The Negative Effects of Welfare Spending in America - Assignment Example

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. As of the report for fiscal year 2011, the total funds spent for the “federal welfare programs amounted to roughly $ 1.03 trillion. . . This excludes entitlement programs to which people contribute (e.g. Social Security and Medicare)”, according to Sessions, J. (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 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. 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. 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. Chart 2 (Source: Chantrill, Christopher. Charts and Graphs: Welfare Including Healthcare Spending Chart. Viewed January 7, 2013 @ http://www.usgovernmentspending.com/spending_chart_1902_2015USp_13s1li011lcn_40t17t13t_Welfare_Including_Healthcare ) Chart 3 (Source: Chantrill, Christopher. Charts and Graphs: Welfare Including Healthcare Spending Chart. Viewed January 7, 2013 @ http://www.usgovernmentspending.com/spending_chart_1902_2015USb_13s1li011lcn_40t17t13t_Welfare_Including_Healthcare ) And so while it is true that a growing welfare spending lowered the poverty level in the USA from 1993 to 2000, apparently as a result of private enterprises which delivered the welfare services and generated immediate employment for the purpose of doing so, in the long term, statistics reveal the negative impact of rising poverty level after the private enterprises were already in place for welfare services to be given to the public. Increasing welfare expenditures no longer stopped the growth in poverty level starting year 2000. And the other negative impact wherein the rich got richer while the middle class earned less worsened the economic plight of American society in spite of all the increases in welfare spending for the needy. An extract of the absolute dollar figures worth of welfare spending is shown in Table 1 – Welfare Spending Data in Billions of Dollars 1990 – 2015. Table1 -Welfare Spending Data in Billions of Dollars 1990 – 2015. Corresponding to the same years discussed, 1990 to the present, an inspection of the unemployment rates over the years showed the pattern of decline in unemployment rate from 1993 to 2000, followed by a cycle of rising average unemployment rate per month from 2000 to the present. See Chart 4 – Statistics of Unemployment Rates, 1990 - 2012. The details of absolute figures in terms of unemployment rate are shown in Table 2 – Data of Unemployment Rates, 1990 - 2012. It should be reiterated that welfare spending did not stop growing (on the average). Yet the unemployment rate grew. Although the fault may not be fully attributed to the idea of perpetually increasing the welfare spending, it can be logically stated that increasing the welfare spending does not necessarily alleviate high poverty rate and does not assure American society of lower unemployment rate in the long run. (Source: Bureau of Labor and Statistics. Viewed January 7, 2013 @ http://data.bls.gov/pdq/SurveyOutputServlet ) Chart 4 – Statistics of Unemployment Rates, 1990 to 2012 (Source: Bureau of Labor and Statistics. Viewed January 7, 2013 @ http://data.bls.gov/pdq/SurveyOutputServlet ) Table 2 – Data of Unemployment Rates, 1990 – 2012 Providing for the needs of less privileged is good only up to a certain extent. It will provide for immediate relief in times when people cannot find income earning jobs. But to say that spending for growing need for welfare (simply because the people cannot find sources of income) will be a solution to facilitate economic growth and rise in the employment opportunities is a fallacy. The US Small Business Administration boasts of 49% increase in small businesses since 1982, adding 8 million new jobs, while big businesses cut down employment by 4 million since 1990 (US SBA, 2013). This is nothing to be happy about. Population used to be only 226,646,000 in 1980 (US Census Bureau, 2012 p.11). Today, US population is somewhere in the vicinity of 315,000,000 or an increase of more than 88 million. Can you imagine what people at the US Small Business Association meant by an increase in job opportunities of only 8 million since 1982? What about the 80,000,000 additional US population? What will be their jobs? If government keeps increasing welfare spending at the expense of job opportunities, more and more people will depend on welfare spending. There will be definite growth in unemployment rates precisely because the funds don’t go for creation of new businesses and new jobs. The providers of welfare services already exist. They can only add to their income by serving more dependents, but not add more employment. And people cannot be blamed for being jobless and for becoming more dependent. They were “packaged” to be jobless by the mere act of not creating employment opportunities, and by providing just the option of depending on welfare benefits in order to survive. Or at least it appears that US government has been focusing on “dole-outs” in the form of welfare benefits, while there has been no concrete and clear set of actions to ensure the employment of millions who are unemployed. But don’t you worry, says Uncle Sam. There’s more welfare spending on the way. Works Cited Brady, David. Rich Democracies, Poor People: How Politics Explain Poverty. UK: Oxford University Press, August 13, 2009. Lowry, Robert C. The Effects of Public Welfare Spending and Federal Welfare Reform on Private Social Services Employment in American States. Iowa State University, March 2, 2005. Viewed January 7, 2012 @ http://courses.gov.harvard.edu/gov3009/spring05/lowry.pdf Sessions, Jeff. CRS Report: Welfare Spending The Largest Item in the Federal Budget. United States Senate Budget Committee, 2011. Viewed January 6, 2013 @ http://budget.senate.gov/republican/public/index.cfm/files/serve/?File_id=34919307-6286-47ab-b114-2fd5bcedfeb5 US Census Bureau1. Income, Poverty and Health Insurance Coverage in the United States: 2011. US Department of Commerce US Census Newsroom, September 12, 2012. CB12-172. Viewed January 7, 2013 @ http://www.census.gov/newsroom/releases/archives/income_wealth/cb12-172.html US Census Bureau2. Statistical Abstract of the United States: Section 1. Population. Viewed January 7, 2013 @ http://www.census.gov/prod/2011pubs/12statab/pop.pdf US SBA. Small Business Trends. US Small Business Administration, 2013. Viewed January 7, 2013 @ http://www.sba.gov/content/small-business-trends . Weiss, Karen. Record U.S. Poverty Rate Holds As Inequality Grows. Boomberg Businessweek: Global Economics, September 12, 2012. Viewed January 7, 2013 @ http://www.businessweek.com/articles/2012-09-12/record-u-dot-s-dot-poverty-rate-holds-as-inequality-grows Read More