict his recent rhetoric about the need for “bipartisanship.”

Obama once again nominated John J. “Jack” O’Connell, who gave hundreds of thousands of dollars to liberal politicians.  O’Connell used $2.5 million in state-settlement money to pay off a creditor, in an unethical diversion of state funds. Using political influence, he got himself hired to bring a costly and futile lead paint lawsuit that “achieved nothing, other than waste thousands of hours of attorney time.” The U.S. Chamber of Commerce opposed O’Connell’s nomination — the first time it ever opposed a federal judicial nomination.

Obama renominated Edward Chen, a fervent advocate of racial preferences who unsuccessfully challenged a provision of the California Constitution banning racial discrimination and preferences. Chen also “objected to the singing of ‘America the Beautiful’ at a funeral because of his ‘feelings of ambivalence and cynicism when confronted by appeals to patriotism.’”

Radical law professor Goodwin Liu was also renominated. As lawyer Ted Frank noted in the Washington Examiner, Liu once claimed that racial quotas are not merely permitted, but constitutionally “required.”  If confirmed, Liu would sit on the Ninth Circuit Court of Appeals, a sharply-divided federal appeals court with jurisdiction over a whopping one-fifth of the American people. Liu wrongly argued in the past that the Constitution requires some forms of welfare, although he denied supporting such a constitutional right to welfare in his more recent testimony before the Senate Judiciary Committee, when he experienced a politically-convenient confirmation conversion after his nomination became controversial.  Although Liu briefly worked for a law firm, Liu has no experience actually trying cases, despite the fact that judges are supposed to have “substantial courtroom and trial experience” (a fact that did not keep the staunchly liberal ABA, which shares Liu’s ideology, from supporting his nomination despite his lack of this basic qualification).   Liu has claimed that “‘free enterprise, private ownership of property, and limited government” are right-wing concepts and ideological “code words.” Liu is also a big user of politically-correct psychobabble, writing that a judge is supposed to be a “culturally situated interpreter of social meaning” rather than an impartial umpire who interprets the law in accord with its plain meaning or its framers’ intent.

Obama also renominated Louis Butler, who was so extreme that he was removed from the Wisconsin Supreme Court by voters in 2008 (the first time the state’s voters had removed a Justice since 1967).  Butler’s empathy for criminals was summed up by his nickname, Loophole Louis.

Wintery Knight has an interesting discussion of how unemployment benefits keep people from working, drawing on coverage from The New York Times and academic studies. As he notes, this undermines the methodology used by the Congressional Budget Office (CBO) in concluding that the stimulus package would increase the size of the economy in the short run. (Even the CBO admitted that the stimulus would shrink the economy in the long run.)

We recently discussed other ways that the stimulus package discourages work and cuts the size of the economy. The recent deal between Obama and Congressional leaders will extend these harmful provisions, as well as the unemployment benefits that discourage work. (The job-destroying $800 billion stimulus package also gutted welfare reform.)

Earlier, we discussed how the stimulus wiped out American jobs, and Harvard economist Jeffrey Miron’s conclusion that the stimulus was not only a failure at creating jobs, but also was intended to push left-wing ideological goals, rather than to revive the economy.

Thanks to food stamps, Medicaid, and housing subsidies, and other welfare benefits, many “poor” people have far more disposable income than self-supporting households earning $40,000 to $60,000 a year.  Veronique de Rugy points to a finding that “a one-parent family of three making $14,500 a year (minimum wage) has more disposable income than a family making $60,000 a year” — even excluding benefits from Supplemental Security Income.  “America is now a country which punishes those middle-class people who not only try to work hard, but avoid scamming the system.”

These disincentives to work were expanded in the job-killing $800 billion stimulus package, which largely repealed welfare reform and increased the refundable tax-credits given to non-taxpaying “poor” households.  These refundable credits are being perpetuated in the costly $900 billion deal recently reached between Obama and congressional leaders.

The analysis de Rugy cites actually understates the disincentives to work, because it ignored the fact that many households that are “poor” in terms of taxable income are not poor at all once you factor in tax-free income from non-governmental sources.  For example, child support is tax-free to the recipient family, no matter how huge the payments they receive (for example, a billionaire may pay several million dollars a year in child support to each of his ex-girlfriends with kids, leaving them in tax-free luxury, and under New York’s child support guidelines, everyone is supposed to pay at least 17 percent of their gross income in child support for just one child, regardless of how high that income is.  In Massachusetts, middle-income households pay 25 percent of gross income for just one kid — which is around a third of their after-tax income — under that state’s child support guidelines).

The stimulus package contained provisions encouraging states to temporarily ratchet up their child support guidelines to reap more federal matching funds.  Maryland recently increased its child support guidelines to excessive levels, permanently.  Ohio is now weighing a massive proposed child-support increase, also apparently based on erroneous reasoning.  However, these increases probably will not provide a net benefit to state budgets, because increased federal funding is offset by incarceration and other direct and indirect costs associated with enforcement of excessive child-support guidelines).

Federal matching funds are having a negative effect on child welfare in other contexts, such as unwarranted CPS seizures.  (The federal government is increasingly using matching funds to meddle in areas of tort, criminal, family and domestic violence law traditionally handled by the states, sometimes in ways that actually increase domestic-violence-related deaths and injuries.) Financial obligations imposed by divorce courts are also harming soldiers and small businesses.

Federal food stamp allotments are so generous that they clearly exceed the amount needed to actually feed a family on a bare-bones budget.

I just read an interesting report about disposable income in America. The claim is that the head of a household of four making minimum wage has more disposable income than a family making $60,000 a year. How is this conclusion reached? Well, supposedly after all government benefits, including food stamps and medicaid, the individual making less money can receive significantly more benefits than the person making $60,000.

Although there are some flaws in the report (one example being a failure to include employer healthcare benefits) the report does illustrate some severe flaws in our tax code and welfare system. If it turns out that individuals can work less, while doing financially better than people who make more money, why work? While some argue the Keynesian multiplier will boost the economy, at some point common sense has to come into play.

The best way to boost the economy is to have all citizens working productive jobs. Adding an unnecessary moral hazard by paying people not to work, while punishing people who do, will invariably result in a worse economy.  Sadly, anyone who advocates against the status quo is often accused of hurting the poor.

Photo Source and here.

Obamacare is going to wipe out 800,000 jobs through its disincentives to work.  That contrasts sharply with false claims by House Speaker Nancy Pelosi (D-Calif.) that the new health care law would create jobs,  ”400,000 of them almost immediately.” That 800,000 lost jobs “is 50% more than all the people who work for GM, Ford, and Chrysler combined,” yet the Congressional Budget Office regards it as a “small amount” compared to the overall labor force.  To some people, the glass is always half full.

As we discussed earlier, it was the Congressional Budget Office’s own report that showed that Obamacare discourages work and thus shrinks the economy.  Obamacare was so poorly drafted that some people are massively punished for working and earning more.  One hypothetical 62-year old lost $7,836 in tax credits for a $22 increase in income, resulting in a 35,618 percent marginal tax rate on that additional income.  Who would work longer hours, or seek to earn more, if they end up with less take-home pay at an income of $55,000 than $46,000 — as is true for some people under Obamacare?

As noted earlier, the new healthcare law raises taxes on the middle-class and investors,  reduces lifesaving medical innovation, and drives up health insurance premiums.  It also will bankrupt many “small to midsize” medical-device manufacturers, driving up unemployment.