Stealth redistribution

Article Highlights

  • The benefit of not working increased sharply from 2006 to 2010, from about $10,000 to $15,000 per year--a 50% increase

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  • The average monthly unemployment-insurance payment received was $834 in 2006 and by 2010 it was $2,667

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  • Staying home and collecting a government check has never been so attractive

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This article appears in the January 23, 2012 issue of National Review.

The government's response to the Great Recession has been characterized as a bailout for the rich and a cold shoulder for the poor. This perception has been magnified by the media coverage of the Occupy Wall Street movement. The story would present future historians with a puzzle if it were true. How could the most liberal president in American history, accompanied for his first two years by an equally liberal Congress, be so uncharitable?

The answer is, they weren't. Since 2007, and apparently well below the radar, the safety net has expanded radically. The benefits available to those who do not work are sharply higher, and likely explain a good deal of the high unemployment we still see today. Staying home and collecting a government check has never been so attractive.

"Staying home and collecting a government check has never been so attractive." --Kevin A. HassettThe stark numbers have been highlighted in recent research by University of Chicago economist Casey B. Mulligan. It is very easy to believe that overall spending on social programs has increased following the recession, since the program's automatic stabilizers are always triggered during an economic slump. Mulligan points out that spending increased not only due to the recession, but because the eligibility requirements for most programs were expanded, and their benefits increased. Spending per person has gone up, not just total spending.

The nearby chart taken from the study provides a concise glimpse of his main results. It represents the average amount of assistance (inflation-adjusted) that an unemployed or underemployed individual under the age of 65 received from the beginning of 2006 to the end of 2010. The benefit of not working increased sharply over that time, from about $10,000 to $15,000 per year-a 50 percent increase. And remember that the chart does not show the overall increase in spending. Clearly those in need have not been abandoned.

Click to view larger version of the chart.

What has constituted the increase? The average monthly unemployment-insurance payment received was $834 at the beginning of 2006, while by the end of 2010 it was $2,667. Home retention actions (mortgage modifications) were almost nonexistent in 2006 but increased sharply due to pressure from Uncle Sam. Consumer loan charge-offs (commercial banks' declaring that a debt-usually credit-card debt-is unlikely to be collected) increased significantly over the four-year period, for the same reason. Other transfers, such as food assistance, increased as well.

Yes, unemployment is high, but is it any wonder?

Kevin A. Hassett is a senior fellow and director of economic policy studies at AEI.

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