• Tag Archives welfare

  • New Report Shows Growth of the Welfare State Has Fueled Long-Term Declines in the Labor Force

    Posted on by Azrael Comment

    A massive labor shortage continues to grip the nation and hold back our economic recovery. With countless pandemic and policy factors influencing the shortage, there’s a heated debate over what’s keeping so many workers out of the labor force. But a new study confirms that the growth of the welfare state is playing a massive role—and that this trend began long before the pandemic. 

    Published by experts on the Republican side of the Senate Joint Economic Committee, the analysis reports, “the U.S. has witnessed an unprecedented rise in disconnected prime-age workers over time.” As shown in the graph below, the men’s labor force participation rate has fallen from more than 97 percent in 1955 to 89 percent prior to the pandemic, while the women’s labor force participation rate has declined in recent decades as well.

    Image Credit: JEC Republicans

    What’s causing this decline? Well, the study examines popular explanations like displacement from immigration and technological advancements and finds that they do not account for this drastic drop. Rather, it suggests that the biggest factor is that “many would-be workers are voluntarily disconnected from work, and government programs and policies have likely made work less attractive for these Americans.”

    There has been tremendous growth in the welfare state over these decades. Per the committee, in 1998 about 20 percent of working-age Americans living in households between the 20th and 50th income percentiles were benefiting from government programs. As of 2014, that figure was up to 30 percent.   

    Indeed the study notes that “only 12 percent of inactive, prime-age, able-bodied men said they wanted a job or were open to work.” Why? It doesn’t take a genius to figure out that the widespread availability of robust welfare benefits is a key part of the explanation.  

    “A significant body of empirical evidence suggests that government transfers— especially those without work requirements—tend to lower employment,” the study reports. “For example, labor force participation and earnings fall after receiving housing assistance, losing Medicaid coverage increases employment and gaining the coverage can reduce it, and the introduction of the food stamp program in the 1960s and 1970s decreased employment significantly.” 

    We can’t overlook these troubling findings. Yes, there’s no doubt that the pandemic and pandemic-specific policies are contributing to the particularly acute labor shortage currently facing our economy. But in the bigger picture, our long-term labor problems are driven particularly by a bloated welfare system that disincentives work and traps people in poverty.  

    Yet some are learning the opposite lessons. With their $3.5+ trillion spending plan, progressives in Congress are trying to make the welfare state even bigger! This is bad for the economy and actually bad for the supposed beneficiaries, too—the anti-poverty, mental, emotional, health, and social benefits of being employed are widely and extensively documented. Policies should incentivize employment; not discourage it.  

    “As the number of Americans who receive government assistance has grown, more Americans have voluntarily left their jobs,” Republican Senator Mike Lee commented in light of this report. “Congress’ plan to spend an additional $3.5 trillion to provide households with new subsidies and fewer incentives to work would only make things worse.” 

    Indeed it would. Hopefully, this new study injects some much-needed insight into the ongoing conversation about labor shortages. In the big picture, our labor participation problems can’t be fixed without serious rollbacks of the welfare state.


    Brad Polumbo

    Brad Polumbo (@Brad_Polumbo) is a libertarian-conservative journalist and Policy Correspondent at the Foundation for Economic Education.

    This article was originally published on FEE.org. Read the original article.


    📂This entry was posted in News and Politics 📎and tagged

  • ‘It’s Easy Money’: Nigerian Scammer Laughs about Huge Sums Stolen from COVID Welfare Programs in Bombshell Interview

    Posted on by Azrael Comment

    State unemployment agencies aren’t especially responsible stewards of taxpayer dollars even in the best of times. Yet when the COVID-19 crisis and government lockdowns put tens of millions of Americans out of work, Congress responded by pouring more taxpayer money into state-level unemployment systems.

    The federal legislation enormously increased weekly payouts and expanded unemployment benefits to many new classes of workers, with little in the way of verification or qualification requirements. This welfare expansion was just reauthorized in the second major COVID-19 spending package, which Congress passed in mid-December. Sadly, lawmakers didn’t bother to address the runaway fraud that had plagued the first round of COVID relief efforts.

    An astonishing $36 billion has been lost to fraud in pandemic unemployment benefits, the Department of Labor reports. To put this figure in context, the entire unemployment system only paid out about $26 billion in 2019.

