The Rise Of The Welfare State

Zero Hedge ^ | 9-11-13 | Lance Roberts

[RKBA Democrat]

It is interesting to note that while the unemployment rate has been falling, currently at 7.3%, it has not been because of a strongly increasing workforce. Rather it has been a function of people leaving the workforce. This, of course, brings up the obvious question of how these people are live if they aren't working. A recent trip to Walmart answered that question.

As I was standing in line, with an assortment of items on my "back to school" shopping list, there was a Hispanic gentleman in front of me with two shopping carts full of groceries and other items. The cashier deftly handled the scanning and quoted the final price to the gentleman who reached into his pocket and pulled out his wallet. What caught my attention was that his wallet was literally about to explode from the amount of cash that was stuffed into it. My first thought was "Wow, this guy is doing alright for himself." However, my moment of admiration quickly turned to admonishment as instead of using some of his hoard of cash - he whipped out his supplemental nutrition assistance card. I literally watched in amazement as the cashier rang up the purchase, handed him the receipt and thanked him for his patronage. Really? This guy just loaded up on groceries using my tax dollars and he gets thanked for "his" patronage. He should be turning around and thanking me instead.

For me, I was stunned. My first thought was to follow the gentleman out into the parking lot and mug him to get my tax dollars back. However, quickly realizing my first option was unrealistic and illegal, I turned to the cashier and asked a simple question. "How often do you see people using food stamps to buy groceries?" The answer: "Just about every other person."

Welcome to 'Merica, The Welfare State.

This experience came to mind when I read a great article by Diana Furchtgott-Roth at E21 entitled "When It Pays Not To Work." In this article she cites some alarming statistics:

"Lawrence Lindsey, president and chief executive officer of The Lindsey Group, estimates that if the labor force participation rate were the same today as it was before the recession began, the unemployment rate would be 11.2 percent, rather than 7.3 percent.

One reason for this continuing trend is the panoply of government benefits, including unemployment insurance, now available up to 73 weeks, depending on the state. On average, unemployed Americans can receive 53 weeks of unemployment insurance, up from 26 weeks before the recession.

Over 8.9 million adults received disability insurance from the Social Security Administration in July 2013, the latest data available. The number of people receiving benefits is 23 percent higher compared to five years earlier and 55 percent higher than 2003. Benefits are higher, too. Recipients get an average of $1,129 monthly, 12 percent more than in 2008 and 35 percent more than in 2003.

Over 47 million Americans receive benefits from the Supplemental Nutrition Assistance Program (formerly food stamps), Other elements of the federal safety net include mortgage relief, and Temporary Assistance to Needy Families. The provision of subsidized health care for those earning below 400 percent of the poverty line under the Affordable Care Act, beginning in 2014, will exacerbate this.

These programs have expanded in two ways. Eligibility has increased, and the programs have become more generous."

The chart below shows the rise in social benefits as a percentage of real disposable income which is currently near the highest level on record.

(graph embedded in artice)

The next chart shows the current number of food stamp participants through June of 2013 at 47.8 million with an estimate of cots that will likely exceed $81 billion.

(graph embedded in article)

The reality is that when an individual can make more living on welfare than working it is quite easy for a mass number of individuals to simply disappear from the work force. The problem is that such a structural transformation of the workforce is economically damaging long term.

Diana summed the problem up well.

"The shrinkage of the labor force has profound implications for future economic performance. Reduced economic growth will lead to steadily higher tax burdens on existing workers, which will in turn discourage labor force participation. This race to the bottom needs to be stopped."

She is absolutely correct. As I showed in my recent missive on long term economic growth we are already experiencing the lowest rate of annualized economic growth in history. With an aging population rapidly moving towards retirement; the structural employment imbalance will lead to far more economic ills in the not so distant future as the drain on welfare programs intensifies as people continue to leave the workforce. As Diana correctly stated "The race to the bottom has to stop." However, as long as the current administration continues to push more support programs, bailouts and extensions of benefits; it simply makes it more profitable to stay at home and live off "government cheese."

[RKBA Democrat]

In case any of y'all are curious as to why amnesty is pretty much a sure bet, here is why...

"...instead of using some of his hoard of cash - he whipped out his supplemental nutrition assistance card. I literally watched in amazement as the cashier rang up the purchase, handed him the receipt and thanked him for his patronage. "

Yeah sure, amnesty is about cheap labor and getting new voters for the 'rats. But those are just the fringe benefits for the kakistocracy. Mostly, though, it's about trying to get 14 million plus people who are surviving and and many cases thriving on the underground economy to please join the official economy.

