Topic: Economic Policy
Reforming CalWorks SSI and Food Assistance Helps Everyone
Governor Schwarzenegger’s May balanced budget proposal included almost 650 million in savings from Welfare Reform. These reforms were enacted for the rest of the United States back in the 1990’s, the last time the federal government had even a look at a balanced budget. The reforms are good for everyone. They will work for the individuals involved. They’ll work for the State of California, and they’ll help the nation.
by Paul Benedict
(libertarian)
Wednesday, July 1, 2009
"A mouse! Whisky (the cat) has a mouse!" my daughter shouted. Then I knew it was on when I heard, "the poor thing. It's so scared." Scenes of chasing daughter, cat, and mouse around the house leapt to mind. Thankfully, it actually fell to my oldest to perform the mouse salvation attempts. Twice he spared the mouse and released it to freedom, and twice within that hour Whisky ended up catching it again and dutifully returning the little gray rascal to the living room. The catch and release ritual must be the cat version of "fetch." With one last superhuman effort my son, a prayer on his lips, released the mouse far beyond our farthest fence. Needless to say, by dinner word reached us that the missus had found Whisky with a dead mouse. When it comes to animals I tend to be Roman: "May I fare as well when my day comes," I thought
There is a point to this parable. Life is filled with paradox and with unintended consequences. The most merciful thing might have been to simply kick the cat out of the house with its mouse and let nature take its course. The unintended consequences often cut both ways. While on the one hand, who would suspect that people who are giving often reap the most out of life? On the other hand, grey beards will note that it is the choice of the easier path that most often damages the lives of people. The Governor's May budget proposal on CalWorks is a study of such instructive paradoxes. For instance, $647 million dollars of the Governor's Proposal eliminates programs California enacted in the 1990's to counter Federal Welfare Reform. This includes reductions in monthly grants ($614 million) to $1,407 per couple, for blind, disabled, and elderly couples, and reductions ($35 million) in food assistance (State Funded Food Stamps) for legal immigrants. Even with a 24 billion dollar deficit, no one is talking about eliminating programs. Five hundred million of the reductions are being bring one program to the very generous federal minimum levels, and the other $147 million are reductions to programs the federal government eliminated in the 1990's. Even in California's penury, her generosity to the poor abounds. However, one of the paradoxes, the unintended consequences of being exceedingly generous is that California has more than 30% of the nation's welfare recipients while having only 11% of its population.
This unintended consequence arises because the Federal Welfare Reform program of the 1990's worked. Individual programs had been piloted successfully in the states (unlike the liberal plans for health care reform) and then applied with significant freedoms for individual states to continue experimentation. The welfare rolls shrunk, employment rose and, lo, for a brief shining moment the deficit appeared almost balanced. Welfare Reform is good for people. Prosperity cannot begin without first being profitable to others. Millions of people prospered because of those reforms, but not in California. California, feeling kind-hearted towards her hapless poor, enacted program after program to counteract these successful reforms. Hence, the large welfare rolls (see also: Tom Blumer, "California Draggin")
The other reason for these unintended consequences is, ironically, that supply and demand works every time it's tried, even in the welfare state. Welfare recipients flocked to California because of the looser eligibility requirements and the higher returns. The greater the return on one's investment in the government became, the greater the demand for the government's program. This last paradox is the reasons these reductions and reforms must occur now. As unemployment grows, the numbers of dislocated workers will likewise grow. California will have challenges enough without attracting trouble from the other 49. One final irony: because these reforms were not enacted when first suggested, there is a serious possibility that California will not use the TANF Emergency Funds allocated in the Stimulus Bill because welfare rolls will go down. One can only hope this holds true. The stimulus bill was supposed to keep unemployment at 8%... We're at 10% and still climbing. California's welfare rolls are rising more rapidly than any state in the Union except Florida's.
Some complain that losing the federal TANF Emergency Funds is bad economics. After all, the stimulus funds will stimulate the economy. This is cave man logic borrowed from ne'r-do-well economists like John Maynard Keynes. It is only repeated to day because such discredited formulations worked so well in fooling so many in years gone by. Increases in demand not accompanied by an increase in profitable employment only results in inflation. The economic troubles of the day are caused by fear. People are frozen by fear. They cannot act. The Stimulus bill, the increasing nationalization of the private sector has shown the common man the abyss. Let California show a glimmer of light in this darkened land. Make the reforms California. Lose some stimulus money, and make a big show of giving it back. Petition the federal government to take those extra funds to pay down the principle on our national debt.
©2009 Paul Benedict, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Wednesday, July 1, 2009
Last modified: Wednesday, July 1, 2009
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Reader Comments:
Posted By: Adrian Scott
Date: 2009-07-01 11:58:24
The paradox you refer to is commonly known as the "welfare trap". It wouldbe a start to see these reforms enacted, in tandem with private charity at county level picking up expensive cases, or those which peek more than 10% above the average dole.
But I feel that it would need to go farther than federal minimums prescribed back then.
Have you heard of Carl Milsted before? He's a part-time activist who draws from all across the Political Compass synergies between liberal and conservative policy. His site holisticpolitics.org is filled articles of a planned book that was once supposed to make the LP more marketable. Well, they instead decided they were perfectly fine losing, and he left. But the articles, which are no more than 5 years old, have plenty of relevance.
One of the ideas he researched was once endorsed by Milton Friedman, and that was basically a welfare system that gave small, supplemental incomes to people who opted into his program.
His reasoning was that the perverse incentive would be eliminated because the threshold would be high enough not to discourage people from quitting work. Now, on a national level, this would require an unfathomable amount of bureaucracy, even though he estimated the program to only last around 10-15 years after a slow phaseout.
I think it would be worth a shot to craft a plan around that proposal today. Of course, reading his actual idea is probably a better idea. You can find it listed as "Welfare that Works" on his site.
Posted By: Paul Benedict
Date: 2009-07-01 12:36:07
Hi Adrian,
I'll check out the site. Of course one cannot command charity, but it is a far better outcome for those "down on their luck" to be indebted to a man of the cloth than to be beholden to a faceless bureaucrat.
Posted By: Paul Benedict
Date: 2009-07-02 14:11:19
Hi Adrian,
I spent a little time at Milsted's website.
Milsted is a great teacher! I enjoyed the simplicity of his analysis. His key principle cannot be taught often enough. His discussion of Adam Smith by use of the three pillars is also water in a thirsty land. You know how I feel about Keynes! Bush’s last stimulus “tax cut” was another Keynesian failure. The voodoo went out of the voodoo economics because capital formation, investment, and business unit profits were not the target of the tax cuts. As a Milsted analysis might show, the needed economic resources were not encouraged.
Just as supply and demand graphs intersect at price, there must be a more complex equation that a debt free nation could utilize to determine the least repressive amounts of government spending and taxation. Certain over-spending decrease national GDP, certain over taxation likewise destroys free market prosperity. Decoupled, the inability of a national government, because of a lack of taxation and a lack of spending, to provide for the national defense, and to provide for the general welfare (curse the abuse of that phrase) adds to the ease and stability of free markets.
I have a few thoughts on the negative effects of usury on the free enterprise system that I’ll publish when I review Levin’s Liberty and Tyranny. Except in the area of business investment and profit sharing relative to merchandizing, debt messes everything up.
I also like Milsted’s attempt to elucidate natural law. Many talk this up, but few have any clear philosophical system. Here, though, Milsted and I have a difference or two. Because I'd like this column to stay focused on non mainstream media headlines, I posted my explanation of these differences at thetownscrier.blogspot.com(www) [link edited for length]