Tuesday, June 30, 2009

Terminating CalWorks' SSI and Food Assistance Helps Everyone

Governor Schwarzenegger’s May balanced budget proposal included almost 650 million in savings from Welfare Reform. These reforms were enacted for the rest of the United States back in the 1990’s, the last time the federal government had even a look at a balanced budget. The reforms are good for everyone. They will work for the individuals involved. They’ll work for the State of California, and they’ll help the nation.

“A mouse! Whisky (the cat) has a mouse!” my daughter shouted. Then I knew it was on when I heard, “the poor thing. It’s so scared.” Scenes of chasing daughter, cat, and mouse around the house leapt to mind. Thankfully, it actually fell to my oldest to perform the mouse salvation attempts. Twice he spared the mouse and released it to freedom, and twice within that hour Whisky ended up catching it again and dutifully returning the little gray rascal to the living room. The catch and release ritual must be the cat version of “fetch.” With one last superhuman effort my son, a prayer on his lips, released the mouse far beyond our farthest fence. Needless to say, by dinner word reached us that the missus had found Whisky with a dead mouse. When it comes to animals I tend to be Roman: “May I fare as well when my day comes,” I thought…

There is a point to this parable. Life is filled with paradox and with unintended consequences. The most merciful thing might have been to simply kick the cat out of the house with its mouse and let nature take its course. The unintended consequences often cut both ways. While on the one hand, who would suspect that people who are giving often reap the most out of life? On the other hand, grey beards will note that it is the choice of the easier path that most often damages the lives of people. The Governor’s May budget proposal on CalWorks is a study of such instructive paradoxes. For instance, $647 million dollars of the Governor’s Proposal eliminates programs California enacted in the 1990’s to counter Federal Welfare Reform. This includes reductions in monthly grants ($614 million) to $1,407 per couple, for blind, disabled, and elderly couples, and reductions ($35 million) in food assistance (State Funded Food Stamps) for legal immigrants. Even with a 24 billion dollar deficit, no one is talking about eliminating programs. Five hundred million of the reductions are simply bring one program to the very generous federal minimum levels, and the other $147 million are reductions to programs the federal government eliminated in the 1990’s. Even in California’s penury, her generosity to the poor abounds. However, one of the paradoxes, the unintended consequences of being exceedingly generous is that California has more than 30% of the nation’s welfare recipients while having only 11% of its population.

This unintended consequence arises because the Federal Welfare Reform program of the 1990’s worked. Individual programs had been piloted successfully in the states (unlike the liberal plans for health care reform) and then applied with significant freedoms for individual states to continue experimentation. The welfare rolls shrunk, employment rose and, lo, for a brief shining moment the deficit appeared almost balanced. Welfare Reform is good for people. Prosperity cannot begin without first being profitable to others. Millions of people prospered because of those reforms, but not in California. California, feeling kind-hearted towards her hapless poor, enacted program after program to counteract these successful reforms. Hence, the large welfare rolls (see also: Tom Blumer, “California Draggin…”)

The other reason for these unintended consequences is, ironically, that supply and demand works every time it’s tried, even in the welfare state. Welfare recipients flocked to California because of the looser eligibility requirements and the higher returns. The greater the return on one’s investment in the government became, the greater the demand for the government’s program. This last paradox is the reasons these reductions and reforms must occur now. As unemployment grows, the numbers of dislocated workers will likewise grow. California will have challenges enough without attracting trouble from the other 49. One final irony: because these reforms were not enacted when first suggested, there is a serious possibility that California will not use the TANF Emergency Funds allocated in the Stimulus Bill because welfare rolls will go down. One can only hope this holds true. The stimulus bill was supposed to keep unemployment at 8%... We’re at 10% and still climbing. California’s welfare rolls are rising more rapidly than any state in the Union except Florida’s.

Some complain that losing the federal TANF Emergency Funds is bad economics. After all, the stimulus funds will stimulate the economy. This is cave man logic borrowed from ne’r-do-well economists like John Maynard Keynes. It is only repeated today because such discredited formulations worked so well in fooling so many in years gone by. Increases in demand not accompanied by an increase in profitable employment only results in inflation. The demand stimulated by welfare payments is inflationary because the dollars are not backed by labor, they are "funny" money. The economic troubles of the day are caused by fear. People are frozen by fear. They cannot act. The Stimulus bill, the increasing nationalization of the private sector has shown the common man the abyss. Let California show a glimmer of light in this darkened land. Make the reforms California. Lose some stimulus money, and make a big show of giving it back. Petition the federal government to take those extra funds to pay down the principle on our national debt.