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A tool of the 1% tells us about the wonderfulness of unemployment

8 April 2012

Summary:  Advocacy for the 1% is the easy and surest way of success in America, with wealth and power concentrated in the 1%.  So we should become accustomed to reading their soothing explanations of why we live in the best of all possible worlds.  No anger necessary.  Today we have a fine example of this genre.

Macroeconomics forms  a key element of geopolitical crisis.  Both domestic and global crises require a better understanding than today’s theories provide.  Perhaps that is the most important similarity between our situation and that of the early 1930s. 

To meet this challenge we have thousands of economists.  They come in three kinds.

  • Mainstream:  striving to improve as-yet immature theories in a rapidly changing world.
  • Supporting the 1%:  saying whatever necessary to support Team 1%’s agenda.  Anything goes: speculative new theories, contradicting one’s own past statements, imaginary data.  Sometimes embarrassing work, but a path to career success.
  • Fringe:  bold exciting assertions, data and coherence unnecessary, obtaining crowd appeal rather than peer approval (eg, Steve Keen, as in here, here, here, and here).

For an example of Supporting the 1% at work see “What the ‘End of Retail’ Means for Young Workers“, Karl Smith (Asst Prof of Public Economics and Government, UNC at Chapel Hill), The Atlantic, 6 April 2012. 

Let’s see his logic, starting with the opening:

Quickly tying together a bunch of threads: My general take is that neither GDP nor the Employment-Population Ratio is a stat we should care about for its own sake. By that same token, in-and-of-itself, I don’t consider declines in unemployment from people leaving the workforce to better or worse than declines from people becoming unemployed.

There are lots of reasons, but fundamentally because these are a function of choices people make about their lives. … What matters is whether or not the labor market is functioning smoothly.

Smith’s opening suggests his awareness that he’s blowing smoke at us.  First, he doesn’t bother to write carefully.  He second sentence should read (change in red): “I don’t consider declines in unemployment from people leaving the workforce to better or worse than declines from people becoming unemployed”.

Second, his explanation is insane.  Why doesn’t he consider people getting jobs “no worse” than people giving up searching for jobs after years of unemployment?  Because poverty is just a choice, a life-affirming wonderland!  What matters is the continued working of the sacred efficient labor market!

When lots of people choose to retire, stay in school longer or stay home to raise a family the trends will reverse. However, its not immediately clear that working is a better life choice than the other three options. Indeed, we generally consider the other three to be luxuries afforded by a wealthy society.

The U of NC could provide Prof Smith a valuable post-graduate education by firing him with bad references.  What might Smith learn as exhausts his family’s savings and unemployment insurance.  Watches his home foreclosed.  The lesson would be especially vivid if he was a manual worker in his late 50′s, facing the exciting prospect of either chronic unemployment or starting a new career — working his way up from the bottom rung (again). 

Smith might learn that hopeless job searches are in fact worse than getting a job.

Smith’s article gets more interesting as one reads on.  One learns that new entrants to the labor force, with little or no experience, find unemployment a opportunity to become poets and scholars (/sarcasm).

One possibility, however, is that the relatively weak growth in shopping center employment relative to retail sales since 2000 and especially recently is driving down overall teen employment levels.  However, because teenagers are especially suited to shopping center employment they are dropping out of the labor force in response. That is, the End of Retail is causing a permanent shift in teenage employment because there are no substitutes for retail jobs.

… E-commerce means more efficient shopping but because we are not repurposing teenage labor but losing it completely … On the other hand the non-measured gains to increased free time and — one can dream — increased school work are larger than we would have expected.

Unemployment rate of age 18-19; click to see full graph

College costs rising, with aid availability and coverage decreasing.  So of course teenage unemployment is wonderful.  Or so “one can dream”.  If one is a tenured college professor with a heart of stone.  The ideal candidate for a world run for and by the 1%.  Someone has to write articles like this to keep the sheep dumb and complacent.

