Paul Jacob

When people plan to retire, which by all accounts is a voluntary transaction, they embrace and accept that their income may go down by 20 percent. But it's okay. They are not working. They planned for that. The most studious, forward-looking planners say: I don't need the kind of income that I had when I was working, when I am not working. A 10 or 20 percent pay cut is what I need. And with these expanded programs we had lots of people, millions of them, who got less than 20 percent pay cuts from being laid off.

And it is not only the case that government’s mostly well-intended aid to the unemployed has increased the longevity of this depression, it served as the causeof some of the unemployment, as well. It provided the trigger for layoffs. (Markets “force” employers to be compassionate, says Mulligan, even to the extent of timing layoffs to maximize employee returns via unemployment insurance. He bases this somewhat startling idea on prior research: “It’s not something I’ve invented.”)

At this point the reasonable reader might want to throw hands into the air. If the good things one wants to do makes bad things happen, what can we do?

The answer may be simple: Very little, if we want to do it well; or lots, and do it all badly, messily.

There are many reasons to believe that government intervention in society, whether it be by subsidy or regulation or gigantic transfer programs like Social Security, while alleviating small suffering here and there, or even constant, nagging suffering — and certainly unburdening us from some fears and anxieties — sets us up for huge hits. Inured to small pains, we are forced to endure bigger ones. Protected from small shocks — such as business failures — we are corralled into chutes that line us up for gigantic ones, later. The history of the recent financial implosion is a history of moral hazard leading up to it. Though those on the left blame a lack of regulation, several regulations, both new (Basel) and some old (the bond ratings requirement), triggered the debacle. And now we learn what some of us have long suspected: that the moral hazard of extended welfare state benefits trap the poor into dead-end dependency. And provide an additional trigger for depression.

This is no way to run a country.

Folks may think they’re being “generous” when advocating benefit extensions, but the long-run effects — heck, near-term effects — actually hurt the ones we try to help.

Is this a “hard” message? Not really. We just have to give up illusions. Adamantine hearts are not required. Indeed, softer hearts — Mohs Scale: 1, with all the grit and scratch resistance of talc — will thrive once no longer wasted on delusional politics and illusory policies.     (references)

Paul Jacob

Paul Jacob is President of Citizens in Charge Foundation and Citizens in Charge. His daily Common Sense commentary appears on the Web and via e-mail.