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Monday, August 30, 2010

Record Highs On Welfare, Food Stamps And Medicaid

Welfare programs were created to help people that have hit bad times get a foothold, some help until they can get on their feet but since Democrats took over both Houses of Congress in 2007, the number of people on such programs as Welfare, food stamps, unemployment insurance and Medicaid have risen to record highs.

USA Today reports "Record number in government anti-poverty programs."

50 million Americans are on Medicaid, a 17 percent rise since December 2007.

40 million people get food stamps, a 50 percent rise.

10 million receive unemployment insurance, four times the amount that was recorded in 2007.

4.4 million people are on welfare, an 18 percent increase.

As caseloads for all the programs have soared, so have costs. The federal price tag for Medicaid has jumped 36% in two years, to $273 billion. Jobless benefits have soared from $43 billion to $160 billion. The food stamps program has risen 80%, to $70 billion. Welfare is up 24%, to $22 billion. Taken together, they cost more than Medicare.

The steady climb in safety-net program caseloads and costs has come as a result of two factors: The recession has boosted the number who qualify under existing rules. And the White House, Congress and states have expanded eligibility and benefits.

What these people need is not a permanent welfare state fix as they are being given, so dependent on the Government to support them they cannot get a foothold and dig their way out, what they need are jobs.

We need our manufacturing back, we need to give businesses incentive to create more jobs, hire more people, we need to give the wealthy a reason to start spending again, we need to undo the damage not continue to pile on to Government programs. As a country with a massive national debt that continues get bigger, we simply cannot afford to continue to extend benefits for the masses in the hopes that things will get better.

Close to 10 million receive unemployment insurance, nearly four times the number from 2007. Benefits have been extended by Congress eight times beyond the basic 26-week program, enabling the long-term unemployed to get up to 99 weeks of benefits. Caseloads peaked at nearly 12 million in January — "the highest numbers on record," says Christine Riordan of the National Employment Law Project, which advocates for low-wage workers.

(Chart from US Government Spending)

Is it any wonder that 62 percent of the country believes we are going in the wrong direction?

[Update] Excellent, must read piece by Robert Barro, titled "The Folly of Subsidizing Unemployment," where he explains "My calculations suggest the jobless rate could be as low as 6.8%, instead of 9.5%, if jobless benefits hadn't been extended to 99 weeks."

In a recession, it is more likely that individual unemployment reflects weak economic conditions, rather than individual decisions to choose leisure over work. Therefore, it is reasonable during a recession to adopt a more generous unemployment-insurance program. In the past, this change entailed extensions to perhaps 39 weeks of eligibility from 26 weeks, though sometimes a bit more and typically conditioned on the employment situation in a person's state of residence. However, we have never experienced anything close to the blanket extension of eligibility to nearly two years. We have shifted toward a welfare program that resembles those in many Western European countries.

The administration has argued that the more generous unemployment-insurance program could not have had much impact on the unemployment rate because the recession is so severe that jobs are unavailable for many people. This perspective is odd on its face because, even at the worst of the downturn, the U.S. labor market featured a tremendous amount of turnover in the form of large numbers of persons hired and separated every month.

For example, the Bureau of Labor Statistics reports that, near the worst of the recession in March 2009, 3.9 million people were hired and 4.7 million were separated from jobs. This net loss of 800,000 jobs in one month indicates a very weak economy—but nevertheless one in which 3.9 million people were hired. A program that reduced incentives for people to search for and accept jobs could surely matter a lot here.

Moreover, although the peak unemployment rate (thus far) of 10.1% in October 2009 is very disturbing, the rate was even higher in the 1982 recession (10.8% in November-December 1982). Thus, there is no reason to think that the United States is in a new world in which incentives provided by more generous unemployment-insurance programs do not matter much for unemployment.

Another reason to be skeptical about the administration's stance is that generous unemployment-insurance programs have been found to raise unemployment in many Western European countries in which unemployment rates have been far higher than the current U.S. rate.....

Read the entire piece.