I disagree with what is apparently the thesis of a book reviewed at City Journal, that food stamps, unemployment benefits, and other federal, state, and local support programs have resulted in less economic activity than might otherwise have been the case:
But as University of Chicago professor Casey Mulligan’s shocking book, The Redistribution Recession, makes clear, going on food stamps is hardly unusual any more. With their loosened eligibility requirements and expanded benefits, food stamps and a host of other federal and state programs are undermining traditional incentive structures—and keeping the nation’s unemployment rate stubbornly high. A preeminent labor-market economist, Mulligan presents extensive research into these labor-market “distortions”—the way that policy interposes itself between prospective employers and employees—since 2008. Ordinarily, such heavily quantitative research is the province of economics journals. In this case, the findings deserve a broader audience.
That’s not to say that I don’t think that policy is producing distortions that reduce economic policy. We’re redistributing from young to old in the form of Social Security benefits and Medicare, from just about every other sector to the healthcare sector via Medicare, Medicaid, and other healthcare subsidies, from every other sector to the defense sector through defense spending, and from savers to borrowers (not to mention the banking industry) through the measures adopted during the financial crisis that sparked off the Great Recession. That’s just a few of the ways in which we’re redistributing and IMO their sheer volume dwarfs any economic distortions produced by food stamps.
Indeed, I see the history of our economy over the last several decades very, very differently from what’s being implied in the post. I think that what we’ve seen is that sectors that are subsidized or protected survive while sectors that aren’t similarly favored decline or stall. I don’t think that unemployment insurance is causing the percentage of people employed to shrink—just look at the large number of long-term unemployed, mostly ineligible for unemployment insurance payments at this point (although some of those have now gone on to Social Security Disability). I think that a slack job market is mostly the cause rather than the effect and that we’ve got a buyer’s market in employment due to trade, monetary, immigration, and social policy decisions that have been made over the period of the last forty years.
Those are some headwinds.