Important note

Of course we can make no reliable judgements about Karl Smith and his work based on this one sample.  So while the article discussed here in effect serves the interests of the 1%, it might be an exception in his overall body of work.

For more information about the US job market

  1. Important: Globalization and free trade – wonders of a past era, now enemies of America, 16 March 2011
  2. America passes a milestone!, 20 January 2010 — More jobs in government than manufacturing
  3. Yes, it is a “mancession”, with men losing more jobs than women. Just like all recessions., 5 October 2009
  4. Update on the “mancession”, 2 December 2009
  5. A look at the engines of American job creation, 12 January 2010
  6. An ominous trend: number of Americans working for the government vs. those making things, 5 March 2010 — Update to the Oct 2009 post.
  7. The coming big increase in structural unemployment, 7 August 2010
  8. Important: The coming Robotic Nation, 28 August 2010 — Part 1 of 2
  9. Important: The coming of the robots, reshaping our society in ways difficult to foresee, 22 September 2010 — Part 2 of 2
  10. Economists grapple with the first stage of the robot revolution, 23 September 2010
  11. Arithmetic of decline: America’s lost decade for jobs, 27 November 2010
  12. A status report about the US economy (we party so hard we cannot hear the alarms ringing), 27 March 2012
  13. About the March jobs report – a few jobs bought at great cost, 7 April 2012

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30 Comments leave one →
  1. 8 April 2012 1:13 am

    “Prof Smith shows in the opening his awareness that he’s just blowing smoke at us. First, he doesn’t both to write carefully.”

    The reviewer, scribbling away in hissy-fit mode, doesn’t seem to be writing very carefully either. He or she should try again when equanimity has been regained (if they ever manage to reach that state). This post is (or should be) embarrassing to the managers of the site. It has a quality reminiscent of an evaluation my college room mate got on one of his many carelessly written American Studies essays: “D-, pure phlegm!”

    • 8 April 2012 6:38 am

      desierasmus

      The post provides a coherent analysis, based on explicit quotations. Do you have any substantative criticism of it, or are you rendering a verdict ex cathedra — to which we should all bow and accept? Or is your mockery just the absence of thought?

      I vote for the latter based on my experience with similar comments, but that’s just a guess.

    • 8 April 2012 7:08 am

      Also, desierasmus choose to quote a sentence from this post that directly contradicts your comment. I showed that Smith’s opening contains a material (if easy to make) misstatement: “unemployed” should be “employed”.

      That’s an odd thing to do. Did desierasmus read the post?

  2. aguest permalink
    8 April 2012 1:45 am

    “Fringe: bold exciting assertions, data and coherence unnecessary, obtaining crowd appeal rather than peer approval (eg, Steve Keen, as in here, here, here, and here).”

    I strongly suggest that

    1) You list references directly to Keen’s work. A link to his blog main page would be a start; a detailed, technical view of Steve Keen’s model can be found here.

    Presenting _only_ links to the interpretation of his work by his detractors constitutes truly a disingenuous approach.

    2) You present Keen as some kind of crackpot, whose ideas assume “data and coherence unnecessary”.

    While I would not venture in appraising the comparative coherence of various economic models, it is obvious that S.Keen views are strongly informed by the observation of data (see here for instance). Prof Keen also has a lot to say about mainstream (neo-Keynesians and neo-classicals alike) economists being guilty of the “data and coherence unnecessary” sin.

    3) Prof. Keen is part of a movement coarsely called “heterodox economics”, and receives peer approval all right — but of course not by proponents of competing economic doctrines.

    4) Granted, he is fringe (even geographically — he is in Australia, not in the USA or the UK), and makes bold assertions.

    You have been repeatedly stating that the current crisis is leading economies outside the explanatory range of established models (essentially monetarism and Keynesianism). I suggest you familiarize yourself a little bit with what heterodox economists like Keen are saying — their theories are based on overcoming the unrealistic assumptions of those established models, and are geared towards explaining such crises. Really worth a study.

