March 11, 2015

Something that cannot go on forever, will not go on forever

Filed under: Economics, Government — Tags: , , , , , — Nicholas @ 03:00

At Ace of Spades H.Q., Monty brings the weekly DOOM post:

Boomers fret that their kids are ruining their retirements. Millennials, meanwhile, fret that their parents and grandparents are ruining their futures. That’s the reality of the welfare state, babies: it pits those who fund the government cheese against those who receive it. The welfare state was always a game of musical chairs, and it may be Millennials who are left standing when the music stops. Or they may wise up and just refuse to play the game any more.

I often catch heat for bashing on Boomers in this space, but mostly I’m trying to point out that the problem will require everybody to accept some unsavory truths. Boomers being mad at the young ‘uns, the young ‘uns being mad at the Boomers: they’re both getting mad at the wrong people. The problem is with the federal government, and at some point everybody is going to have to accept that the promises made by this corrupt bunch of assholes cannot be kept, and it’s morally wrong to burden future generations to pay for these lies.

For older people, the problem is one of sunk costs: we have to accept that much of the money we “paid in” to the welfare state was summarily squandered. There is no giant pile of money sitting in a vault somewhere. There is only an ocean of debt. For younger people, it’s a matter of accepting that a 65-year-old retiree can’t simply turn on a dime and reverse a lifetime’s worth of decision-making. Decisions driven by rules and incentives prevailing at the time the decisions were made. (In retirement planning as in investing more generally, uncertainty is the worst enemy.)

The perverse actions of the federal government over the past sixty or seventy years have put retirees fundamentally at odds with younger workers — the incentives are completely inverted depending on which group you happen to be in. It is this aspect of the welfare state that I loathe the most: the fracturing of familial and generational bonds, the mortgaging of the lives and labor of children (and generations yet unborn) who are being given no say in the matter. One of the absolute bedrock principles of liberty — political, social, cultural — is consent, and our children did not consent to have these burdens placed upon them.

Ultimately, a new compact between old and young is going to have to be forged. Young people need to understand that retirees, as a rule, didn’t choose to be put in the spot they’re in. Retirees need to understand that it’s morally wrong to expect young people to forgo their own financial futures to finance the retirements of their elders. There needs to be an understanding among all adults, young and old, that “fair” is no longer in the cards. We have been cheated, all of us, and the money is long gone. The best we can do now is mitigate the consequences of the fraud perpetrated on us. But the first step in that mitigation process is accepting that the status quo is unsustainable … and ethically reprehensible.

March 10, 2015

Megan McArdle on the politics of aging

Filed under: Economics, Health, USA — Tags: , , , — Nicholas @ 02:00

As with most western countries, the extension of what we consider “normal lifespans” creates financial and demographic changes that our social welfare systems are struggling to keep up with:

Who will take care of all the old people?

That’s the theme of Nicholas Eberstadt’s latest piece on demographics, which I highly recommend to all of you. The core problem of the welfare state is that it relieves people of the need for family to take care of them, but it does not relieve society of the need for caretakers. In fact, because there’s evidence that more generous social-security systems cause people to reduce their fertility, you can argue that these systems are undercutting the very actuarial basis upon which they depend.

The effect is what social-security systems are struggling with around the world: As the ratio of workers to retirees declines, it gets harder and harder to raise the tax revenue to cover benefits. Though Americans talk anxiously about the fiscal health of our systems, international pension-reform wonks actually look enviously at our system, which contains fewer of the incentives for earlier retirement that plague many countries.

But our demographic transition is not just a problem of pension math. There’s also the problem of what it does to economic growth as society ages. As workforce growth slows, so does gross domestic product growth. In theory, this can be made up with greater productivity growth. But productivity growth is moving in the wrong direction — and because older people tend to be more risk-averse as workers and investors, that too may be a natural result of an aging society.

