This week, the Republicans running the House Ways and Means Subcommittee on Human Resources will accuse Obama of creating massive disincentives for people receiving welfare and food stamps to look for gainful employment. One of the witnesses is University of Chicago economist Casey Mulligan, who wrote The Redistribution Recession: How Labor Market Distortions Contracted the Economy, a book that argues there is a link between low labor participation rates and generous welfare schemes. He is expected to tell the subcommittee on Tuesday that Obamacare will have the unintended consequence of making it even more attractive for unemployed people to continue on the dole.
Mulligan is the new darling among conservatives, and as such has become a frequent target of insults hurled by Paul Krugman, the Nobel Prize-winning economist and Obama apologist who frequently embarrasses himself in his column in the New York Times. Krugman says blaming welfare programs for high unemployment is like blaming soup kitchens for the Great Depression.
From common sense and experience, however, we know that there is verity in what Mulligan says. Despite the recovery, a record 47.8 million people were enrolled in the Supplemental Nutrition Assistance Program, or SNAP (what we used to call Food Stamps), at the end of 2012, versus 28.2 million in 2008. That’s a 70% increase, and the annual cost of the program is around $75 billion.
And as of May 31, 4.4 million people had been unemployed for 27 weeks or more, and the labor participation rate was 63.4%, the lowest percentage since Jimmy Carter’s presidency. Mulligan says the overgenerous safety net is the reason for the low number. He estimates that four million heads of households and their spouses earned as much while unemployed as they did while employed.