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GOP should rethink ideas on moocher class

By: Bloomberg View

Posted: 08/27/2012 1:16 PM | Comments: 0

Delegates start to gather on the opening day of the Republican National Convention Monday at the Tampa Bay Times Forum in Florida. (LIONEL HAHN / TRIBUNE MEDIA )

As Republicans gather this week in Tampa, Fla., to nominate Mitt Romney for president, they will try to tilt the national mood-o-metre toward limited government, individual liberties and free markets.

These are the estimable principles that have animated Republicans for generations. It’s the tea party with the rough edges sanded down. Or is it?

As we listen to Republican candidates and voters across the country, we hear something less admirable: carping about people who are on government support. Some speak disparagingly of them as the "moocher class" for paying no federal income taxes while getting food stamps, government health care and unemployment checks.

President Barack Obama, the plaint goes, has gutted the 1996 welfare-reform law’s work requirements. Television ads for Romney and stump speeches by his running mate, Rep. Paul Ryan, promote the Obama-ruined-welfare-reform idea daily. Radio talk-show hosts and conservative bloggers refer to Obama’s call for higher taxes on the rich as a war on the productive class. Smart executives accuse Obama of being a closet socialist, siphoning off their money to give to the slackers.

To all of the above, the moocher class — this election year’s agitprop — is the country’s biggest problem. It’s not. By claiming that it is, Republicans do a disservice to the party and to the national debate.

The United States in fiscal 2012 will spend about $210 billion on food stamps, unemployment insurance and welfare. Add in Medicaid and the tab swells to about $485 billion. Still, it’s small beer compared with the $1.3 trillion the U.S. will spend on Social Security and Medicare alone. Include $700 billion for defense, and the moocher class’s bounty looks even smaller.

And that doesn’t account for the ample government benefits — farm subsidies, oil and gas allowances, and other corporate welfare — many moocher-class critics get, or the tax breaks for mortgage interest, employer-provided health insurance and charitable contributions.

The moocher-class mythologists forget the U.S. just went through its worst recession in 75 years, and that unemployment has exceeded 8 per cent for almost four years. The U.S. is on the verge of having a permanent jobless class made up largely of middle-age workers whose occupations have been destroyed because of automation and globalization.

The moocher fabulists also ignore data showing that U.S. incomes have stagnated for a decade, and that inequality has skyrocketed. The top-earning one per cent of households now bring home about 20 per cent of total income, versus about 10 per cent in 1970. Recent studies conclude that upward mobility is easier in Europe than in the U.S. So much for Republican nightmares about the U.S. becoming a European-style welfare state.

The Pew Research Center reported last week that the U.S. middle class just experienced a lost decade, shrinking for the first time since the Second World War. Its median household income fell 4.8 per cent to $69,487 in 2010 from an inflation-adjusted $72,956 in 2001. Median wealth (including retirement savings and home values, minus debt) tumbled an even greater 28 per cent, to $93,150 from $129,582, largely because of the housing crash.

Another party shibboleth is that Obama’s stimulus spending shifted wealth from "makers to takers." It’s more accurate to say that the stimulus — by most economists’ reckoning, required medicine — was a giant earmarking exercise that sent tax dollars back to the districts of lawmakers in both parties. Without it, an economy that shrank 6.3 per cent in 2008 would have fallen into an abyss.

At any rate, increased federal spending under Obama isn’t the major cause of the deficit. Nor are the Bush-era tax cuts and the Iraq and Afghanistan wars, as Democrats believe. As a Bloomberg Government study shows, the rise in the deficit — from an average of 1.9 per cent of gross domestic product in the pre-crisis years (2005 to 2007) to 9.3 per cent of GDP post- crisis (2009-2011) — is almost entirely due to the economic decline, which drove down tax receipts and pushed up spending on unemployment, food stamps and other support programs.

Lastly, it’s incorrect to say Obama undermined welfare reform. Temporary Aid to Needy Families, as it’s formally known, is a $16.5-billion block grant to the states, only 40 per cent of which goes toward benefits. In July, Obama invited states to apply for waivers that would give them greater flexibility to design programs that promote employment, while relieving them from some paperwork requirements. If granted, states would still have to move adults into jobs within two years and cap lifetime benefits (usually five years). Anyway, don’t Republicans normally applaud block grants that come with fewer federal strings?

Instead of worrying about the rise of a moocher class, Republicans would be better off thinking up ways to improve the standard of living for the next generation, and making sure the benefits of economic growth are more widely shared. That means vastly improving education and transportation, on which the private sector depends. It involves figuring out how to control health-care costs and means-testing Social Security and Medicare so the wealthy receive less and pay more. It means reconfiguring our system of national defense.

It also means a change in mindset. The party can’t cling to the one solution — tax cuts — that has been its cure-all for decades. Yes, we all love tax cuts, but they benefit mostly the rich. Besides, federal income taxes are at the lowest level since the 1950s.

At a time when the U.S. can borrow for 10 years at about 1.6 per cent, and when 12.8 million people are unemployed (and eight million more part-timers would prefer full-time work), we would be out of our minds not to borrow and spend to fix problems and give the economy a kick in the pants. A serious, long-term austerity diet can follow later.

At this moment in U.S. history, leadership doesn’t require shrinking government immediately, but seeing that Big Government doesn’t remain permanent. The moochers — and some of them may be waving Romney-Ryan signs in the convention hall — would love to work with the party on that.

— Bloomberg News

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