July 10, 2014

Millennials starting to get jaded about the virtues of government

Filed under: Economics, Government, USA — Tags: , , , , , — Nicholas @ 07:57

The latest Reason-Rupe poll has some interesting results on the Millennial generation:

A Reason-Rupe survey of 2,000 Americans between the ages of 18 and 29 finds 66 percent of millennials believe government is inefficient and wasteful — a substantial increase since 2009, when just 42 percent of millennials said government was inefficient and wasteful.

Nearly two-thirds of millennials, 63 percent, think government regulators favor special interests, whereas just 18 percent feel regulators act in the public’s interest. Similarly, 58 percent of 18-to-29 year-olds are convinced government agencies abuse their powers, while merely 25 percent trust government agencies to do the right thing.

The Reason-Rupe report finds this skepticism of government has millennials favoring general reductions to government spending and regulations:

  • 73 percent of millennials favor allowing private accounts for Social Security; 51 percent favor private accounts even it means cutting Social Security benefits for current and future retirees because 53 percent of millennials say Social Security is unlikely to exist when they retire
  • 64 percent of millennials say cutting government spending by 5 percent would help the economy
  • 59 percent say cutting taxes would help the economy
  • 57 percent prefer a smaller government providing fewer services with low taxes, while 41 percent prefer a larger government providing more services with high taxes
  • 57 percent want a society where wealth is distributed according to achievement
  • 55 percent say reducing regulations would help the economy
  • 53 percent say reducing the size of government would help the economy

Of course, along with those hopeful signs are a few that show millennials are still idealistic (i.e., socialistic) in other areas: higher minimum wages, guaranteed food and shelter for all, and raising taxes on the rich all got lots of support in the poll.

April 7, 2014

US government data security failures

Filed under: Bureaucracy, Government, Technology — Tags: , , , , — Nicholas @ 09:02

David Gewirtz says that the press has totally mis-reported the scale of government security breaches:

Summary: This is one of those articles that spoils your faith in mankind. Not only are government security incidents fully into holy-cow territory, the press is reporting numbers three magnitudes too low because someone misread a chart and everyone else copied that report.

You might think this was an April Fool’s gag, except it was published on April 2nd, not April 1st.

According to testimony given by Gregory C. Wilshusen [PDF], Director of Information Security Issues for the Government Accountability Office to United States Senate Committee on Homeland Security and Governmental Affairs that, and I quote, “most major federal agencies had weaknesses in major categories of information security controls.”

In other words, some government agency data security functions more like a sieve than a lockbox.

Some of the data the GAO presented was deeply disturbing. For example, the number of successful breaches doubled since 2009. Doubled. There’s also a story inside this story, which I’ll discuss later in the article. Almost all of the press reporting on this testimony got the magnitude of the breach wrong. Most reported that government security incidents numbered in the thousands, when, in fact, they numbered in the millions.

Emphasis mine. Here are the actual numbers:

Incidents involving personal identifying information grew from about 10.5 million in 2009 to over 25 million last year. By the way, some press reports on this misread the GAO’s charts. For example, the Washington Free Beacon wrote about this, claiming “25,566 incidents of lost taxpayer data, Social Security numbers, patient health information.” What they missed was the little notation on the chart that says “in thousands,” so when they reported 25,566 incidents, what that really reads as is 25,566 x 1000 incidents.

2014 GAO analysis of security breaches

This is an example of how the Internet echo chamber can get information very, very wrong. The Chicago Tribune, via Reuters reported the same incorrect statistic. So did InformationWeek. So did FierceHealthIT. Business Insider picked up the Reuters report and happily repeated the same statistic — which was three orders of magnitude incorrect.

This is why I always try to go to the original source material [PDF] and not just repeat the crap other writers are parroting. It’s more work, but it means the difference between reporting 25 thousand government breaches and 25 million government breaches. 25 thousand is disturbing. 25 million is horrifying.