    • 8 April 2012 2:30 am

      I disagree on all points. Having had many dozens of discussions about fringe- and pseudo- science stating what should be obvious, I’ll give the short answer.

      (1) The references I gave all linked back to Keen’s work. I linked to the notes that supported I was making. I suggest that you read them carefully. Also, you can see Keen’s CV here.

      (2) You miss the point, which is the same as that in the global warming debates. Science is conducted largely in peer-reviewed journals. Chatter on websites is useful when supporting that, or when informing the general public of the core debate. Fringe discussions take place almost entirely outside the peer-reviewed universe, playing largely to the general public — most of whom have little understanding of the technical issues involved.

      We see this with both global warming (AGW, CAGW) and economics where scientists go wild when addressing the general public, making statements they would seldom dare make before their peers.

      We see this in discussions, for example, about Keynesian theory by people who have near-zero understanding of Keynes work. With such people economists can easily win large audiences with theories that their peers would laugh at. For example, see this: “Krugman “Knocked out of Neoclassical Orbit” by Steve Keen’s Meteoric Rise!”; the hot Lauren Lyster interviews Keen on RT, 5 April 2012:
      .

      For ignorant applause of this nonsense see this post by Lambert Strether at Naked Capitalism:

      The interview proper is from 4:19-19:10 — if you skip the blog war background and the boxing animation (!) at the beginning. Keen throws down one money quote after another, but I like this one. To the neo-classicals:

      “Hey, your models didn’t predict the financial crisis, we can ignore your models.”

      This one’s good too:

      “[Y]ou can’t model the economy without including the role of banks, debt, and money. And Krugman’s part of the economic establishment, which for 30 or 40 years has got away with arguing that you can model a capitalist economy as if it had no banks in it, no money, and no debt… You just don’t have a model of capitalism if you don’t include those components.”

      Ouch! Will Krugman have the stones to sit down at the glass table?

      These statements are absurd.

      (1) None of today’s models reliably predicts recessions, let alone other forms of crisis. That does not mean that the current state of the art can be ignored in favor of speculation. That’s not how science works.

      (2) The second quote by Keen about Krugman’s work is fiction (or a lie, depending on how one prefers to see these things). One of Krugman’s most famous “models” is the Babysitting Coop, a monetary exchange model in which a shortage of money causes a recession (see his “Baby-Sitting the Economy“, Slate, 14 August 1998 — “The baby-sitting co-op that went bust teaches us something that could save the world.”

      Also see Krugman’s “Banking Mysticism“.

    • Matt D. permalink
      9 April 2012 5:55 am

      I had never heard of Keen before I read about him today, but I’m not entirely convinced by Krugman’s (or your) rebuttals of him here. Most of the points that you (and he) seem to consider most powerful involve pointing out some way in which Keen has mischaracterized the theories he is attacking. All of these points, if true, should have little bearing on the substance of what Keen is saying.

      It’s almost like a round-about ad hominem attack. Saying “Mr. X is clearly unqualified and incoherent, therefore I don’t even need to carefully address the substance of his argument,” might save time, but it won’t always be very convincing.

      Is my impression reasonable based on the links that have been provided, or have I missed something big?

    • 9 April 2012 12:30 pm

      Matt,

      I don’t understand your comment. It looks like you have “missed something big.” Twice.

      (1) I gave no rebuttals.

      (2) Keen gives an critique of neo-keynesian theory. If he incorrectly states the theory, than his critique has no validity.

    • Matt D. permalink
      9 April 2012 1:26 pm

      Well, I don’t see a need to get into a big debate over this here. But for the record, after reading Krugman’s and Keen’s posts, I am not satisfied that Keen has misstated Neo-Keynesian theory.

    • 9 April 2012 1:45 pm

      It’s certainly not appropriate to get into a debate because I doubt you know much about Neo-Keynesian theory. Which was my point about these technical debates in public forums.

