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February 21 2013

This Is Not How an Economy Is Supposed to Act

Charlotte Hays

We have moved into what are uncharted waters for our republic: declining unemployment coupled with drastically increasing dependence on government. Nicholas Eberstadt writes today:

A strange and disturbing new social pattern is unfolding before our eyes in America today: growing dependence on government handouts in the face of declining unemployment rates. Though we are now preparing to enter into the fourth year of recovery from our Great Recession, the roster of Americans seeking and obtaining entitlement benefits from our government just seems to keep on going up.

This is not the way the world is supposed to work-even if you are hopelessly infatuated with Keynesianism. Cheerleaders for Keynesianism, of course, take it as a tenet of their faith that the government should be spending aggressively during economic downturns. (To their way of thinking, the social welfare state should be one of the main vehicles for such expenditures: not only to provide a safety net, but to stimulate upswing by making up for insufficient macroeconomic demand.)

Yet to the finely calibrated Keynesian mind, government spending is supposed to be counter-cyclical: meaning that as things get better, the hand of the state is supposed to recede from economic life.

But the hand of state is not receding in contemporary America. One reason is that President Obama believes above all in government. As Eberstadt observes the president said in his second inaugural address that “no matter how responsibly” we live, any of us can hit a bad patch, a lost job, or a serious illness perhaps, and government must be there when these risks occur.

The logic would appear, however, to be that fewer people would avail themselves of entitlement programs as the economy recovers. But this isn’t happening. The number of Americans receiving benefits was 144 at the height of the Great Recession, Eberstadt writes, but now the number is 150 million—a jump of five and a half million. Eberstadt writes:

Yes, it is true that our ‘recovery' in the aftermath of the Great Recession has been miserably weak; yes, it is true that there are other ways to measure employment prospects besides the unemployment rate; yes, it is true that the effects of poverty can linger on after an unemployed job-seeker finds new work.

But neither these qualifications nor any others should obscure this basic truth: the old counter-cyclical relationship between the unemployment rate and dependence on government entitlement transfers has apparently broken down. In good times or bad, evidently, America's dependence on government largesse is now always on its way up.

Meanwhile, the only man in the nation with a veto pen talks about the “asking” the very rich to pay more to support this morally-destructive system. This is silly and frivolous, and he should be called on it.

Just for the record: everything I’ve ever learned about life, in particular money management, I learned from hard knocks. I’ll bet I’m not alone. As the government more and more cushions citizens from educative hard knocks, more people will not have the rich learning experience of coping with risk or failure.  

 

 

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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