February 3, 2014

QotD: Plight of youth – unpaid internships and helotry

Filed under: Politics, Quotations, USA — Tags: , , , , — Nicholas @ 10:57

It is popular now to talk of race, class, and gender oppression. But left out of this focus on supposed victim groups is the one truly targeted cohort — the young. Despite the Obama-era hype, we are not suffering new outbreaks of racism. Wendy Davis is not the poster girl for a resurgent misogyny. There is no epidemic of homophobia. Instead, if this administration’s policies are any guide, we are witnessing a pandemic of ephebiphobia — an utter disregard for young people.

The war against those under 30 — and the unborn — is multifaceted. No one believes that the present payroll deductions leveled on working youth will result in the same levels of support upon their retirements that is now extended to the retiring baby-boom generation. Instead, the probable solutions of raising the retirement age, cutting back the rate of payouts, hiking taxes on benefits, and raising payroll rates are discussed in an environment of après moi le déluge — to come into effect after the boomers are well pensioned off.

The baby-boomer/me generation demands what its “greatest generation” parents got — or, in fact, far more, given its increased rates of longevity. The solution of more taxes and less benefits will fall on young people and the unborn, apparently on the premise that those under 18 do not vote, and those between 18 and 30 either vote less frequently than their grandparents or less knowledgeably about their own self-interest.


Symbolic of the many gifts bestowed by the baby boomers to the present generation of youth — aside from Botox and liposuction — was the new idea of the “intern”: an unpaid helot position predicated on the notion that the young and poorer might someday win a wage from the older and richer.

How odd that President Obama, in his soon-to-be-infamous “I have a pen and phone” boast to bypass the Congress, claimed that he would act outside the Constitution to enact his agenda and help the “kids.”

In truth, no administration in recent memory has done more to harm young people. Like some strange exotic species of the animal kingdom, we Americans are now eating our own young.

Victor Davis Hanson, “Eating Our Young”, VDH’s Private Papers, 2014-01-28

The welfare trap

Filed under: Britain, Bureaucracy, Government — Tags: , , , — Nicholas @ 09:27

An older post by A Very British Dude discusses the real problem with most of the public welfare/income support/unemployment benefits in Britain, but the same argument applies to most Western countries:

So your taxes, about a third of which go to paying working-age benefits, about a third in pensions, and the rest, everything else are part of a decent society in which everyone’s helping everyone else. Or they would be if the system wasn’t comprehensively broken, failing at all the significant tasks the welfare state is supposed to achieve. The welfare state is supposed to prevent poverty. It is, in fact, its major cause.

The problem is one of incentives, and not just those faced by the poor themselves. It’s obvious to anyone who isn’t paid handsomely to farm the poor, that for many people, it’s simply irrational to work. Once they’ve paid for taxes, clothes, transport and lunch, they’re considerably worse off than they would have been had they stayed in their pyjamas and watched Jeremy Kyle. Why would you take a miserable, boring, unpleasant minimum wage job instead of existing on benefits? The job insecurity at the bottom of the pyramid and the bureaucratic complexity of informing the authorities of a ‘change in circumstance’ is a further barrier. So when when the low-waged is “let go” after a couple of weeks, he’s got to re-apply for Housing benefits, Job-seekers’ allowance, Council Tax Benefit, income support and so on, from scratch. He may be genuinely destitute as a result of payments stopped, then restarted again too late, thanks to an abortive effort to “do the right thing”. Is it really any wonder so many feel trapped?

So, who benefits from this system? Certainly not those getting the benefits many of whom are comprehensively trapped in a life they wouldn’t have chosen. Not the Children of those getting benefits, who learn no other life thanks to the distorted incentives faced by their parents, but in whose name the benefits are paid. Certainly not the people paying the bill, John Q. Taxpayer, who thanks to the system face a sullen and resentful underclass, some of whom spend their non-working lives looking for ways to relieve you of your easily saleable property in order to buy sufficient narcotics to break the tedium for a few hours.