      The success of pseudosciencs provide the extreme illustration of this problem (Keen is fringe science, a very different thing). The the debates between creationists and biologists, in which the former often (usually?) win. Also note the long success of the absurd “Chariots of the Gods” theory by Erich von Däniken, Immanuel Velikovsky’s Worlds in Collission nonsense, etc. Without more effort than most people are willing to make, evaluating scientific theories is beyond most people’s ability (except where they have some relevant training and experience).

    • 11 April 2012 12:01 pm

      “The the debates between creationists and biologists, in which the former often (usually?) win.”

      They do? I was under the impression creationists pretty much lose everytime (in debates, getting their clap trap in the schools, etc.)? Am I mistaken?

    • 11 April 2012 1:22 pm

      Creationists usually win in terms of audience reaction. They have glittering generalities and appealing simple stories. Science is complex, its conclusions often disturbing, and requires background knowledge in order to understand.

      Public debates are seldom a contest. Skilled speakers with slick stories vs. scientists playing on an unfamiliar stage.

  3. sglover permalink
    8 April 2012 1:56 am

    Another excellent post. A minor observation: The Atlantic is the perfect host for Smith’s obtuse drivel. A ton of magazines and newspapers have shucked integrity, but few have plunged as steeply and willfully as that rag has over the last decade.

  4. 8 April 2012 6:23 am

    The website of Smith’s employer shows him as an untenured assistant professor in 2007 and as having come to the University of North Carolina immediately after graduation from from a second-rate institution in the same Southern state. His publication record is modest–exceptionally modest. He might be a sycophant for the 1%, but it would be more generous, and it may be more accurate, to give him the benefit of the doubt and view him as floundering among ideas he just doesn’t understand.
    .
    .
    FM Note: See Smith’s bio and publications here.

    • 8 April 2012 7:00 am

      (1) None of those are criticisms I’ll ever make of anyone. Einstein was a patent clerk; Mendel was a monk. Many valuable insights have come from people with weak bios; Harvard has produced its share of fools.

      As for the quantity of his publications, my interest lies rather in their quality.

      My point is that these things are best fought out among experts. Also, eEconomics has become a spectator sport, with most of the fans remaining as ignorant after years of cheering as when they began. This is not good, on many levels.

      (2) “but it would be more generous, and it may be more accurate, to give him the benefit of the doubt and view him as floundering among ideas he just doesn’t understand.”

      That’s interesting! These judgements are of course subjective. It seems to me more generous to assume he’s going for career success, perhaps a spot at Heritage or CATO, than to assume he does not understand. I well understand the demands of family and the ferocity of competition in the job jungle.

      (3) Thanks for catching the mistake about tenure. I mentally confused Smith’s rank (Asst Prof) with Keen’s (Assoc Prof). Fixed!

  5. 8 April 2012 3:24 pm

    FM offers: “…is fiction (or a lie, depending on how one prefers to see these things).”

    !!!! Clever, generous. I will steal that One for my use!

    And Ms. Lyster IS quite the package these days!

    As for the rest of the Post, it is fascinating to watch the tortured actions of some humans to cement their own perceived self serving plans and in such obviously humorless ways. (Do they ever laugh at themselves?)

    • 8 April 2012 3:56 pm

      I think some of the folks commenting here do not understand the nature of today’s America, let alone the new America now under construction.

      In the past 30 years — during the era of deindustrialization, outsourcing, deunionization, and contract labor — the smart people joined the civil service. Nice pay, great benefits, and job security. In aggregate they did far better than people in the private sector, no matter how loudly mocked by fools.

      In the new America, with wealth and power concentrated in the 1%, smart people will become courtiers. Mock these people to your hearts’ content; they are the ones who will prosper.

