Tags: obama | welfare | state

Economists: Stimulus Plan Signals New Welfare State

Monday, 02 Feb 2009 07:21 PM

By David A. Patten

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Economists and pundits are beginning to sound alarms that the U.S. economy is perilously close to a “tipping point,” where so many voters will be on the public payroll it will be politically impossible to rein in entitlement programs.

The trillion-plus Obama stimulus program, they warn, could push the economy over the brink.

Already, 40 percent of Americans don’t pay taxes. Obama’s stimulus gives non-taxpayers up to $1,600 – money they did not pay – in the form of a tax credit.

Putting millions more workers on the entitlement roles, either through universal health insurance or the expanded SCHIP health program, will further diminish support for future free-market reforms to make the U.S., economy more competitive, conservative economists warn.

Free-market economists point to failed welfare-state experiments in England, France, and Germany, and now openly say America could be headed down the same rocky road.

“The economic tides will not stand still while Washington experiments with European-type social democracy, even though the dollar's role as the global reserve currency will buy some time. Our trademark competitive advantage will be lost, and once lost, it will be hard to regain,” Carnegie-Mellon professor of economics Adam Lerrick warned in The Wall Street Journal.

And that Lerrick’s warning was written before the election and the whopping $1.2 trillion stimulus proposal.

Lerrick added ominously, “Tomorrow's children may come to question why their parents sold their birthright for a mess of ‘fairness’ -- whatever that will signify when jobs are scarce and American opportunity is no longer the envy of the world.”

Columnist and economist Thomas Sowell is voicing similar concerns, stating in a recent column: “This administration and Congress are now in a position to do what Franklin D. Roosevelt did during the Great Depression of the 1930s -- use a crisis of the times to create new institutions that will last for generations.

“To this day, we are still subsidizing millionaires in agriculture because farmers were having a tough time in the 1930s. We have the Federal National Mortgage Association (‘Fannie Mae’) taking reckless chances in the housing market that have blown up in our faces today, because FDR decided to create a new federal housing agency in 1938.

“Who knows what bright ideas this administration will turn into permanent institutions for our children and grandchildren to try to cope with?” he added.

Is the economy approaching a point where Americans will look to the nanny state for protection? Consider:

  • The stimulus plan is expected to expand the federal workforce by up to 600,000 employees. Many of those jobs would be located in northern Virginia, which could easily shove the Old Dominion out of GOP hands and into the blue column for the foreseeable future.

  • The stimulus would send hundreds of billions of dollars flowing into state coffers, swelling state workforces as well. While jobs are desperately needed, many economists say it’s important to maintain a balance between public and private sectors.

  • The Congressional Budget Office (CBO) estimates the recent expansion of SCHIP, which will now cover families earning up to $65,000 per year, will induce 2.4 million people to drop their private insurance coverage and hop on the government insurance roles.

  • The CBO also estimates that the stimulus money for Medicaid will bring 1.2 million more persons under the Medicaid umbrella this year.

  • Wall Street Journal columnist Kimberley A. Strassel reports Democratic “stealth care” will also pay 65 percent of COBRA premiums for seven million Americans. Democrats may move 10 million more Americans under the federal health umbrella -- in just four weeks!” she writes. “Good luck ever cutting off that money. Meanwhile, the Democratic majority is gearing up for a Medicare fight, where it may broach plans to lower the eligibility age to 55. Whatever costs accrue, they'll pay for by slashing the private Medicare Advantage option.”

  • After the stimulus deal -- which involves so many programs that House Minority whip Eric Cantor, R-Va., insists on calling it “a spending bill” rather than a stimulus package – Obama plans to introduce universal health care. Some believe it will grow to become one of the largest government programs in U.S. history.

    “Guiding all of this,” Strassel writes, “is the left's hope that by the time America wakes up to what's happening, it'll be too late. Democrats might be on to something.”

    Or as Sowell puts it: “All that money is just a gift to the Democrats to spend in whatever ways will advance the interests of their constituents and of the Democratic Party.”

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