Welfare Reform
Robert Waldmann is back
I didn’t mean to stop blogging for so long. I apologize. I also apologize for this post which is one of my occasional screeds against welfare reform. Oddly there seems to be almost a consensus that welfare reform was a good policy. I think this is based entirely on the fact that, by pure coincidence, it was implemented during the late 90s boom.
Matt Zetlin wrote
One thing that hasn’t happened yet — but should — is that liberals who are noting that Republican obstructionism and the 60 vote Senate are the primary causes of a frustrating first year for Obama should become much more sympathetic to Bill Clinton.
[skip]
Now, there is room to complain about his priorities in office and whether NAFTA and welfare reform were really key components of any type of progressive or liberal agenda, but it seems impossible to say that the only reason that the Clinton administration didn’t produce the progressive results one might have wanted had much to do with Clinton himself.
I comment.
Good points and congratulations on the link from Yglesias. I object very strongly to two words in your post “welfare reform.” You write that it was arguably not a “key component[] of any type of progressive or liberal agenda,” For the sake of debate, I’ll scotch the “arguably” and interpret “one can complain” as meaning “it is true that.” Your praising welfare reform with faint damnation is still, to put it as politely as I can, batshit insane.
You do know that there are over 6,000,000 food stamps recipients in the USA with 0 cash income (nothing to live on but food stamps) don’t you ? I’d say that situation has a whole whole whole hell of a lot less than nothing to do with ” any type of progressive or liberal agenda,” It is also true that TANF enrollment has barely increased during the first 16 months of the current recession (warning out of date pdf from an advocacy organization or try the official verrrry slowwwww opening link don’t blame me blame HHS gluttons for boredom can go to the index for maybe more data) and is about one third of peak AFDC enrollment. Welfare reform caused and is causing immense human suffering. There are desperately desperately poor people in the USA (I define that as income less than half the poverty line) because the social safety net was destroyed by a bill signed into law by Clinton.
The perception that welfare reform was good policy or OK policy or not terrible policy is based entirely on the fact that, when it was enacted, the economy was booming. The poor did OK in the late 90s in spite of welfare reform. The non poor did very well. You can’t judge a policy looking only at events during an extraordinary boom. Look the US poor did very well indeed during the war in Vietnam, but it was terrible policy. I assert that your reasoning is absolutely along the lines of admitting that the war in Vietnam was not a “key component[] of any type of progressive or liberal agenda.” I really mean that. Each consists of evaluating a policy only by looking at what happened at the same time. We can’t blame welfare reform on the filibuster. We can’t even blame it on the Republicans in congress. They did not have the votes to over ride a veto. Clinton decided not to veto a welfare reform bill. He condemned millions of people to horrible horrible poverty (as opposed to merely horrible poverty without welfare reform).
I also find it odd that you classify NAFTA along with welfare reform. I strongly support NAFTA and I don’t like hearing it associated with welfare reform. What was wrong with NAFTA ? I’d consider free trade to be a key component of any progressive or liberal agenda. That is because protection condemns third world workers to horrible horrible horrible poverty. The only case for protection is that it is needed to defend hereditary privilege (the advantage of being born a citizen of a first world country). No decent progressive or liberal can support any such thing. Instead people who want to unite the forces of egalitarians and selfish racists who want to keep the third world poor convince themselves that trade is bad for the third world.
Now, in general, I absolutely agree with your excellent post. It is simply insane to act as if Clinton ran the country when he was President. It is especially insane to act as if he ran the country when the only power he had was the veto. However, he did not use the veto when any decent person would have done so. That’s a fact and the only excuse would have been that there were 67 senators willing to over ride a veto (there weren’t 60 senators willing to vote for cloture it passed under reconciliation).
“The only case for protection is that it is needed to defend hereditary privilege (the advantage of being born a citizen of a first world country). No decent progressive or liberal can support any such thing.”
I’m afraid I must differ with you. I am a decent progressive, and I support trade protection. Exporting our jobs to China helps (in the long run) neither China nor ourselves. I want trade protection and I want those jobs back here. Our first responsibility is to ourselves.
Stanley A–Agreed. Nancy Ortiz
It was evident at the time of signing that “welfare reform” wouldn’t work. I remember reading the papers at the time (up here in Canada, no less) and thinking “they’re just dumping these people.”
The idea is predicated on there being enough jobs suited to the skills of all the people who would get pushed off social assistance. This wasn’t true at that time, and it’s much falser now. It was just a nice fairy-story to sooth the conscience of anyone who still had one. Like people who dump puppies in the country because then they’ll have a nice farm home (usually, they are hit by a car, eaten by a coyote or shot by farmers who can’t allow feral dogs to establish themselves.)