The main benefit of the benefits system accrues to those employed on secure graduate salaries to administer the system. These people are the farmers of the poor. This is not just the civil servants and local government employees who administer the system, but also the charity employees who don’t see the homeless and destitute (they outsource this to unpaid volunteers). It’s the police who are part of the state-crushing of the spirit of the young who find themselves trapped in this hell. The that the poor exist at all causes fear in the hearts of the affluent, and justifies the need for a police force. The Bureaucracy is an excellent provider of jobs. Which is why none of the solutions suggested by the Left of the political spectrum would ever reduce bureaucacy or police numbers, or the benefits bill. For that would involve firing sub-paying members of Unite or the PCS, and Unite is by far the biggest funder of the Labour party.

H/T to Amy Alkon for the link.

Update: A useful reminder from Rob Fisher at Samizdata — inflation hits the poor much harder than anyone else.

The Institute for Fiscal Studies is pointing out that while poorer people are paying more for food and fuel, richer people are enjoying low interest rates. So government spending and borrowing and the artificially low interest rates that go along with that are harmful to poor people, as are taxes on fuel, and income tax on minimum wage earners, and countless other instances of state meddling.

June 28, 2013

QotD: In praise of Bastiat’s “What is seen and what is not seen”

For me, [Bastiat’s “What Is Seen and What Is Not Seen“] is the pinnacle of economic profundity. You can call it obvious. But when I first started learning economics at the age of 17, none of Bastiat was obvious. I was an honors student at a well-regarded California high school. Yet as far as I can remember, I had never heard any argument against the minimum wage, Social Security, or the FDA in my entire life.

Every teacher and book I ever encountered treated naive populism like the Law of Gravitation. Evil businesses aren’t paying workers enough? Raise the minimum wage; problem solved. The elderly are poor? Increase Social Security payments; problem solved. Evil businesses are selling people bad drugs? Impose more government regulation; problem solved.

If you favor these programs, you can call these arguments straw men. But I assure you: These “straw men” were never presented by opponents of these policies. On the contrary, these “straw men” were invariably presented by people who favored these policies. How is that possible? Because during my first 17 years of life, I never encountered an opponent of any of these policies! You might assume I was grew up in a weird Berkeley-esque leftist enclave, but bland Northridge, California hardly qualifies.

What was going on? The best explanation is pretty simple: I only heard straw man arguments in favor of populist policies because virtually everyone finds these straw man arguments pleasantly convincing. Regardless of the merits of the minimum wage, Social Security, and the FDA, economic illiteracy is the reason for their popularity. If someone like Bastiat convinced people that the pleasantly convincing arguments are inane, proponents would have to fall back on arguments that are intellectually better yet rhetorically inferior.

Bryan Caplan, “Who Loves Bastiat and Who Loves Him Not”, EconLog, 2012-08-15

May 30, 2013

Latest EU legal move may drive support to UKIP

Filed under: Britain, Europe, Law — Tags: , , , , — Nicholas @ 08:13

Mats Persson explains why Nigel Farage and UKIP may see a spike of support when the latest legal challenge gets going:

The European Commission will today take the UK to the European Court of Justice — the body meant to police the EU treaties — over its rules on EU migrants’ access to benefits. The Commission says the UK’s so-called “right to reside” test — a filter used to make sure that EU migrants are eligible to claim benefits — is illegal under EU law as British citizens pass it automatically. The UK Government is disputing this claim saying it is clear that the UK rules “are in line with EU law.” In other words, the folks in Brussels are about to throw a hand grenade into the already red-hot domestic EU debate.

The legal details around this case are hugely complex as are the rules governing EU migrants’ access to benefits […] But essentially, this is about the EU’s one-size-fits-all model sitting poorly with the UK’s ‘universalist’ welfare system, which is largely made up of means tested benefits rather than contribution-based benefits — unlike many other systems in Europe. The UK government feels it needs a filter — practically and politically — to make sure migrants come here to work rather than to claim benefits. Legally this is a grey area but it’s clear that the Commission is taking the strictest interpretation.

