Not only is unemployment still a high 8 percent, but the labor force participation rate is near a 30-year low. This means many able-bodied and able-minded work-age adults simply dropped out of the job market.
Look at the record number of Americans applying for and receiving disability benefits. The Congressional Budget Office blames this on the economy: "When jobs are plentiful, some people who could qualify for the DI program may choose instead to work. ... CBO projects that as a result of the most recent recession and slow recovery, the number of disabled worker beneficiaries will continue to rise over the next few years (although growth will slow as the economy improves)."
The EBT scandal also raises another issue: Is government welfare -- as opposed non-government charity -- the best way to help the needy and to encourage self-sufficiency?
When President Lyndon Johnson implemented the so-called "war on poverty," poverty in America in 1965 stood at about 15 percent -- nearly identical to today's rate. It had been trending downward for decades. From an estimated 70 percent at the turn of the century, the poverty rate was 22.5 percent in 1959, 19 percent when Johnson announced his "war" in January 1964 and 17.3 percent by the time Congress enacted the Economic Opportunity Act in August 1964. It pretty much flat-lined from 1965 onward -- hitting a one-time low of 11.1 in the early '70s, but bouncing back to 15 percent or slightly higher several times.
Welfare spending -- after adjusting for inflation -- nearly tripled from 1965 to 1975. But the poverty rate barely budged. The number of long-term welfare recipients increased.
How do we know that government welfare took away incentive from able workers?
President Clinton signed the 1996 welfare reform act. It allowed "family caps" so that a welfare recipient received no additional money for having another child while on welfare. It also placed time limits on recipients. Marian Wright Edelman, president of the Children's Defense Fund, called the bill "the biggest betrayal of children and the poor since the CDF began."
But welfare rolls decreased by almost half -- a much steeper decline than even the most enthusiastic supporters of reform ever expected. "The latest government statistics reveal that welfare caseloads have dropped an astonishing 46 percent since 1993," wrote Cato economist Stephen Moore in 2000. "The explanation for this progress is that welfare reforms in Washington and in the states have had a profound impact in reversing the perverse incentives of the Great Society welfare state."
The question is not whether we help, but how to do so without incapacitating the needy.
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