But the real predicate of the idea, if one troubles to think it to its conclusion, is this: jobless people are worthless, and worthless people might as well die.
Some proponents of health care reform use the argument that if people don’t get early care, late care is much more expensive. Therefore treat people early and cheaply. But the Cheney’s of the world take the argument one step further: don’t give early care or late care, because burial is cheapest of all.
Of course mostly, jobless American citizens don’t take the hint. How inconsiderate.
Hi Robert I am glad you are posting again and I really liked the post until the NAFTA part. I wonder how you can get into the actual details and consequences of Clinton’s welfare reform and then simply spit out not even an Adam Smith quality defence of free trade in the abstract. Never occurred to you that free trade can be a policy in the furtherance of privilege as well?
How is Mexico doing? How is the illegal immigration problem doing? Where is that grand balancing of living standards that was going to allow Mexican workers to have a decent living standard in Mexico? How did the opening up of Mexican grain and maize markets work out for the Mexican peasantries? And while we are at it how have lesser educated American workers done since NAFTA?
Perhaps this is why welfare reform hits hard for you: a kind of tacit recognition that the bottom half of the labour market gets sold out under putative “free trade.”
Hi Robert I am glad you are posting again and I really liked the post until the NAFTA part. I wonder how you can get into the actual details and consequences of Clinton’s welfare reform and then simply spit out not even an Adam Smith quality defence of free trade in the abstract. Never occurred to you that free trade can be a policy in the furtherance of privilege as well?
How is Mexico doing? How is the illegal immigration problem doing? Where is that grand balancing of living standards that was going to allow Mexican workers to have a decent living standard in Mexico? How did the opening up of Mexican grain and maize markets work out for the Mexican peasantries? And while we are at it how have lesser educated American workers done since NAFTA?
Perhaps this is why welfare reform hits hard for you: a kind of tacit recognition that the bottom half of the labour market gets sold out under putative “free trade.”
Hi Robert I am glad you are posting again and I really liked the post until the NAFTA part. I wonder how you can get into the actual details and consequences of Clinton’s welfare reform and then simply spit out not even an Adam Smith quality defence of free trade in the abstract. Never occurred to you that free trade can be a policy in the furtherance of privilege as well?
How is Mexico doing? How is the illegal immigration problem doing? Where is that grand balancing of living standards that was going to allow Mexican workers to have a decent living standard in Mexico? How did the opening up of Mexican grain and maize markets work out for the Mexican peasantries? And while we are at it how have lesser educated American workers done since NAFTA?
Perhaps this is why welfare reform hits hard for you: a kind of tacit recognition that the bottom half of the labour market gets sold out under putative “free trade.”
Well I shouldn’t have written something that implies that you are not decent progressives. Sorry.
However, if you think our first responsibility is to ourselves, then you support hereditary privilege. Also I sense ideology in the combination of the claim of fact that free trade doesn’t help China in the long run and the claim of values that our first responsibility is to ourselves. The coincidence is suspiciously convenient. Oh and appealing to the long run when 30 years counts as short run is a way to dodge all evidence.
Again there is a problem with coincidences. Mexico had a crisis about the time NAFTA was ratified. The crisis was not caused by NAFTA although it may have been caused by policies the Mexican government followed to make sure NAFTA was ratified. Mexican growth from 1995 to 2000 was very extraordinary (boucing back from the crisis was important).
Mexico has bet on free trade with the USA and won big. Of course they are suffering this year because of our recession.
I’d say your thinking is very similar to that of welfare reform enthusiasts. A final judgment on a policy can’t be made in a few years as the effect of the policy can’t be distinguished from the effect of the business cycle. After a year or two, the media move on to another story. Thus welfare reform is consisered a success and NAFTA a failure.
Looking at all the evidence which is now available I am convinced that welfare reform was a catastrophe and NAFTA a success.
Another problem with your comment is that you set up a straw man. Mexico is still poorer than the USA, so there hasn’t been a grand balancing of living standards. No one promised that Mexico would be as rich as the USA now. My sense is that Mexico has done very well.
On the other hand, other countries have benefited much more from the relative absence of protection by rich countries. In the recent era with free trade, the world distribution of income has ceased to have two modes rich and poor. The benefits to the median person of international trade have been mega colossal. I don’t think that anyone who is willing to look at the data and who cares about people equally can fail to see that.
Oh sorry a link for data on Mexico
http://globalis.gvu.unu.edu/indicator_detail.cfm?Country=MX&IndicatorID=19#row
Robert:
Nice to see you back.
