Hope’s expiration

In confirming that he will let the Bush tax cuts expire, President Obama is discarding proven economic medicine. He is also bringing the discredited welfare state back to life, bigger than ever, says Investor's Business Daily (IBD).

Heritage Foundation senior domestic policy analyst Robert Rector recently noted that the stimulus will overturn the fiscal foundation of welfare reform and for the first time since 1996, the federal government would begin paying states bonuses to increase their welfare caseloads.

Rector added that the new welfare system Obama would establish is actually worse than the old AFDC (Aid to Families with Dependent Children) programme because it rewards the states more heavily to increase their caseloads:

Under the stimulus bills, the federal government will pay 80 per cent of cost for each new family that a state enrols in welfare.

The original goal of helping families move to employment and self-sufficiency and off long-term dependence on government assistance has instead been replaced with the perverse incentive of adding more families to the welfare rolls.

Uncle Sam would actually pay the states many billions of dollars to increase their welfare caseloads. Rector sees welfare spending increases nearing $800 billion over a decade, with more than $1.3 trillion added to the national debt by the stimulus.

Yet amidst all this, the president promises to cut the budget deficit in half by the end of his first term – a promise Harvard economist Jeffrey Miron, appearing on CNN, disparaged as "wildly optimistic," especially since the massive, ever-expanding Social Security and Medicare entitlement programmes are left unaddressed.

Source: Editorial, Hope's Expiration, Investor's Business Daily, February 24, 2009.

For text: http://www.ibdeditorials.com/IBDArticles.aspx?id=320285002503138

For Rector study: http://www.heritage.org/Research/Welfare/wm2287.cfm

For more on Welfare Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=44

FMF Policy Bulletin/ 03 March 2009