As I’ve argued before, claims that EU migrants come here in droves to claim benefits are widely exaggerated — and free movement of workers has been largely beneficial for the UK and Europe. However, it’s clear that the combination of immigration, Europe and benefits is one of the potentially most toxic ones in modern day politics, so needs to be treated with kid gloves. Even if all the evidence suggests EU migrants are less likely to claim benefits than British citizens, the perception of “benefit tourism” is still absolutely explosive.

May 17, 2013

Zoe Fairbairns’ Benefits

Filed under: Books, Britain, Media — Tags: , , , , — Nicholas @ 07:55

Neil Davenport talks about the recent re-publication of Zoe Fairbairns’ dystopian feminist novel, Benefits:

Written in the febrile political atmosphere of late-1970s Britain, Benefits is about a future state’s sinister attempts to control women’s fertility, and to encourage responsible parenting, through the introduction of a universal ‘wages for housework’ benefit.

Although rarely out of print since it first appeared in 1979, Benefits has recently been re-issued, with a new introduction by Fairbairns, for the e-reader age. It is now being marketed as a political attack on ‘anti-welfarist Tories’, yet as Fairbairns points out, anyone who views Benefits as simplistically ‘anti-Thatcherite’ is missing its key point: that welfare benefits can become a weapon of social engineering and control. On top of critiquing aspects of welfarism, Benefits lays into radical feminism’s self-defeating slogan, ‘The personal is political’, while passionately championing women’s liberation and equal rights — feminism’s one-time aims.

Like many dystopian novels, Benefits is rooted in the fears, the panics and the politics of the period it was written in. So although it is set in the dying days of the twentieth century, it rather charmingly echoes the late 1970s: all tower-block grime; politico slogans on walls; squats; communes; poorly designed radical pamphlets. It also speaks to the more alarmist rhetoric of that period of the mid- to late 1970s. From ecologists predicting Europe-wide famine to the New Right’s panic over single mothers to respectable racists complaining about ‘coloured immigration’, the political feeling in Benefits is unmistakably mid-Seventies.

[. . .]

Equally prescient in Benefits is the way its fictional state believes that ‘poor parenting’ can have a corrosive impact on the individual and society; this has become an unquestioned orthodoxy today.

Many dystopian novels hint at a future in which pornography has become staple entertainment. Benefits does that, too, and this also speaks to the reality of twenty-first-century life, especially to today’s increasing separation of sex from genuine intimacy (it talks about ‘all that sex and no babies’).

In Fairbairns’ nightmare vision, women who want to receive benefits must undergo ‘a programme of education for motherhood’. This sounds suspiciously like parenting classes, which are increasingly common today, especially for poorer families, or what David Cameron calls ‘chaotic families’. Also, in imagining a future in which parenting is redefined as a ‘national service’, Benefits hints at today’s creeping nationalisation of individual families. The novel even features a supra-sovereign state called Europea, where British politicians willingly offload their own parliamentary responsibilities. Sound familiar?

April 28, 2013

Denmark re-thinks their generous social support system

Filed under: Economics, Europe, Government — Tags: , , — Nicholas @ 11:52

Denmark has a very liberal approach to welfare and social services … perhaps too liberal:

It began as a stunt intended to prove that hardship and poverty still existed in this small, wealthy country, but it backfired badly. Visit a single mother of two on welfare, a liberal member of Parliament goaded a skeptical political opponent, see for yourself how hard it is.

It turned out, however, that life on welfare was not so hard. The 36-year-old single mother, given the pseudonym “Carina” in the news media, had more money to spend than many of the country’s full-time workers. All told, she was getting about $2,700 a month, and she had been on welfare since she was 16.

