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Thursday, August 24, 2006

Shut Your Eyes and Claim Victory

Robert Reich says welfare reform is not the success you might have heard about. There are serious flaws in the current rules for welfare that have been overlooked or ignored in the rush to praise the reform effort:

Welfare Deform -- A Sad Anniversary, by Robert Reich: I'm baffled by the way the press has covered the tenth anniversary (this week) of Bill Clinton's welfare reform -- full of praise for a policy that has led to more poverty in America among single mothers and their children than before. I keep reading that welfare reform succeeded because welfare rolls were reduced. Of course they were reduced. People were kicked off welfare. How could they not be reduced?

To be sure, the economy of the late 90s was so strong that many who were kicked off found jobs. Remember, between 1995 and 2000, some 14 million new jobs were added to the U.S. economy. That was because Alan Greenspan allowed the economy to grow fast, thereby pushing the official rate of unemployment down below 4 percent. In many cities, employers had to troll for workers -- which meant a lot of people who otherwise could never find or keep a job landed and maintained one, and at a wage above the minimum.

But that was then. Now is now.

Since 2001, barely 6 million new jobs have been added, and the recovery has been anemic. Large numbers of people are too discouraged even to look for work, which means they're not counted as unemployed. As usual, it's the poor and unskilled who are at the end of the job line. And worse may be in store: The Fed has raised steadily raised rates. The economy is slowing.

The welfare law signed by Bill Clinton allowed recipients to depend on welfare for a maximum of five years during their lifetimes. Assume they got off welfare and got a job in the roaring late 90s. During the anemic 00s they've been mostly out of work. If they've depended on welfare (now called "temporary assistance") to keep their kids fed, their five years is about over.

Look, I'm not saying the old welfare system was a good one. I'm just saying we didn't replace it with anything much better. The poor need health care, job training, a decent minimum wage, and income assistance while they get the training. They're getting almost none of this. Above all, they need an economy that's creating lots of jobs. They don't have this, either. At the very least, the five-year limit should be suspended whenever the payroll survey of new jobs falls below the number needed to keep up with population growth (150,000 a month), as it has for months now.

The number of Americans in poverty has continued to rise during this so-called recovery. Many poor kids are in grave trouble. Instead of congratulating ourselves for "ending welfare as we know it," we should be acknowledging that when it came to poor Americans we simply shut our eyes even tighter than they were shut before.

This is from another post wondering why the administration remains puzzled about people's dissatisfaction with the economy. Reich explains:

The Sixty-Four Thousand Dollar Question, by Robert Reich: ...Rarely before in history has the American economy grown so nicely without most Americans sharing in the growth. Corporate profits are fatter than they've been in years. What corporations aren't using for investment they're awarding to their top executives or distributing to their shareholders. The top one percent of income earners, gleaning over $750,000 this year, are doing wonderfully well and are quite happy about the economy. The typical family -- with stagnant income, a house that's no longer a piggy bank, and higher fuel bills -- is not. Hence the real disconnect.

Supply-side economics, meaning big tax cuts for the very wealthy, used to be called trickle-down economics on the assumption that some of the gains would be felt by average people. But in this economy nothing has been trickling down. The real sixty-four thousand dollar question is why the White House is puzzled that most Americans are so downbeat.

Here's one way to think about it. Suppose that one third of America is experiencing strong real income growth growth, but two-thirds are seeing their real incomes fall. However, employment remains relatively strong and the income of the first group is rising fast enough so that, overall, real GDP is rising robustly.

Even though two-thirds of the people are working just as hard as ever, but seeing their real incomes fall, many would not call this a weak economy because employment  and growth are so high. But is it so hard to understand why there would be dissatisfaction is such a world? Apparently so, and the lack of understanding and the insistence the economy is strong allows a lot of problems such as those discussed above for low-income workers in need of assistance during times when jobs are scarce to be overlooked.

    Posted by on Thursday, August 24, 2006 at 09:11 AM in Economics, Policy, Politics | Permalink  TrackBack (1)  Comments (15)


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    » Welfare Deform: Now Why Didn’t I Say That? from Angry Bear

    On Saturday, I criticized certain rightwing comments on the 1996 welfare “reform” legislation by noting that the use of welfare caseloads as the metric for judging the alleged success of this program was misleading. Via Mark Thoma we see Robert Reich... [Read More]

    Tracked on Thursday, August 24, 2006 at 10:55 AM


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