      “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”
      — Upton Sinclair in I, Candidate for Governor: And How I Got Licked (1935)

      “To laugh, to lie, to flatter to face,
      Foure waies in court to win men’s grace.
      — Roger Ascham, The Schoolmaster (1570)

      To shake with laughter ere the jest they hear,
      To pour at will the counterfeited tear;
      And, as their patron hints the cold or heat,
      To shake in dog-days, in December sweat.
      — Samuel Johnson, London, line 140 (1738)

      At the throng’d levee bends the venal tribe:
      With fair but faithless smiles each varnish’d o’er,
      Each smooth as those that mutually deceive,
      And for their falsehood each despising each.
      — James Thomson, Liberty, Part V, line 190 (1734)

  6. 8 April 2012 5:36 pm

    “In the new America, with wealth and power concentrated in the 1%, smart people will become courtiers. Mock these people to your hearts’ content; they are the ones who will prosper.”

    So true. There is something to be said for prosperity. It does seem to bring some peace.

    And: “…the smart people joined the civil service. Nice pay, great benefits, and job security.”

    Clearly to be seen these days. The self satisfaction of being right does have a limit.

    • 8 April 2012 6:31 pm

      “There is something to be said for prosperity. It does seem to bring some peace.”

      Historically that is not correct. Prosperity for the 1% soemtiems means austerity for the 99%. Severe austerity soemtimes sap a people’s will to resist. Sometimes economic growth sparks political change (eg, late 18th century America and France, 19th century Europe).

  7. William C Wesley permalink
    8 April 2012 6:43 pm

    The people with the most money can hire whom ever they want to stack the media any way they want, including university media, its so simple; cronies will deny to their last breath that they are cronies because if they admitted it they’d be fired.

    I’d like to know what economist has analyzed the economic functioning of organized crime, which is a large percentage of the economy….no of course not, when the mob bosses fire their cronies no one ever hears from them again

    • 8 April 2012 6:52 pm

      There are hundreds of papers by economists about the economics of organized crime published since its “rediscovery” in the early 1960s. See Google Scholar for a quick survey.

  8. William C Wesley permalink
    8 April 2012 7:30 pm

    OK good, glad to hear that, however I myself haven’t see these papers quoted in the popular media, which seems to paint a law abiding picture that does not reference economic terrorism. I guess good old J E Hoover wasn’t able to squelch the truth forever, but many economists in the spot light seem to me to be good at ignoring it when referencing serious economic theory.

  9. annanic permalink
    8 April 2012 8:34 pm

    As an aging Brit veterinarian who spent a lot of worktime chasing sheep ,I dont know how your social security system works , but I cant imagine you give dole money to those not actively seeking work , so what are these people who have stopped actively seeking work , living on ? are they sick- sick rates gone up ? Died of starvation-death rate gone up ?Or are they retiring earlier on private pensions , staying in school longer ,staying at home looking after children , or living off handouts from Dad ?All, as Smith says , signs of a relitively affluent society .Or are they all working for the cash in hand/black/drug economy?

    • 8 April 2012 11:05 pm

      People respond in many ways to unemployment.

      General options:

      • 7 million people receive unemployment insurance benefits
      • Be supported by spouse.
      • Drop out into the cash economy.
      • Where eligable, go on welfare (eg, single parents)

      For older people:

      • Retire early, scaping by on savings until retirement payments kick in.
      • Go on disability (esp older people; those numbers are rising fast).
      • Move in with children.

      For younger people:

      • Go back to school.
      • Move back with parents.
  10. annanic permalink
    9 April 2012 12:28 pm

    Surely that is exactly Smith’s point. If you couldnt live off your spouse/parents/savings because they had/there was insufficient money ,you would make darn sure you stayed eligable for unemployed benefit insurance. Or is the eligability time-limited or means -tested in your country ?

    • 9 April 2012 12:35 pm

      “Surely that is exactly Smith’s point. If you couldnt live off your spouse/parents/savings because they had/there was insufficient money ,you would make darn sure you stayed eligable for unemployed benefit insurance.”

