Today on Marketplace Robert Reich, professor of public policy at the University of California, Berkley, weighed in on the idea that America turning into an ‘entitlement state’ or worse, ‘European style welfare system.”
Mr. Reich’s full comments are pasted below (emphasis mine):
“One of the few things the Republican presidential candidates agree on is that President Obama is turning America into what they call a “European-style welfare culture.”
“In his standard stump speech, Mitt Romney charges Obama with replacing our merit-based society with an “entitlement society.” Yesterday’s big winner Rick Santorum says, “There’s a push to get more and more people dependent.” Newt Gingrich calls Obama the best food-stamp president in American history.”
“Government data do show direct payments to individuals shot up by almost 32 percent since the start of 2009, and almost half of Americans now live in homes where at least one person is collecting a federal benefit — such as Social Security, food stamps, or unemployment insurance.”
“The GOP candidates argue our economic problems stem from this sharp rise in what they see as dependency on government. But they have cause and effect backwards. The reason for the rise in these federal benefits is Americans got clobbered in 2008 with the worst economic catastrophe since the Great Depression. Many are still in it. They and their families have needed whatever helping hands are available.”
“That’s why the percentage of Americans falling into poverty has grown dramatically over the past three years.”
“Most of the new jobs being created are in the lower-wage sectors of the economy — hospital orderlies, nursing aides, secretaries and retail clerks, hotel and restaurant workers. Millions of other Americans remain working in their old jobs only because they’ve agreed to cuts in wages and benefits. And millions of others have become temps or contract workers.”
“If anything, America’s safety nets have been too small and shot through with holes. Only 40 percent of the unemployed qualify for unemployment benefits.”
“We haven’t entered an entitlement society. Too many Americans have entered a downwardly-mobile society.”
It is true that the great recession of 2008 caused many to go on government assistance but Mr. Reich fails to note that the recovery (if you can call it that) has been nothing but a dead cat bounce and by his own admission over half of Americans are still living on some form of government assistance. The reason for this is not a mystery to those who believe in fiscally conservative principles and our pitiful recovery is a direct result of Obama’s business killing regulation which is evident in a recent post from the Heritage blog. Here is a chart comparing the recoveries (output relative to potential GDP) from two deep recessions – 1981 and 2008 – and this shows how Reaganomics beats Obamanomics hands down.
Liberals fail to link increased government assistance (extended unemployment benefits and increased welfare spending) to hindering the economic revival because we incentivize people to stay on government assistance instead of looking for work. As proof of that theory, I have shown in a previous post how increasing Welfare spending as a percent of GDP increases the poverty rate.
Mr. Reich reaches the conclusion that we are not turning into an entitlement state and doubles down by stating that the safety nets we have aren’t big enough! Astounding! From the 2009 IRS tax data (the latest available) I have shown that over 90% of all tax revenues go to pay Social Security, Welfare, Medicare, Medicaid and Unemployment Insurance. How can you say we are not an entitlement state when almost all the money we take in from taxes pays for entitlement programs? And yes, Social Security is an entitlement program.
It is ironic that Reich would make these statements the same day an exhaustive research article was published at the Heritage website showing that America’s dependence on government assistance is at an all time high.
Almost half of all Americans don’t pay any income tax.
Over 70% of government spending goes to pay for dependence programs. Note that this differs from my 90% figure because ‘spending’ takes into account the money we borrow (I just used the money we take in from taxes).
Mr. Reich is a bright guy so how does he not see this? Is he ignorant about how economics is always about motivations and when we provide handouts to those who are able to work we just enable them to remain on the government payrolls? Or does he have a political agenda that is complicit with Obama in wanting to turn America into a Socialistic state? There really is no other alternative to explain the statements he made today – he is either ignorant or evil.