[jsanders2001]

7.3 is pure manufactured government spun BS. All it takes is looking around at your ommunity to see the droes of people losong their jobs or being downgraded to the point that it almost costs them more to work if they have to drive any distance. Again that number is pure Obama spun BS manipulation.

[Travis McGee]

[Blueflag]

‘Travis’ - good article but it’s about one book and half an anthology behind you.

[Blueflag]

LOL You are too fast.

[willywill]

“7.3 is pure manufactured government spun BS. All it takes is looking around at your ommunity to see the droes of people losong their jobs or being downgraded to the point that it almost costs them more to work if they have to drive any distance. Again that number is pure Obama spun BS manipulation.”

the question then becomes, when does the system implode.

[steelhead_trout]

When you don’t have a robust manufacturing base, you are left with a lot of low-skilled people with nothing to do except flip burgers and exclaim “welcome to Wal Mart.”

[Travis McGee]

Thanks. Appreciate that. We do what we can.

[Responsibility2nd]

This article is stpot on. But it doesn’t go far enough.

The real unemployment numbers don’t factor in the part time and under-employed workers in America. There are millions of folks trying to get by on part time wages simply because that’s all there is.

And what with Obamacare punishing employers who have no other recourse but to hire part timers and not full timers...

Its only gonna get worse.

[Blueflag]

silly me; trying to ping YOU!

[Travis McGee]

The question then becomes, when does the system implode.

Three days after the power goes out, for any reason.

[Travis McGee]

I just happened to be sitting here at the moment.

[RKBA Democrat]

“The Day the EBT Died” is coming. And probably sooner than we think.

[Responsibility2nd]

“Three days after the power goes out, for any reason.”

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

That reminds me. Is the power still out in Detroit?

jus sayin.

[Travis McGee]

Not that I know of.
If it was, the EBT machines would not work, and the city would be on fire.

[Alberta's Child]

It's high time for us to face the truth, and to stop referring to entitlement programs like Social Security, Medicate, Section 8 housing and "supplemental nutrition assistance" as taxpayer-funded programs.

The reality is that, with the U.S. government running on an annual deficit in excess of $1 trillion, the beneficiaries of these programs are using money that isn't costing the U.S. taxpayer a dime. This is how these programs have managed to perpetuate themselves at all.

[Responsibility2nd]

From a few hours ago...

 

The Power Has Gone Out In Downtown Detroit

Wednesday, September 11, 2013 3:53:29 PM · by lbryce · 48 replies

Business Insider ^ | September 11, 2013 | Adamn Taylor

Downtown Detroit was hit by a power outage at around 1 p.m. today. Multiple buildings appear to have lost power including city hall, Detroit News is reporting. CBS Detroit reports that the Frank Murphy Hall of Justice and the People Mover in downtown Detroit have also lost power, while Local 4 News reports that some Wayne State University buildings lost power and there were reports of people stuck in elevators. We recently reported how the city was racing against the end of Daylight Savings Time to restore reliable service to thousands of street lights. The city's office of emergency management...

 

[mjp]

we are already experiencing the lowest rate of annualized economic growth in history. With an aging population rapidly moving towards retirement; the structural employment imbalance will lead to far more economic ills in the not so distant future as the drain on welfare programs intensifies as people continue to leave the workforce.

The cost of the welfare state is due to the diversion of funds from capitalists, businessmen, and the rich to government officials, government employees and to recipients of welfare and redistribution. The aggregate results are:

1) decreases in profits
2) decreases in savings
3) decreases in net investment
4) decreases in demand for capital goods
5) decreases in demand for labor of workers
6) decreases in money wage rates for workers
7) decreases in supply of labor hired
8) decreases in net consumption of capitalists, businessmen, and the rich
9) decreases in demand for consumers' goods by workers
10) decreases in productive expenditure
11) decreases in investment of capital
12) decreases in capital invested
13) increased demand for consumer goods by welfare recipients and bureaucrats
14) decreased ratio of demand for capital goods / demand for consumers' goods
15) decreases in total productive ability
16) decreased capital accumulation
17) lower standard of living for the average wage earner

[silverleaf]

do not associate social security with Medicaid and section 8

the recipients of the latter put NOTHING into the system

social security - some recipients AND their employers have paid SS taxes for 20-30-40 years - with NO CHOICE to opt out and invest privately- and trusted “the govt” to invest or manage the money as their retirement supplement

big difference between welfare and SS even though they are govt programs

[IMR 4350]

“the question then becomes, when does the system implode.”

I’m predicting right after the 2014 election so it can be blamed on the republicans.