There is a common conception that the social safety net is actually causing unemployment. That is, making a more generous social safety net will ipso facto, cause unemployment to increase. That is, people suddenly, inexplicably prefer not to work en masse, so they will all collectively sign up for social programs. Or that a sudden mass outbreak of contagious laziness has gripped the American people like a virus that just happened to coincide with the financial crisis. This is similar to the view that the Great Depression was caused by soup kitchens.I would argue that this is just mining the resentment of the people who still have jobs.
“The social safety net must not become a hammock,” thunder the conservatives in Congress. Therefore, in their view, it must be a bed of nails. The poor must atone for their sins. Yet no matter how painful we make the net, it still will not create a job where there is no need for one. Punishing the poor will not make prosperity come back. It never has. There was plenty of unemployment throughout history before there were any sorts of government social programs. And besides, it does not seem like disability is anything else but a desperate choice. Again, from the NPR piece:
People who leave the workforce and go on disability qualify for Medicare, the government health care program that also covers the elderly. They also get disability payments from the government of about $13,000 a year. This isn’t great. But if your alternative is a minimum wage job that will pay you at most $15,000 a year, and probably does not include health insurance, disability may be a better option.
But, in most cases, going on disability means you will not work, you will not get a raise, you will not get whatever meaning people get from work. Going on disability means, assuming you rely only on those disability payments, you will be poor for the rest of your life. That’s the deal. And it’s a deal 14 million Americans have signed up for.
The social safety net is not a hammock that workers can luxuriate in. In a New York Times/CBS News poll conducted last fall, two-thirds of those receiving benefits said they were not enough to pay for basics like housing and food. Another poll conducted by National Public Radio and the Kaiser Family Foundation about the same time found that only 22 percent of the long-term unemployed were receiving unemployment benefits.
One widely cited study published by the Federal Reserve Bank of San Francisco compares workers covered by unemployment insurance and those who were not (such as new entrants into the labor market) between 2005 and 2010, and found that extended unemployment benefits could not account for more than eight-tenths of one percentage point of the increased unemployment rate in the later years.
There is also the idea that the size of government is somehow preventing people from being hired, or that high taxes are preventing companies from hiring. There is only one problem with this. Corporate profits are at an all time high, while effective corporate tax rates are at historic lows. Even the nominal tax rate is hardly paid thanks to loopholes and offshoring. And corporations are flush with cash. Just one corporation, Apple, has more cash on hand than the U.S government. Why can they not hire everyone? Again, if you do not believe this, then please refer to the charts at the end of the article. This proves it to be true. There is theoretically nothing preventing the private sector from creating whatever jobs it needs, right now. The only thing preventing it is demand, and this is a result of unemployment and low wages. Tax cuts will not solve that.The last statistics I recall show three job applicants for every position. Increasing that number to five or six or eight is not going to cause jobs to appear. Neither will more education.
“The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie.”
“However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.”
And the size of government in aggregate is shrinking, even before the ‘sequester’. You can see this at a local level. Fire engines reduced. Garbage collections scaled back. Libraries closing. Furlough days. none of this is “freeing” the private sector to offset government job losses.
The only comparable period in government data, which goes back to 1939, came after World War II, when the government was shrinking for a very good reason. The year-over-year string of declines ended in December 1947 at 30 months. So we have a new record here — a record being set largely because governments, particularly local ones, have been squeezed by a dearth of tax revenues. Year-over-year jobs have been down for 44 consecutive months in local governments.
For the most recent 12 months, private sector employment is up 1.9 percent. Government employment is down 0.5 percent.
We are constantly told that we are “living beyond our means.” But what are “our means?” Our means are the resources at our disposal, our knowledge and our human capital. We cannot live any other way but “within our means.” It’s impossible. What they really mean is, we are debt slaves to the bankers. This is something else. “Our means” from a financial standpoint is whatever we deign them to be.
There’s also an idea that “printing money” will cause people to suddenly lose faith in the creditworthiness of the United States government. Of course we will print money to pay our debts, so does every other country on earth (including China). What “backs” currencies is not an arbitrary amount of gold bars, but a healthy, productive, safe, democratic country with ample resources and human capital. That’s what faith in any currency is- the belief that the underlying economy of the country that is printing the currency is sound and its government is stable. Nothing else. So by that logic, how does destroying the underlying economy and immiserating millions to pay off debt enhance the faith people have in the U.S economy? It doesn’t and it can’t. Again, its a confusion of abstractions for reality.
There is a quasi-mystical view that once “balance” is restored, growth and full employment will return. This is simply a modern-day rain dance. There is no evidence that paying down debt causes jobs to appear. In fact, the facts say the debt has been shrinking faster than at any time in the post war period. Where is the jobs miracle?
And Europe should be an obvious test case that austerity does not magically produce prosperity. It reminds me of a story from Galileo (as told by Lewis Mumford):
This is well illustrated by Galileo’s story in his ‘Dialogues’ (Second Day) wherein he tells about a physician who dissected a corpse to demonstrate that the nervous system had its origin in the brain and not the heart–exposing the mass of nerves that proceeded from the brain and the single nerve coming from the heart. But the Aristotelian observer present, confronted with this proof, said: “You have made me see this business so plainly and sensibly that, did not the text of Aristotle assert the contrary…I should be constrained to confess your opinion to be true.”
What if we “got tough” and just eliminated it all, disability, Medicare, Social Security, Food Stamps, unemployment insurance, all of it? The economy would most likely crash, not roar to life. To repeat myself, neither balancing the budget nor eliminating social programs will magically create jobs. And “uncertainly” as a brake on job creation is just silly. Somehow we are to believe that the roaring lion of the capitalist economy is transfigured into a frightened deer in headlights by the slightest unknown? After being told for years how robust capitalism is, we are now to believe that it is is really that fragile? It is a poor manager who cannot take uncertainty into account. Reality is uncertain, always has been and always will be.
Historically, it has been conservatives like the 19th century chancellor of Germany, Otto von Bismarck, who established the welfare state in Europe. They did so because masses of poor people create social instability and become breeding grounds for radical movements.
In postwar Europe, conservative parties were the principal supporters of welfare-state policies in order to counter efforts by socialists and communists to abolish capitalism altogether. The welfare state was devised to shave off the rough edges of capitalism and make it sustainable. Indeed, the conservative icon Winston Churchill was among the founders of the British welfare state.
American conservatives, being far more libertarian than their continental counterparts, reject the welfare state for both moral and efficiency reasons. It creates unhappiness, they believe, and inevitably becomes bloated, undermining incentives and economic growth.
One problem with this conservative view is its lack of an empirical foundation. Research by Peter H. Lindert of the University of California, Davis, shows clearly that the welfare state is not incompatible with growth while providing a superior quality of life to many of those left to sink or swim in America. …
A Conservative Case for the Welfare State (Economix)
Social Darwinism as a public policy does not have a good success rate. I think the elites believe that anesthetizing the public with digital entertainment and cheap processed carbohydrates, and subjecting them to constant propaganda will keep them in line. The vast hoarding of weapons in Middle America is not a good omen for that approach. And ratcheting up the surveillance state is a recipe for civil war. The social safety net that we already have is the reason why we have not felt the collapse as badly as the last time. And that’s a good thing. Let’s not eliminate that. let’s expand it. Rather than fear the post-work society, let’s embrace it and free up our potential.