In past years, Danes might have shrugged off the case, finding Carina more pitiable than anything else. But even before her story was in the headlines 16 months ago, they were deeply engaged in a debate about whether their beloved welfare state, perhaps Europe’s most generous, had become too rich, undermining the country’s work ethic. Carina helped tip the scales.

[. . .]

Students are next up for cutbacks, most intended to get them in the work force faster. Currently, students are entitled to six years of stipends, about $990 a month, to complete a five-year degree which, of course, is free. Many of them take even longer to finish, taking breaks to travel and for internships before and during their studies.

In trying to reduce the welfare rolls, the government is concentrating on making sure that people like Carina do not exist in the future. It is proposing cuts to welfare grants for those under 30 and stricter reviews to make sure that such recipients are steered into jobs or educational programs before they get comfortable on government benefits.

Officials have also begun to question the large number of people who are receiving lifetime disability checks. About 240,000 people — roughly 9 percent of the potential work force — have lifetime disability status; about 33,500 of them are under 40. The government has proposed ending that status for those under 40, unless they have a mental or physical condition that is so severe that it keeps them from working.

April 6, 2013

The old class system and the modern welfare state

Filed under: Britain, Bureaucracy, Government — Tags: , , , , , — Nicholas @ 09:34

A majority of Britons who are on state assistance now believe that the system is too generous and discourages recipients from seeking jobs:

In 2003, 40 per cent of benefits recipients agreed that ‘unemployment benefits are too high and discourage work’; in 2011, 59 per cent agreed. So a majority of actual benefits recipients now think the welfare state is too generous and fosters worklessness. Surely those well-off welfare cheerleaders, when shown these figures, would accept that perhaps they don’t know what they’re talking about. But no, they have simply come up with a theory for why the poor are anti-welfare: because they’re stupid.

Even more resented than those who abuse the system are those who run it:

Working-class mothers hated the way that signing up for welfare meant having to throw one’s home and life open to inspection by snooty officials, community health workers and even family budget advisers.

They didn’t want ‘middle-class strangers’, as they called welfare providers, ‘questioning them about their children’. They felt such intrusions ‘broke a cultural taboo’.

And the use of welfare as a way of allowing society’s ‘betters’ to govern the lives of the poor continues now. Indeed, today’s welfare state is even more annoyingly nannyish than it was 80 years ago.

As the writer Ferdinand Mount says, the post-war welfare state is like a form of ‘domestic imperialism’, through which the state treats the poor as ‘natives’ who must be fed and kept on the moral straight-and-narrow by their superiors.

Mount describes modern welfarism as ‘benign managerialism’, which ‘pacifies’ the lower orders.

Working-class communities feel this patronising welfarist control very acutely. They recognise that signing up for a lifetime of state charity means sacrificing your pride and your independence; it means being unproductive and also unfree.

April 3, 2013

They “held the kind of attitudes that make the Daily Mail‘s headlines look positively Left‑wing”

Filed under: Britain, Economics, Government, Media — Tags: , , , — Nicholas @ 09:47

Brendan O’Neill on the vast gulf between the bien pensant supporters of Britain’s current welfare system and those who actually depend on that system:

Comfortably off liberal campaigners are always bemused to discover that the working classes and poor do not share their love of the welfare state. Where radical middle-class students bravely spend bitterly cold evenings on pro‑NHS demos, and Left-leaning newspaper columnists write heartfelt articles about the importance of maintaining welfare payments, the less well-off seem totally unmoved by cuts to welfare.

[. . .]

Agreement that “unemployment benefits are too high and discourage work” has risen steadily among the less well-off. Only 40 per cent of benefits recipients agreed with it in 2003, while in 2011 59 per cent did. Thirty-eight per cent of working-class respondents agreed in 2003 that welfarism discouraged work; 58 per cent agreed in 2011.

