Why Hillary supporters love the American Welfare State
A Hillary-supporting retired insurance agent here in Massachusetts linked on Facebook to a panegyric about Barack Obama’s years of accomplishment. One of Obama’s accomplishments was the following:
Welfare spending is down: for every 100 poor families, just 24 receive cash assistance, compared with 64 in 1996.
I asked if he believed that, as a society, were spending “less on welfare (cash handouts, housing, food, health care, phones, etc.) compared to 1996.” The answer was “yes,” and he believed the welfare spending had been trending down to 2 percent of GDP.
I think this is interesting partly because the guy failed to notice the millions of Americans on SSDI/SSI+Medicaid+Oxycontin and guestimate that these folks alone should consume in the neighborhood of 2 percent of GDP (gobbling up 95 percent of the world’s prescription opiates has to cost something, right?). Also because Medicaid is one of the largest welfare programs and he’s been exposed to 20 years of news about how health care costs in the U.S. are skyrocketing. (Medicaid alone is about 3.6 percent of GDP and then you have to add in $43 billion of Obamacare subsidies and the portion of Medicare that is attributable to young Americans on SSDI (beneficiaries shift from Medicaid to Medicare after a couple of years, I think), so health care welfare consumes at least 4 percent of GDP.
He was also implicitly ignoring the shrinkage of the economy due to people being discouraged from working because it is more lucrative to collect welfare. (See this analysis of family law in the U.S. economy for some literature references and also Book Review: The Redistribution Recession.) If enabling Americans to collect alimony and profitable child support shrinks the U.S. economy 3 percent, the Welfare State has to be responsible for at least another 3 percent, no?
On the same day, a Cambridge government worker posted a chart from the Boston Federal Reserve Bank. It shows that white Bostonians have a “total wealth” of $256,500 while nonwhite households have essentially no wealth, e.g., $700 in total wealth for a black household (one iPhone? But they apparently don’t own that phone outright because “net worth” is $8). In other words, according to the Federal Reserve Bank experts, a typical black Bostonian is poorer than 226 million Africans who have an unencumbered-by-debt smartphone). I pointed out that even the lowest income Bostonian couldn’t have a net wealth of $8 because he or she would be entitled to (a) a lifetime of free public housing, (b) a lifetime of food stamps (SNAP), (c) a lifetime of Medicaid/Obamacare, (d) (typically) Social Security payments from the mid-60s until death. These were all forms of “wealth”. He deleted the comment, of course!
I wonder if we could quantify the wealth of someone entitled to welfare. An officially poor Bostonian, if living in Cambridge or Boston public housing, has a centrally located apartment that is worth far more than $256,500 (in some cases $1-2 million) and is generally entitled to live there until death and, oftentimes, to hand the apartment down to a family member. So he or she has all of the benefits of ownership without having to pay property tax, condo fees, maintenance, etc.
Of course, not everyone in the Boston area who is on welfare gets an apartment in a nice area. CATO’s Work versus Welfare Tradeoff 2013 looks at the aggregate. Four years ago, collecting welfare in Massachusetts was worth $50,820 per year on a pre-tax basis. The current yield of a 30-year Treasury bond is 2.9 percent. So you’d need roughly $1.75 million in Treasury bonds to earn $50,820 per year. Unless there is a significant risk of losing all of these welfare benefits, which doesn’t make sense anecdotally (the families that we know personally have been collecting welfare in Cambridge for generations), the “wealth” of a welfare household is actually at least $1.75 million.
[If you consider that the value of welfare benefits should rise with inflation, it is probably more accurate to use the “Treasury Real Yield Curve” for TIPS. That’s only 1 percent on the 30-years. So actually each welfare household has a wealth of closer to $5 million and, if you assume that there is no free lunch, this is also likely the minimum cost to taxpaying members of American society.]
This is only a couple of intelligent people, and their circle of friends clicking “like,” commenting approvingly, and condemning the Trumpenfuhrer for his purported hardhearted attempts to scale back government handouts. But I wonder if much of the anger of Hillary supporters can be attribute to their acceptance of ideas such as “welfare is only 2 percent of GDP and declining” and “Boston-area black households have a wealth, net of debt, of $8” (i.e., a Boston-based black family could become wealthier by emigrating to Burundi (GDP per capita, adjusted for purchasing power: $800/year)).
Related:
- Canvassing for Elizabeth Warren (a Massachusetts citizen who considers himself highly politically educated yet who was unaware of Medicaid)