Michael Maiello's picture

    Why Cutting Benefits Helps Nobody

    One of the ancillary benefits of the success of Michael Wolrach's Unreasonable Men is that when websites like The National Memo choose to excerpt from it I get to know websites like The National Memo.  So, today I found their excellent write-up about a study showing that cutting unemployment benefits failed to motivate workers to rejoin the work force.

    The conclusion there is hardly surprising.  The economic recovery has been driven largely by margin expansions involving cost cutting, not job creation.  Whether or not you give people unemployment benefits, they cannot go back to work if there are no jobs.  Further, unemployment benefits in the United States are not generous.  The idea that people prefer a subsistence lifestyle to a reasonable salary has always struck me as absurd. Yes, there will be some exceptions (there always are) but the idea that life on welfare is somehow a life of luxurious leisure can only have been pushed by people who have never been on welfare and sold to people who imagine that somebody is getting away with something while they work.

    That said, the post Financial Crisis era did not leave to rampant starvation in the streets (I want to be careful there, some people have, in fact, starved in the streets and some children suffer from malnutrition so I don't mean to dismiss this as problems solved).  Somehow, during a period of high unemployment, people have found a way to get by.  We know that unemployment benefits and food stamps are not enough, particularly for unemployed people with dependents. We know that, contrary to economic logic, that the state scaled benefits back when they were needed the most.  So, how did we avoid a total Grapes of Wrath nightmare?

    The answer, I think, is friends, neighbors and families.  When the state falls down, people step up to fill the gap.  The psychic and financial sacrifices that people have to make to support a sibling, a parent, a cousing or an in-law are considerable and not really well covered in the media.  In terms of job creation and new business development it's a definite negative.  It's hard enough to leave a job to try to create your own business without having extra temporary dependents.  

    When the state reduces unemployment benefits politicians will say that they are protecting the public coffers and reducing burdens on taxpayers.  What really happens, though, is that the state transfers its obligations onto working people.  A burden on the State Treasury becomes a direct burden on individual bank accounts.



    I believe that the term of art for this intervention is "doubling (tripling??) up".


    As a corollary to the re-purposing of basements into "spare rooms", the contraction in household formations causes grey hairs to sprout on the heads of construction company executives, and is a millstone around the neck of an economy struggling to recover from even a mere cyclical downturn, let alone a financial apocalypse.

    The answer, I think, is friends, neighbors and families. When the state falls down, people step up to fill the gap.

    Unfortunately, this works best if you happen to already belong to a advantaged socioeconomic group.

    I was also surprised by the existence of such a professional liberal site that I'd never heard of. My Amazon rank is up today, almost as high as it was the first week after all the press. I don't think there's been much recent press except for National Memo mention, so I assume it must have pretty good reach.

    I remember when it began with some fanfare, but I confess I haven't been watching to see how it developed until now.  Joe Conason is the editor and I'm glad to see you made it there!  Google "National Memo" and if you do it soon enough you might just see what all the fuss is about.  They gave great play to your book and it looks like it was part of their weekend push.  Congratulations!

    That's very cool! I was looking in the search results area, so I didn't even see the right-hand feature at first. I suppose the book was featured in the newsletter too.

    Hey Mike, it's Mike. 

    I remember when I was working at Heritage, my roommate, who is still my friend, said that "the best way to get someone out of poverty is to make it uncomfortable for him to be in it." Typical right wing speak but a couple years later I heard him bemoan that "profit" is more important than people to many when we talked about pharmaceutical drugs. I think that Reagan era libertarian speak is losing its value and had value in a small window of time.

    You heard people playing the "welfare queen" card the most during the 1980s and 1990s - times of epic opportunity and wealth in this country. Politicians traditionally are socialists - they usually were left wing or right wing socialists. American politicians before the Reagan era were often times for socialism - the like of George Wallace or Theodore Bilbo were all for public universities and entitlements as long as they were beneficial to whites only.

    Needless to say, we still have the weak social infrastructure we built during the good times. It shouldn't fall on individuals to make sure people aren't begging or starving. It would not take a whole lot of cash to create a basic minimum income and insure that everyone has their base needs taken care of, with work there to provide their secondary needs. We should have mental institutions where people who are a threat to themselves or others can cool off. We should back off from various international crisis so that needs at home can be taken care of. We should bring back regulations so that pharmaceutical companies do not market towards children. We had alot of these things before the Reagan era, you know, and they worked fine.

    Contrary to popular belief, social programs don't harm the economy. People are going to feel much more confident about themselves and their prospects for employment if they have money in their pocket - George W. Bush understood this in the wrong way with his tax cuts - and in the case of the minimum wage, they'll feel more confident in working if they know that their work will earn some cash.

    Latest Comments