      (1) Smith says nothing like that. He never mentions unemployment insurance.
      (2) How are young people supposed to “stay eligable for unemployment benefit insurance”?

  11. 9 April 2012 1:37 pm

    More attempts by tools to sugar-coat the jobs picture

    If you like ignorant propaganda, you’ll find the news media a fount of insight!

    1. Here’s Why You Shouldn’t Freak Out About the Shrinking Workforce“, Matthew O’Brien, The Atlantic, 6 April 2012
    2. Where do people go when they drop out of the labor force?“, Brad Plummer, Washington Post, 8 April 2012

    These people assume that folks without jobs are doing just fine. Students work without jobs because they prefer the leisure! Boomers are retiring early using their lavish benefits and large IRAs.

    All of this is delusional nonsense. Early retirement and students without jobs often equal lower incomes, even desparation and poverty. The employment surveys do not show income, so these tools use their imagination to paint pretty pictures.

  12. 9 April 2012 1:55 pm

    Turn to the foreign news media for useful analysis!

    Der Spiegel, the UK news papers — they still provide useful information and analysis. Such as this, which I strongly recommend: “America’s dream unravels“, Edward Luce, Financial Times, 30 March 2012 — “As other nations rise, the US is in relative economic decline – and the country’s political system is making things worse.” Excerpt:

    Many cities and towns across America have been shattered by the demise of mass employment in manufacturing over the last generation. Few have been hit as hard as Gary – once a thriving hub of steel production, and birthplace of the late Michael Jackson, one of the most successful pop stars in history. Some places, such as Pittsburgh, have become showcases of urban reinvention, partly by making the most of the strong medical legacy left by the departing generation of well-paid union workers (whose “Cadillac” healthcare packages spawned a robust hospital system).

    Almost every city, including Gary, has dug deep to fund a new sporting stadium. Convention centres are also a staple of America’s formula for urban regeneration. The jury remains out on their impact. In contrast, there is a surprisingly broad consensus among state and city officials across America about the economic virtues of gambling. Unlike the titans of football and baseball, whose new stadiums swallow huge chunks of local capital budgets, gaming companies only require a licence to gamble and a few tax breaks. It helps if there is a large population centre nearby – East Chicago virtually merges with Gary at the Illinois state border line.

    It helps even more if there is a pool of able-bodied unemployed people prepared to work for low wages and anaemic benefits. Gary can still offer that. But in spite of all the casinos, its population keeps shrinking. In 1980 it had 145,000 people. That is now down to 80,000. “When I was five years old, my mother would hold my hand when we walked down Broadway because there were so many people,” says Saleem el-Amin, a middle-aged city demolition worker, pointing at the town’s eerily quiet main street.

    When asked how many of his friends worked in the casino industry, el-Amin says: “There’s a cousin who works at Ameristar [another hotel casino] as a house-keeper” – meaning a cleaner. In contrast, he knows of plenty of people who wager their surplus cash on the blackjack table or the slot machines.

    From Florida to California, and numerous Native American reservations in between, the impact of gambling varies, according to a welter of studies. Some show that the effect on the people around the casinos is a net negative. It can also be bad for tax revenues. One study estimated that for every dollar a gaming house invests in an area, three are subtracted by the costs of dealing with its social effects. Casinos may be a way of replacing some of the manufacturing jobs lost to China, Brazil and elsewhere. But they are also a magnet for racketeers, pimps, drugs and those living on the margins.

    In a world where the economic centre of gravity is shifting from west to east, the continued faith in casinos, and other forms of gaming, epitomises a certain bankruptcy of thinking among America’s policy makers. On the charts they show up as service jobs, which economists instinctively treat as superior to jobs that involve making things. Much like the shift from farming to manufacturing a century ago, America is now climbing up the value-added chain to the more cerebral world of service industries. Brain power is America’s future.

