New Welfare in the Stimulus Bill
The House stimulus bill overtly increases federal welfare spending by $264 billion. Most of this spending will occur in the first two years after passage. For example, if enacted, the House stimulus bill will spend an additional $88 billion in means-tested welfare aid in FY 2009, an increase of more than 20 percent above prior spending levels. Federal welfare spending (including small increases built into existing law) will rise from $491 billion in FY 2008 to $601 billion in FY 2009. This one-year spending explosion (by far the largest in U.S. history) will not be a byproduct of unemployment generated by the recession but the result of a deliberate expansion of welfare eligibility and benefits by President Obama and Congress.
Camel's Nose in the Tent
While $264 billion in new welfare spending may seem like a lot, it is only the tip of the iceberg. If the stimulus bill is enacted, the real long-term increase will be far higher. This is because the stimulus bill pretends that most of its welfare benefit increases will lapse after two years. In fact, both Congress and President Obama intend for most of these increases to become permanent.[1] The claim that Congress is temporarily increasing welfare spending for Keynesian purposes (to spark the economy by boosting consumer spending) is a red herring. The real goal is a permanent expansion of the welfare system.
The notion that Congress intends to temporarily increase Pell grants and EITC benefit levels for just two years and then allow benefits to fall back to their original status is out of touch with Washington reality. Any Congressman who, two years from now, suggests that the new welfare spending be allowed to lapse to pre-stimulus levels would be pilloried for slashing welfare.
"Spread the Wealth" Tax Credit
A major new welfare program in the stimulus bill is Obama's "Make Work Pay" refundable tax credit. This credit represents a fundamental shift in welfare policy. At a cost of around $23 billion per year, this credit will provide up to $500 in cash to low income adults who pay no income taxes. For the first time, the government will give significant cash to able-bodied adults without dependent children. Since most of these individuals have little apparent need for assistance, the new credit represents "spreading the wealth" for its own sake.
The lack of connection between this credit and "economic stimulus" is evident in the fact that the first payments under the program will not be made until April 2010.[2] This refundable credit is not included in the stimulus bill because of its "stimulus" effect. Instead, the inclusion of this new welfare program makes good on an Obama presidential campaign promise. While the stimulus bill claims this new credit will terminate after two years, President Obama and the congressional leadership clearly intend it to be a permanent part of a new, much larger welfare state.
Hidden Welfare Spending
There are another six welfare expansions in the stimulus bill that will almost certainly become permanent if the bill is enacted. These include expansions to food stamps, the EITC, the refundable child credit, Medicaid eligibility standards, Pell grants, and Title I education grants. Added to the "Make Work Pay" refundable credit, the aggregate annual cost of these welfare expansions will be nearly $60 billion per year.
The claim that these welfare expansions in the stimulus bill will lapse after two years is a political gimmick designed to hide their true cost from the taxpayer. If these welfare expansions are made permanent--as history indicates they will--the welfare cost of the stimulus will rise another $523 billion over 10 years.[3] The total 10-year cost of welfare increases in the bill will not be $264 billion but $787 billion. The overall 10-year fiscal burden of the bill (added to the national debt) will not be $814 billion but $1.34 trillion.
The House stimulus bill overtly increases federal welfare spending by $264 billion. Most of this spending will occur in the first two years after passage. For example, if enacted, the House stimulus bill will spend an additional $88 billion in means-tested welfare aid in FY 2009, an increase of more than 20 percent above prior spending levels. Federal welfare spending (including small increases built into existing law) will rise from $491 billion in FY 2008 to $601 billion in FY 2009. This one-year spending explosion (by far the largest in U.S. history) will not be a byproduct of unemployment generated by the recession but the result of a deliberate expansion of welfare eligibility and benefits by President Obama and Congress.
Camel's Nose in the Tent
While $264 billion in new welfare spending may seem like a lot, it is only the tip of the iceberg. If the stimulus bill is enacted, the real long-term increase will be far higher. This is because the stimulus bill pretends that most of its welfare benefit increases will lapse after two years. In fact, both Congress and President Obama intend for most of these increases to become permanent.[1] The claim that Congress is temporarily increasing welfare spending for Keynesian purposes (to spark the economy by boosting consumer spending) is a red herring. The real goal is a permanent expansion of the welfare system.
The notion that Congress intends to temporarily increase Pell grants and EITC benefit levels for just two years and then allow benefits to fall back to their original status is out of touch with Washington reality. Any Congressman who, two years from now, suggests that the new welfare spending be allowed to lapse to pre-stimulus levels would be pilloried for slashing welfare.
"Spread the Wealth" Tax Credit
A major new welfare program in the stimulus bill is Obama's "Make Work Pay" refundable tax credit. This credit represents a fundamental shift in welfare policy. At a cost of around $23 billion per year, this credit will provide up to $500 in cash to low income adults who pay no income taxes. For the first time, the government will give significant cash to able-bodied adults without dependent children. Since most of these individuals have little apparent need for assistance, the new credit represents "spreading the wealth" for its own sake.
The lack of connection between this credit and "economic stimulus" is evident in the fact that the first payments under the program will not be made until April 2010.[2] This refundable credit is not included in the stimulus bill because of its "stimulus" effect. Instead, the inclusion of this new welfare program makes good on an Obama presidential campaign promise. While the stimulus bill claims this new credit will terminate after two years, President Obama and the congressional leadership clearly intend it to be a permanent part of a new, much larger welfare state.
Hidden Welfare Spending
There are another six welfare expansions in the stimulus bill that will almost certainly become permanent if the bill is enacted. These include expansions to food stamps, the EITC, the refundable child credit, Medicaid eligibility standards, Pell grants, and Title I education grants. Added to the "Make Work Pay" refundable credit, the aggregate annual cost of these welfare expansions will be nearly $60 billion per year.
The claim that these welfare expansions in the stimulus bill will lapse after two years is a political gimmick designed to hide their true cost from the taxpayer. If these welfare expansions are made permanent--as history indicates they will--the welfare cost of the stimulus will rise another $523 billion over 10 years.[3] The total 10-year cost of welfare increases in the bill will not be $264 billion but $787 billion. The overall 10-year fiscal burden of the bill (added to the national debt) will not be $814 billion but $1.34 trillion.
