Welfare Spending Up? Not So, Another Expert Says.

The welfare spending study I recently wrote about makes two main points. Spending on “social safety net” programs has increased. And it’s shifted from the neediest toward more “deserving” working families.

Policy analyst Shawn Fremstad says the first point is “overstated.” He also argues that it’s too narrow because it ignores the erosion of core unemployment programs that aren’t means-tested, i.e., limited to people below a certain income level.

He demonstrates the former by measuring spending on what he calls income security programs as a percent of GDP, i.e. the value of all the goods and services our economy produces, rather than on a per-person basis, as the study’s author, Professor Robert Moffitt, did.

Looked at this way, spending on what are what are mostly means-tested programs has risen and fallen between the mid-1970s and 2007, in synch with recessions and labor market recoveries.

Spending during recessions has trended down. And spending in 2007 — our latest relatively low-unemployment year — is a small fraction of a percent higher than it was in 1979.

What may seem like a technical debate on how to measure safety net spending really isn’t. Because Fremstad aims in part to show that our so-called welfare state has become “less generous.”

Not only that. Spending on a broader range of employment-related programs, i.e., education, training, employment and social services, is lower, as a percent of GDP, than it was in the mid-1970s. “[T]he story is more about retrenchment than expansion,” Fremstad says.

And not only that. The skewing upward is actually much more pronounced than Moffitt’s analysis finds because we have a whole lot of spending through the individual income tax code. And most of the costliest deductions, exclusions and the like disproportionately benefit the top fifth on the income scale.

Even the Earned Income Tax Credit and the Child Tax Credit, Fremstad suggests, aren’t straightforward benefits for lower-income workers because they “subsidize poorly compensated employment.”

In other words, they enable employers to get away with paying less than they could if the tax credits didn’t supplement their workers’ incomes. The EITC may actually drive wages down, according to research by a prominent labor economist.

Underlying all this is a point Fremstad doesn’t specifically state in his post, but indicated in one of his tweets as @inclusionist: Wages and benefits for working families with children hardly show we view them as deserving.

Though these are beyond the scope of a federal spending analysis, they’re federal policy issues nonetheless.

Not much hope on the horizon for improvements. We seemingly can’t even get a renewal of federal unemployment benefits, let alone a minimum wage increase or any sort of paid leave mandate.

But we blog on.

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