    It doesn’t always appear too cerebral in practice. Too large a share of the new service jobs are dead-end and enforced part-time positions that enable the employer to wriggle out of providing healthcare insurance. In the past decade, the number of Americans insured by their employers has fallen from two-thirds to barely half. Only the senior managerial slots offer any real security and they are mostly taken by outsiders. Much the same could be said of the armies of food preparers, domestic carers and data-entry workers who account for so many of the new service jobs America is creating.

    “We are on track to becoming a country where the top tier remains wealthy beyond imagination, and the remainder, in one way or another, are working in jobs that help make the lives of the elites more comfortable,” says Harvard’s Lawrence Katz, one of America’s foremost labour economists. “They will be taking care of them in old age, fixing their home WiFi, or their air-conditioning, teaching or helping with their kids and serving them their food. It is not a very elegant prospect.”

  13. NYT: "Welfare Limits Left Poor Adrift as Recession Hit" permalink
    10 April 2012 12:00 am

    Welfare Limits Left Poor Adrift as Recession Hit“, New York Times, 7 April 2012 — Excerpt:

    The poor people who were dropped from cash assistance here, mostly single mothers, talk with surprising openness about the desperate, and sometimes illegal, ways they make ends meet. They have sold food stamps, sold blood, skipped meals, shoplifted, doubled up with friends, scavenged trash bins for bottles and cans and returned to relationships with violent partners — all with children in tow.

    Esmeralda Murillo, a 21-year-old mother of two, lost her welfare check, landed in a shelter and then returned to a boyfriend whose violent temper had driven her away. “You don’t know who to turn to,” she said.

    Maria Thomas, 29, with 4 daughters, helps friends sell piles of brand-name clothes, taking pains not to ask if they are stolen. “I don’t know where they come from,” she said. “I’m just helping get rid of them.”

    To keep her lights on, Rosa Pena, 24, sold the groceries she bought with food stamps and then kept her children fed with school lunches and help from neighbors. Her post-welfare credo is widely shared: “I’ll do what I have to do.”

    … While data on the very poor is limited and subject to challenge, recent studies have found that as many as 1 in every 4 low-income single mothers is jobless and without cash aid — roughly four million women and children. Many of the mothers have problems like addiction or depression, which can make assisting them politically unpopular, and they have received little attention in a downturn that has produced an outpouring of concern for the middle class.

    … “The debate is over,” President Clinton said a year after signing the {welfare reform} law, which he often cites in casting himself as a centrist. “Welfare reform works.”

    The recession that began in 2007 posed a new test to that claim. Even with $5 billion in new federal funds, caseloads rose just 15% from the lowest level in two generations. Compared with the 1990s peak, the national welfare rolls are still down by 68%. Just one in five poor children now receives cash aid, the lowest level in nearly 50 years.

    As the downturn wreaked havoc on budgets, some states took new steps to keep the needy away. They shortened time limits, tightened eligibility rules and reduced benefits (to an average of about $350 a month for a family of 3).

    Since 2007, 11 states have cut the rolls by 10% or more. They include centers of unemployment like Georgia, Indiana and Rhode Island, as well as Michigan, where the welfare director justified cuts by telling legislators, “We have a fair number of people gaming the system.” Arizona cut benefits by 20 percent and shortened time limits twice — to two years, from five.

    Many people already found the underlying system more hassle than help, a gantlet of job-search classes where absences can be punished by a complete loss of aid. Some states explicitly pursue a policy of deterrence to make sure people use the program only as a last resort.

    Since the states get fixed federal grants, any caseload growth comes at their own expense. By contrast, the federal government pays the entire food stamp bill no matter how many people enroll; states encourage applications, and the rolls have reached record highs.

  14. annanic permalink
    10 April 2012 10:07 pm

    If the present system is cruel , why do Americans have the vapours if they hear the word Socialism ?

    • 10 April 2012 11:46 pm

      The same reason Pavlov’s dogs salivated when the bell was rung, even with no food. Conditioning.

      Sheep are easily trained.

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