The problem with NAFTA is we didn’t stick to it. Once we could out source production to China at cheaper, we did. Consequently closing down the Mexican facilities. NAFTA was and still is a good idea for the North American Hemisphere at the expense of the Asian Hemisphere. There is no better way to keep illegal immigrants at home than to create work at home and force Mexico to be more liberal.
Off topic: Did you ever have a Chinese-Filipino Economics Prof who was educated at Oxford and spoke very good Engish?
Hi Robert thanks for the candid response. At least there are some specific propositions we can debate vis-a-vis NAFTA and “free” trade. And I put free in scare quotes because a cursory glance at any of these deals makes clear they are really managed trade deals. Free implies unencumbered. So clarity demands more accurate language. Actually the opening of Mexican cereals and grain markets occurred prior to NAFTA and almost all experts agree that it was a economic and social disaster. Contrast this with how South Korea managed the agrarian question and you will find a useful counter example that does not confirm to the free trade script. The data you point to on Mexico hardly makes your case. Mexico nearly tripled its real GDP per capita between 1975 and 1990 and in the post NAFTA years only had managed to increase GDP per capita by less than 50%. Iran had managed a 79% increase from 1990 levels. So if Mexico can’t beat its own pre NAFTA performance nor Iran’s performance are you sure you want to go all in with Mexico? Maybe you have some other data or case studies, but on the case studies I have read and the aggregate data I am familiar with it seems hard to argue that free trade was some magic developmental bullet or even necessarily helpful. Sounds counter intuitive but …
Look my point is not that more open forms of trade are ineffective it is that it really has to be studied on a case by case basis with careful analysis. And if we must deal in aggregates at least let them be more instructive then GDP per capita. I think one interesting attempt to do so can be found here:
http://homepage.newschool.edu/~AShaikh/VMIPaperIv3j.pdf
Hi Robert thanks for the candid response. At least there are some specific propositions we can debate vis-a-vis NAFTA and “free” trade. And I put free in scare quotes because a cursory glance at any of these deals makes clear they are really managed trade deals. Free implies unencumbered. So clarity demands more accurate language. Actually the opening of Mexican cereals and grain markets occurred prior to NAFTA and almost all experts agree that it was a economic and social disaster. Contrast this with how South Korea managed the agrarian question and you will find a useful counter example that does not confirm to the free trade script. The data you point to on Mexico hardly makes your case. Mexico nearly tripled its real GDP per capita between 1975 and 1990 and in the post NAFTA years only had managed to increase GDP per capita by less than 50%. Iran had managed a 79% increase from 1990 levels. So if Mexico can’t beat its own pre NAFTA performance nor Iran’s performance are you sure you want to go all in with Mexico? Maybe you have some other data or case studies, but on the case studies I have read and the aggregate data I am familiar with it seems hard to argue that free trade was some magic developmental bullet or even necessarily helpful. Sounds counter intuitive but …
Look my point is not that more open forms of trade are ineffective it is that it really has to be studied on a case by case basis with careful analysis. And if we must deal in aggregates at least let them be more instructive then GDP per capita. I think one interesting attempt to do so can be found here:
http://homepage.newschool.edu/~AShaikh/VMIPaperIv3j.pdf
Hi Robert thanks for the candid response. At least there are some specific propositions we can debate vis-a-vis NAFTA and “free” trade. And I put free in scare quotes because a cursory glance at any of these deals makes clear they are really managed trade deals. Free implies unencumbered. So clarity demands more accurate language. Actually the opening of Mexican cereals and grain markets occurred prior to NAFTA and almost all experts agree that it was a economic and social disaster. Contrast this with how South Korea managed the agrarian question and you will find a useful counter example that does not confirm to the free trade script. The data you point to on Mexico hardly makes your case. Mexico nearly tripled its real GDP per capita between 1975 and 1990 and in the post NAFTA years only had managed to increase GDP per capita by less than 50%. Iran had managed a 79% increase from 1990 levels. So if Mexico can’t beat its own pre NAFTA performance nor Iran’s performance are you sure you want to go all in with Mexico? Maybe you have some other data or case studies, but on the case studies I have read and the aggregate data I am familiar with it seems hard to argue that free trade was some magic developmental bullet or even necessarily helpful. Sounds counter intuitive but …
Look my point is not that more open forms of trade are ineffective it is that it really has to be studied on a case by case basis with careful analysis. And if we must deal in aggregates at least let them be more instructive then GDP per capita. I think one interesting attempt to do so can be found here:
http://homepage.newschool.edu/~AShaikh/VMIPaperIv3j.pdf
In support one might mention, the mercantilistic policies, that Britain employed towards its colonies during the industrialisation, the mercantilistic policies under Luis XIV and after, that France used towards Britain in the 18th century, the mercantilistic policies used by the USA and Germany in the 19th century, the policies from Japan and South Korea in the 20th century….
