Unemployment Welfare Benefits in Obama Economic Stimulus Bill

1. Unemployment Welfare Benefits in Obama Economic Stimulus Bill By: Jessica Buchser and Kristen Kelly

2. Policy Proposals • Both bills will reinstate AFDC-style welfare funding. The federal government will give $4 billion worth of bonuses to states that increase their number of welfare caseloads, thereby encouraging states to have a higher unemployment rate. • The federal government will pay 80% of the cost for each new family enrolling in welfare. • The bill provides a 65% subsidy to help cover the cost of COBRA for up to 9 months. • Weekly unemployment benefits will increase by $25. • Recipients receiving welfare benefits in 2009 are excluded from taxation on the first $2,400 they receive. • The bill extends unemployment benefits an additional 33 weeks for welfare recipients who have exhausted their regular benefits. • In the $816 billion House bill, $264 billion is means-tested welfare spending to provide money, food, housing and healthcare to unemployed and low-income citizens. The figures in the senate bill are 15% lower than the House bill.

3. Immediate Problems • The House and Senate stimulus bills will overturn any previous welfare reform in the U.S. since the abolishment of AFDC and the installment of TANF in 1996. • States will change their laws to lower welfare eligibility standards in order to gain more caseloads. • Welfare dependency, declining since the abolishment of AFDC, will begin to increase dramatically for the first time since 1996, as able-bodied individuals once ineligible for welfare, begin to freeload on increased benefits rather than choose to work and pay taxes. • Obama’s unemployment policy avoids simply increasing funding for the existing $2 billion TANF contingency fund, and instead will overturn fiscal and policy foundations of welfare reform. • The funds given to states will exhaust federal money and will cause employers to pay higher payroll taxes.

4. Increase in unemployment rate since 2008

5. Hidden Spending • Both the House and senate bills contain over half a dozen new welfare entitlements and expansions of benefits in existing programs. • Seven of these expansions will become permanent, including expansions to: • History shows that once an expansion is put in place to a benefit or program, it becomes almost impossible to take away once it is unneeded, due to lobbying by interest groups and the reluctance of politicians to spark anger and opposition in potential voters.

6. Welfare Spendathon • In the first year after the bill’s enactment, federal welfare spending is expected to explode by more than 20%. • Spending will rise from $491 billion in FY 2008 to $601 billion in FY 2009. • This will be the biggest explosion in welfare spending in U.S. history. • Spending will continue to rise over time.

7. 10-year Effects of Hidden Spending • If the welfare expansions are indeed made permanent, the welfare cost of the stimulus will gain another $523 billion. • When counted, the complete 10-year cost of the hidden spending in both bills will be $787 billion, instead of $264 billion. • The spending will allocate an average of $22,500 for every welfare recipient. • The cost of this spending, however, will be around $10,000 for every income tax paying family. • The total fiscal burden of the stimulus when added to the national debt, will be $1.34 trillion. • The number of people dependent on welfare in the next ten years will be very large.

8. Labor Spending in Comparison to Entire Stimulus Package

9. Political restrictions • Texas Governor Rick Perry, joined with several Southern Republican leaders, has announced that he will refuse to accept the $556 million for unemployment benefits granted to Texas by the stimulus package. • His reasons for rejecting the money are that: 1) Federal provisions will require unnecessary changes in state law. 2) The funds will place heavy burdens on businesses, whom he says will have to pay the costs of the funds when federal money runs out. 3) Businesses should be given money to create jobs, rather than toss it away in unemployment benefits. • Democrats such as Ed Rendell, the Pa governor and chairman of the National Governors Association, believe that Perry’s rejection of the stimulus money is irresponsible. Rendell claims that the stimulus does not require state coverage to be permanent, and that lawmakers can “roll back the expansion in two years”… • Other governors, including Mark Sanford of South Carolina and Bobby Jindal of Louisiana, argue that the unemployment funding in the stimulus wastes taxpayer money. • But some republican governors, such as Arnold Schwarzenegger, say they will happily take the money that southern republicans reject. • Congressman Mike Conaway voted against the bill and openly opposes the wasteful spending.

10. Interest Groups and Businesses • Labor groups have been lobbying for expanded unemployment benefits. • Some interest groups and businesses, such as the UWC-Strategic Services on Unemployment and Worker’s Compensation, oppose the funds given to states because they are afraid of the effects the funds will have on tax rates and state budgets. • Many businesses fear that they will suffer the cost of paying for the funding once federal reserves are exhausted. • But many interest groups support the expanded benefits because interest groups usually develop around new and expanded programs, and lobby to keep these programs permanent.

11. Institutional Think tanks • Researchers from the Domestic Policy Studies Department and the DeVos Center for Religion and Civil Society at the Heritage Foundation argue that Obama’s stimulus bills are: “Trojan horses that deliberately exploit anxiety about the current recession to conceal their destruction of the current welfare reform…” • Both researchers believe that the stimulus money is unnecessary and that the nation would benefit more if money was simply increased to the previous TANF contingency fund and funneled out only to states with immediate unemployment problems.

12. Conclusion • The current economic recession certainly opened a policy window to Obama’s welfare proposals in the Economic Stimulus Package. • The massive stimulus bill, which Obama calls the “largest public works program in history”, made it much easier for the unemployment pork barrel spending to sneak by in the over 1070 page bill. • Much of the public, in its fear of recession, wants the economic crisis to be solved immediately and in any way possible, without giving much thought to the long term costs of the stimulus bill’s “benefits”.