The lack of love for the welfare state among its supposed beneficiaries drives liberal campaigners nuts. Why, they wail, are those on the breadline so down about the glorious postwar system of welfarism, even though it has saved their ungrateful rumps from destitution?

In Monday’s Guardian, columnist John Harris, who regularly travels around Britain to find out what the little people think, bemoaned the fact that anti-welfare “noise” always gets louder “as you head into the most disadvantaged parts of society”. This echoes a recent Guardian editorial which complained that ordinary Brits have become “more Scrooge-like” towards welfare claimants.

Or behold the bamboozled Joseph Rowntree researcher Fern Brady, who was horrified to discover that the less well-off are not remotely “pro-welfare”. Earlier this year, Ms Brady interviewed 150 families who will be affected by benefits cuts and was alarmed to find that “the majority held the kind of attitudes that make the Daily Mail‘s headlines look positively Left‑wing” — that is, they were anti-welfarism, and stingingly critical of those who claim welfare, even though they themselves claim it.

February 20, 2013

Incentives matter (a lot) — the growth of “Disabled America”

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas @ 09:40

Colby Cosh discusses the rise and rise of “Disabled America”, the increasing number of adults of working age who are claiming disability support:

Just looking at fiscal and demographic stats from California will cause a cold, invisible hand to clutch at one’s throat, but talking to an endless series of seemingly able-bodied people who casually disclaim any capacity for honest work is even more chilling. When I got home I found out it’s not just California’s problem. In the OECD’s 2010 “Going for Growth” report, the percentage of the working-age labour force (20 to 65 years) receiving any kind of disability benefit or worker’s compensation is estimated at around 5.1 per cent for Canada. For OECD nations as a whole, the figure is 6.7 per cent.

Northern European welfare states, amiright? But for the super-competitive U.S.A., land of the proudly threadbare social safety net, the number was 9.2 per cent.

[. . .]

There is a handful of economists working on the problem without ever gaining much traction in the popular press; the atmosphere of general crisis hasn’t made it any easier for them to be heard. Reading their papers and seeing them plead for the same reforms every few years is almost as depressing as contemplating Disabled America itself. Just as social security for the aged was devised at a time when workers could expect only a few years of life after clearing 65, social security for the disabled was conceived at a time when manual labour was the norm and “disability” denoted identifiable, incapacitating physical injury. No one envisioned a world in which clerical and “knowledge” work had taken over, but the number of people judged totally unable to work had skyrocketed, owing to vague musculoskeletal disorders, unverifiable chronic pain and an astronomical expansion in the definitions of mental illnesses.

If the system is set up to provide more income through disability payments than through a paying job, there will be a tendency for minor ailments to be parlayed into a disability. When the incentives are rigged to encourage a certain kind of behaviour, people will adapt to take advantage of those incentives. If the system will effectively reward you for being “disabled”, it should be no surprise that we get more people applying for disability support.

Even if the economic climate was better, it’s not likely that governments will crack down on those abusing the system for a couple of solid reasons. First, it’s a public relations nightmare waiting to happen and every government worker knows that you never want your name to appear in the media in this kind of context. Second, people on the disability programs don’t count as unemployed and therefore reduce the pressure on the government to “do more” about jobs. And third, it’s easier to just go with the flow and not try to create any ruckus.

September 28, 2012

Defending the welfare state … badly

Filed under: Bureaucracy, Europe, Government — Tags: , , , , — Nicholas @ 08:27

At sp!ked, David Clements reviews a new book by Asbjorn Wahl which inadvertently exposes some of the very real problems of the modern welfare state in the process of praising and defending it:

Asbjorn Wahl is a trade unionist, director of the Campaign for the Welfare State and Norwegian. While you shouldn’t judge a book by the biog of its author, far less his nationality, it is fair to say that when I opened his new book, The Rise and Fall of the Welfare State, I wasn’t expecting much.