I still await the large crash, that brings all these countries back into the preindustrial age.
One of the most interesting aspects of welfare reform was the serious attempt to avoid finding out what happened to the people so “reformed.” No tracking was done, no statistics kept, no studies completed. So the effects pop up in interesting places: the increasing number of homeless families, the increasing number of children in foster care (particularly older children), and in some really ugly anecdotes. There have been any number of cases of children left home alone while Mom worked at Sam’s Club or WalMart or the local convenience market, and got themselves into serious trouble. Then there are the increasing number of cases where Mom leaves the kids with the sketchy boyfriend and the sketchy boyfriend injures or kills the kid. (Luckily for us, most of the boyfriends just let the kid watch too much TV or eat chips for lunch, but refrain from beating the kid up.)
What’s amazing to me is that the prosecute the mothers for child endangerment. Our society should be prosecuted, as these mothers have no other options.
US ag subsidies are only part of, that story. Some European dairy cows are subsidized at a level above the World Bank standard for poverty (poorest nation status). If there are any developed nations that do not subsidize at least some ag goods, I would be surprised by that. But it matters little because the value of staple goods were so dramatically altered by the glut of 1921 that it is impossible to estimate where the values should be now. It is easiest here to just say that in the US the industrial sector has been taking from the ag sector going back to our first tariffs (1816). I do not know enough about other industrialized nations to say this with any certainty, but I suppose that clever urbanites have been pulling this trick since the Industrial Revolution began. It is not difficult and in the nascent stages it was simply a matter of controlling ‘choices’.
In the US though, until 1921, this was far more difficult than it was in Europe and so high labor values were something of a side-effect of our freedoms, and of our bounty, in a combination thereof, but eventually, a solution was found.
In short, USDA field agents stood idly by, for 3 years after the end of WW1, as wartime production levels were maintained and as ag goods and livestock overwhelmed the domestic markets. By 1929, before the Crash, farm incomes had fallen to 25% of what they were ten years before (real). Almost miraculously, the ‘yellow dog’ union busting campaign also began in 1921, and by 1929, also before the Crash, 71% of the population was living below the poverty line. And ‘The Economy That Roared’ was made possible by limiting ‘choices’. (I don’t have room for much support here but I know this period well if needed, the glut was clearly intentional)
A couple of years ago, corn grown many hundreds of miles away (US), sold for 25% less than corn grown locally in Mexico. Subsidies are complicated but it might be enough here to point out that the financial services industry benefits because subsidies provide collateral as a type of insurance. Maybe too, I can skip ahead and just say that I have spent a fair amount of time in Central America and with the peasants there, and, many of these people were content with the way things WERE. But, by World Bank standards these people live below the poverty line. But of course barter is difficult to value and so the only valid criteria remaining is just ‘common sense’. And all one need do is compare the urban poor to the rural
poor and it only takes a little exploring to see that poverty is in the eye of the beholder, and it is not a coincidence that content, and healthy people, are forced into the type of poverty that benefits all of those who gain from low labor costs. Nor is it a coincidence that Central Americans flood their labor markets and that this overflow spreads to the North to where the money is, naturally.
In the North though the number of manufacturing jobs has been dwindling for decades. And the people who had moved to our industrial centers were left in a vacuum. Welfare programs from the start were the wrong solution because they trapped people in places where these people had few if any ‘choices’. Subsidized housing created dependencies in the wrong places, and subsidized staples (food stamps are a double subsidy) eliminated rural opportunities and caused a migration from rural to urban at a time when it should have been the reverse. Then as the social costs became unpopular in the 1990s, due in part to these concentrating affects, the subsidizing was partially withdrawn. And if the importance of ‘choices’ is fully understood, our crime epidemic, especially that which developed as an illegal drug industry, came as the result of a combination of poorly […]
To fully get what is happening it first necessary to realize that the wealth shift from rural to urban would not be possible without compliance across national borders. The epicenter of nearly all political power is of course predominately urban, and increasingly so, and therefore with a majority based mandate it is easy to understand the political dynamics. What is a little more difficult to understand are the environmental and economic dynamics. I explained how artificially low labor costs restrict upward mobility, and how devaluing resources restricts growth, on a recent thread (DOLB — ‘Flower Shop’) so, a little about the environment:
The mass, global migration, being caused the devaluing of natural resources and agricultural goods, is yet another trend that is the reverse of what it must be. It is critical to get the lack of logic here on every level. Broadly speaking, machines are pulling downward on the demand for unskilled labor as a mass urbanization is occurring. But the more immediate issue is that even the most advanced urban areas do not have the facilities to adequately deal with waste-water runoff. Dead-zones are forming in Puget Sound, Chesapeake Bay, San Pedro and Santa Monica, and these are in areas that DO HAVE sewage treatment facilities. And these are not places subjected to high concentrations of ag fertilizers like those found in the Gulf of Mexico. So, in less advanced urban areas around the world, a migratory trend that guarantees that impervious surface areas must continue to increase, is so clearly a threat to our oceans that the economics of ‘who gets what’ — must be stopped. ~ ray
Hi Robert,
My question to you regarding NAFTA is: Are you for the ideals NAFTA represents or for NAFTA as currently implemented? I ask, because your phrasing suggest people might have a problem with the other phrase associated with NAFTA: Free Trade. I have found no one against free trade, pretty much everyone likes to trade freely. But, you strongly suggested that people who would consider themselves progressive but are against NAFTA are less than honest about their progressive intent. Indignation toward such people?