    That’s right: Bureaucrats lost to fraud more than is usually paid out in an entire year. The $36 billion lost—and that’s just the fraud we know about—amounts to an average of roughly $1,894 lost per current unemployment beneficiary. (What would we think of a private system that lost nearly $2,000 for each customer served?)

    These figures alone are horrifying, but a new bombshell interview with one of the countless international scammers getting rich off our relief efforts makes it painfully clear just how carelessly Congress is throwing around our money.

    A Nigerian student named Mayowa spoke to USA Today and, on the condition of partial anonymity, openly admitted to scamming $50,000 from the US pandemic welfare system so far.

    All he had to do was make a list of real people and then search through available databases of hacked information for their Social Security numbers and birthdates.

    “In most states that information is all it takes to file for unemployment,” USA Today’s Nick Penzenstadler says. ”Even when state applications require additional verification, a little more money spent on sites such as FamilyTreeNow and TruthFinder provides answers – your mother’s maiden name, where you were born, your high school mascot.”

    It doesn’t always work, of course. But Mayowa told the newspaper his success rate is pretty high—about one success in every six claim attempts.

    “Once we have that information, it’s over,” Mayowa told reporters. “It’s easy money.”

    Government bureaucrats were caught flat-footed, and the flood of money being rushed out the door in the name of emergency meant more vulnerabilities than ever. It took many states more than six months to add verification requirements and partially stem the flow. Just to use one state as an example, Washington state usually identifies a few dozen fraudsters in a year—now, it has identified more than 122,000 since March.

    “When you consider the policy factors accelerating benefits and getting them to the neediest people and the expanded $600 available … we had the perfect storm,” Washington Employment Security Department Commissioner Suzi Levine said. “[Scammers] have been lying in wait for this moment.”

    It’s certainly true that the COVID-19 pandemic and the sweeping big government response are unprecedented in our lifetimes. So, the runaway unemployment fraud and rampant fraud in other COVID relief programs are indeed an extreme example. But do not make the mistake of thinking that they are uncharacteristic of big-government programs by any stretch.

    As Austrian economist Ludwig von Mises explained, bureaucracy, incompetence, and waste are inherent to government administration by its very nature.

    In contrast, private businesses are driven to efficiency by the profit motive. A company-wide system that is broken and bleeding money is, in short order, fixed—or if it cannot be, that company will soon be driven out of business by more efficient competitors. This influences the behavior, not only of the business’s owners, but of its hired managers, and thus all its employees.

    “Within a business concern [the management of expenses] can be left without hesitation to the discretion of the responsible local manager,” Mises explained in his book Bureaucracy. “He will not spend more than necessary because it is, as it were, his money; if he wastes the concern’s money, he jeopardizes the branch’s profit and thereby indirectly hurts his own interests.”

    Fundamentally, in private enterprise, everyone involved has skin in the game. So, while mistakes still certainly happen, there’s a strong incentive to correct them and push for as much efficiency as is possible.

    In government the opposite is true.

    “It is another matter with the local chief of a government agency,” Mises explained. “In public administration there is no connection between revenue and expenditure. In public administration there is no market price for achievements.”

    It’s not that government bureaucrats want to waste taxpayer money. But the lack of proper incentives breeds incompetence, and all government agencies have a monopoly on what they do.

    If a state’s unemployment agency does a poor job, it doesn’t go out of business. Neither the profits of the “owners” nor the salaries of the workers are on the line. So, it’s much less likely that anyone will even face firing or disciplinary action for mistakes in government. (Especially thanks to the strength of public sector unions).

    Need proof? Only a few state administrators have been fired throughout this entire national COVID-19 welfare fraud scandal. It’s simply unthinkable that this level of scandal and waste could happen in private enterprise without wide-scale firings and other forms of accountability.

    This inherent inefficiency is a feature of government bureaucracy, not a bug.

    Yes, this particular problem may fade, if expanded pandemic unemployment relief programs are eventually allowed to expire. But waste, fraud, and inefficiency will plague big government efforts long after the COVID-19 pandemic subsides.

    RELATED: Why You Should Expect More Stimulus Fraud Coming Soon.


    Brad Polumbo

    Brad Polumbo (@Brad_Polumbo) is a libertarian-conservative journalist and Opinion Editor at the Foundation for Economic Education.

    This article was originally published on FEE.org. Read the original article.