He begins, as all defenders of the welfare state must, with a bleak account of the public; that is, of the welfare state’s helpless, vulnerable clients and potential clients. There is a ‘feeling of powerlessness and apathy among people’, says Wahl, a feeling of ‘tragic stories’ too numerous to mention. As well as discovering an ‘unexpectedly large number… of victims of workfare’, he finds other people suffering ‘bad health and ever-more demanding work’. He tells us ‘stories of people who struggle with their health, then their self-confidence and their self-image’. As I heard a man on a picket line tell a Sky News reporter recently, everyone is ‘sick and tired of being sick and tired’.

[. . .]

Wahl is critical of both the anti-democratic tendencies of the European Union and the imposition of the ‘economic straitjacket’ resulting from the attack on living standards in the Eurozone periphery countries. But his call for the ‘stimulation of the economy, investment in infrastructure and in productive activities’ can hardly be taken seriously given his doubts about the benefits of economic growth. While attempts by Europe’s governments to counter the financial crisis, and in so doing to create public debt crises, have, as Wahl says, been ‘exploited as an excuse to make massive, intensified attacks on the welfare state’, this does not in itself invalidate the attack. His view that capitalist excess is responsible for all of Europe’s ills is also his blind spot when it comes to seeing the damage done by an increasingly therapeutic welfarism. In truth, the welfare problem is not something dreamt up by neoliberals (whoever they are). Rather, it is symptomatic of a political culture that robs people of their agency, something that you might expect somebody like Wahl to be opposed to. Far from it. ‘Good social security’, he says, ‘gives people that much-needed self-confidence boost that enables them to become active players in society’.

As this back-to-front and patronising rationale makes clear, today’s welfare state infantilises people. It tells them that they are too damaged to function without its official hand-holding and belittling interventions. Any ‘progressive’ movement would surely endorse the contrary view that people should be treated as morally independent beings, responsible for their own actions? But to say as much is to invite the charge that you are horribly right wing and endorse ‘welfare-to-work’ policies (which, incidentally, sound rather more like the unforgiving and austere welfare state envisioned by its founders than that proposed by its supposed critics).

June 18, 2012

Who’s afraid of austerity?

Filed under: Economics, Europe, Government, USA — Tags: , , , , — Nicholas @ 08:17

At the BBC News website, Niall Ferguson on why young westerners should welcome austerity:

The heart of the matter is the way public debt allows the current generation of voters to live at the expense of those as yet too young to vote or as yet unborn.

In this regard, the statistics commonly cited as government debt are themselves deeply misleading, for they encompass only the sums owed by governments in the form of bonds.

The rapidly rising quantity of these bonds certainly implies a growing charge on those in employment, now and in the future, since — even if the current low rates of interest enjoyed by the biggest sovereign borrowers persist — the amount of money needed to service the debt must inexorably rise.

But the official debts in the form of bonds do not include the often far larger unfunded liabilities of welfare schemes like — to give the biggest American schemes — Medicare, Medicaid and Social Security.

The most recent estimate for the difference between the net present value of federal government liabilities and the net present value of future federal revenues is $200 trillion, nearly thirteen times the debt as stated by the U.S. Treasury.

Notice that these figures, too, are incomplete, since they omit the unfunded liabilities of state and local governments, which are estimated to be around $38 trillion.

These mind-boggling numbers represent nothing less than a vast claim by the generation currently retired or about to retire on their children and grandchildren, who are obligated by current law to find the money in the future, by submitting either to substantial increases in taxation or to drastic cuts in other forms of public expenditure.

[. . .]

It is surprisingly easy to win the support of young voters for policies that would ultimately make matters even worse for them, like maintaining defined benefit pensions for public employees.

If young Americans knew what was good for them, they would all be in the Tea Party.

A second problem is that today’s Western democracies now play such a large part in redistributing income that politicians who argue for cutting expenditures nearly always run into the well-organised opposition of one or both of two groups: recipients of public sector pay and recipients of government benefits.

Older Posts »

Powered by WordPress