To set up such an argument is to assume everyone interprets NAFTA as the ideal of free trade for the benefit of all and thus, if they are against it, it is because they are a hypocrite or bias, or prejudice or selfish. I will acknowledge that what has happened here in the US regarding our increasing inequality and income stagnation maybe is being projected onto NAFTA, but to use such a strong term as “hereditary privilege” to describe those who have experienced such and are looking to reverse seems a passive aggressive approach to arguing your position. It’s name calling. It is as insensitive to the plight of those who have seen the fruits of their labor more and more captured by the upper income and wealth of this nation.
I suggest “hereditary privilege” being applied to those in this nation who would be equivalent to those you look to help with free trade in it’s most ideal form is a misapplication as the phrase is commonly used. That NAFTA has benefited a less developed nation does not negate that NAFTA and such policy has eased the ability of capital to game a local economy to their favor at the expense of the local citizenry. I know you and all who read here know that GDP/cap does not mean everyone has the average benefit of said GDP.
If I am wrong regarding how I have read your posting and comments, then I stand corrected and will apologize.
As to how well Mexico has done, the chart you link shows a trajectory that did not change much at all until it leveled in 2000 and 2002. I do not think it proves much regarding Mexico’s relationship with NAFTA.
There is this: http://www.cepr.net/documents/publications/nafta_2004_03.htm
that suggests just the opposite.
There is also this: http://www.cepr.net/documents/publications/nafta_2004_10.pdf with a couple charts that suggest just the opposite of the one you linked. Specifically noted:
Figure 1 shows Mexico’s annual rate of real per capita GDP growth using data from the Penn World Tables, version 6.1 series RGDPCH….Following a 6% decline in 1995, the data show annual growth of […]
Applying the Lucas critique to welfare programs shows that welfare programs change behavior and actually draw people into welfare that might otherwise have worked. Maybe the ones drawn in would only have marginal jobs but their working moves them from the burden column to the asset column. And this is true regardless of their view on quality of life between working and not working.
Man you are a jackass cnatab. Private welfare exists too. All stricter public qualifications do is shift the burden to family, friends, and crime and random unsuspecting do gooders. In your silly model there is work and welfare. In fact there are multiple worlds of welfare and the state from is only one.
should read *form*
Travis,
Your reply is lousy. I say welfare programs draw people in who otherwise would have worked which I feel primarily is a problem for those that have to pay for them but also to the people that go on welfare themselves, and then pass this life style to their children. So you don’t end welfare programs but when you craft them you have to acknowledge their existence on personal behavior and then try to minimized their negative effects. It took a long time to get the left to admit to this truth, and I would like for Robert to assure us that he gets it. The extra burden are their for a reason, without them too many people would go on the system.
Travis,
Your reply is lousy. I say welfare programs draw people in who otherwise would have worked which I feel primarily is a problem for those that have to pay for them but also to the people that go on welfare themselves, and then pass this life style to their children. So you don’t end welfare programs but when you craft them you have to acknowledge their existence on personal behavior and then try to minimized their negative effects. It took a long time to get the left to admit to this truth, and I would like for Robert to assure us that he gets it. The extra burden are there for a reason, without them too many people would go on the system.
Free trade needs to flow in both directions if it is to benefit both parties in the long run. That means no fixing the exchange rate of your currency and no pressuring foreign companies to compromise their intellectual property. It also means not hiring hackers to break into the systems of companies doing business in your country.