    📂This entry was posted in News and Politics 📎and tagged

  • Europe Can Only Afford Its Welfare State by Heavily Taxing the Non-Wealthy

    Posted on by Azrael Comment

    I argued last year that leftists should be nice to rich people because upper-income taxpayers finance the vast majority of the American welfare state according to government data. Needless to say, my comment about being “nice” was somewhat sarcastic. But I was making a serious point about the United States having a very “progressive” fiscal system. The top-20 percent basically pay for government and those in the bottom half are net recipients of that involuntary largesse.

    I also pointed out a huge difference between the United States and Europe. Governments on the other side of the Atlantic impose much higher burdens on lower-income and middle-class taxpayers.

    Here’s some of what I wrote:

    …the big difference between the United States and Europe is not taxes on the rich. We both impose similar tax burden on high-income taxpayers, though Europeans are more likely to collect revenue from the rich with higher income tax rates and the U.S. gets a greater share of revenue from upper-income taxpayers with double taxation on interest, dividends, and capital gains (we also have a very punitive corporate tax system, though it doesn’t collect that much revenue). The real difference between America and Europe is that America has a far lower tax burden on lower- and middle-income taxpayers. Tax rates in Europe, particularly the top rate, tend to take effect at much lower levels of income. European governments all levy onerous value-added taxes that raise costs for all consumers. Payroll tax burdens in many European nations are significantly higher than in the United States.

    So does this mean European politicians don’t like ordinary people?

    I could make a snarky comment about the attitudes of the political elite, but I’ll resist that temptation and instead point out that taxes in Europe are much higher for the simple reason that government is much bigger and that means some segment of the population has to surrender more of its income.

    But here’s the $64,000 question that we want to investigate today: Why are European governments pillaging lower-income and middle-class taxpayers instead of going after the “evil rich” and “greedy corporations”?

    Part of the answer is that there aren’t enough rich people to finance big government. But the most important factor is the Laffer Curve. Politicians can impose higher tax rates on upper-income taxpayers and companies, but that doesn’t necessarily translate into higher revenue. Simply stated, well-to-do taxpayers have considerable ability to earn less income and/or report less income when tax burdens increase, and they do the opposite when tax burdens decrease.

    That’s true in the United States, and it’s true in European countries such as Sweden, France, Russia, Denmark, and the United Kingdom.

    So even if politicians want to fleece upper-income taxpayers, that’s not a successful method of generating a lot of revenue.

    Which is why a shift from a medium-sized welfare state (such as what exists in the United States) to a large-sized welfare state (common in Europe) means huge tax increases on ordinary taxpayers.

    I’ve made this point before, but now I have some additional evidence thanks to a new report from the Organization for Economic Cooperation and Development. The Paris-based bureaucracy is probably my least-favorite international organization because of its advocacy for statism, but it collects and publishes lots of useful statistics about fiscal policy in the industrialized world.

    And here are three charts from the new study that tell a very persuasive story (and a depressing story for ordinary taxpayers).

    First, we can see how the average tax burden has increased substantially over the past 50 years.

    And who is paying all that additional money to politicians?

    As you can see from this second chart, income tax revenues have become a less-important source of revenue over time while social insurance taxes (mostly paid by lower-income and middle-class taxpayers) have become a more-important source of revenue.

    The third chart shows the evolution of the value-added tax burden. This levy takes a big bite out of the paychecks of ordinary people and the rate keeps climbing over time (and if we looked just at European governments that are part of the OECD, the numbers are even more depressing).

    Now let’s put this data in context.

    The United States now has a medium-sized welfare state financed mostly by upper-income taxpayers.

    But because of dramatic demographic changes, we are doomed to have a large-sized welfare state. At least that’s what will happen if we don’t reform entitlement programs.

    And if we leave policy on auto-pilot and there’s a substantial increase in the burden of government spending, it’s simply a matter of time before politicians figure out new ways of taking more money from lower-income and middle-class taxpayers.

    Yes, they may also impose higher rates on “rich” taxpayers, but that will be mostly for symbolic purposes since those levies won’t generate substantial revenue.

    Last but not least, don’t forget that European fiscal burdens will mean anemic European economic performance.

    Reprinted from Intentional Liberty


    Daniel J. Mitchell

    Daniel J. Mitchell is a Washington-based economist who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

    This article was originally published on FEE.org. Read the original article.



    📂This entry was posted in News and Politics 📎and tagged