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The Negative Impact of Increasing Welfare Spending Welfare spending in the USA has been realizing negative effects on the economic standing of American society as a whole, more specifically in terms of long term growth in poverty rates and high levels of unemployment…
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Download file to see previous pages (2011, p.1). SS expenditures in 2011 was $725 billion while for Medicare, it amounted to $ 480 billion. The analytical findings of Brady, D.( 2009, p.81) stated that “As countries devote a larger share of their economy to welfare, poverty declines steeply.” This happened to Scandinavia, Finland, and Sweden, and European continental countries like Netherlands and Belgium. USA was identified to have high poverty and low welfare expenses. He also made clear that poverty is not necessarily increased by higher welfare generosity.(p.84) and further says that it benefits all rather than just “the elderly or men” (p.87). The 5 features of welfare state were historically proven to reduce poverty through greater generosity with (1) social welfare expenditures, (2)expenditures for public health, (3) social security, (4)government expenditures, and (5) “decommodification” (p.91). Brady, D. (p.92) also contends that public employment is less effective than welfare state generosity as a strategy to combat poverty regardless of the regime. The basis of his findings was a poverty headcount in different countries over 20 years from 1974 to the year 2000, and the different welfare state levels of generosity of European and American countries. In another study by Lowry, R.C. (2005, p. 2), the empirical evidence gathered from 1990 to 2000 arrived at the conclusion that in the USA, “public welfare spending by state and local government has a positive effect on private sector employment”. It was because private firms are part of those who deliver the welfare services made possible by government funding. “More public welfare spending is associated with higher private sector employment. . (p.3).” However, statistics have changed from 2000 to 2011. See Chart 1 – Poverty Rate in the USA from 1990 to 2011. And the 2012 poverty rate in USA has continued to prove the negative long term impact of rising welfare spending. Chart 1 While it is true that poverty level expressed in percentage of population declined from 1993 to 2000 in the USA, it showed a general rise from 2000 to 2011. As of September 2012, the USA poverty level was at 15% according to the Census Bureau (Weise, K. 2012). This refers to 46.2 million people living in poverty within the USA alone. In the same US Census Bureau report cited by Bloomberg, the other negative impact included a 1.7 % decline in the “median real household income” and a rise in the income inequality by 1.6%. That is, the rich became richer while the middle class earned less. (US Census Bureau1 2012) Statistics showed that from the comparable years 2000 to 2012, the total welfare spending inclusive of medical services was generally increasing. Chart 2 – Welfare Including Healthcare tells this story in the Appendix section of this paper. The increases were expressed in terms of percentage of GDP which happens to be increasing every year. In absolute figures, welfare spending definitely increased annually. Appendix section’s Chart 3 shows data in terms of increasing $ billions worth of welfare spending. Yet poverty level increased in the same period. This proves a negative long term effect of encouraging people in America to become dependent on welfare spending until more and more get into the habit of not working or not striving to be productive and self-reliant via entrepreneurship with small businesses. And so while it is true that a growing welfare spending lowered the poverty level in the USA from 19 ...Download file to see next pagesRead More
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