Friday, February 6, 2009

Post No. 84: Despite Bad Economy, Welfare Rolls Not Growing (Huh?)

© 2009, the Institute for Applied Common Sense

We call ourselves the Institute for Applied “Common” Sense, and yet we often find ourselves trying to make sense of things.

We believe that instead of being distracted by the superficial symptoms associated with problems, we should “dig deeper” to identify the underlying causes.

Just last week, we discussed the state of the art of various alternative automotive technologies. We noted that the problem is not with the science or the technology, per se.

After all, one could theoretically assemble a group of engineers or scientists to achieve virtually any technological goals, although not necessarily with the desired speed or preferred ease. (More significantly, it’s a timing issue, or simply put, do we have it when we need it, or when we want it, or when we choose to think about it?) Or as the Logistician often notes in his presentations, "whether they were 'sufficiently motivated.'"

In discussing the auto industry, and the government’s involvement (both past and future), we tend to focus on the nature and structure of our governance (management) model in this country, and the limitations associated with it.

The model’s inherent limitations were one of the main reasons that we cautioned against the development a national health care system, at least as currently being discussed. Quite simply, we believe that America does not have a governance model, or mindset (at least not at the present time), to be able to competently run such a system for 300 million subscribers.

Fortunately, we are not alone in our views this time around. This past weekend, C-Span2 Book TV aired a discussion about government’s inability to respond to the needs of its citizens. The title of the program was, “The Next Government of the United States: Why Our Institutions Fail Us and How to Fix Them.”

That is also the name of the book written by Donald Kettl, a leadership and government professor at the University of Pennsylvania. Kettl argues that the government has emerged into “interlocking public-private-nonprofit systems that lack adequate governance, a clear government role, and any central control.”

Hmm, what a radical position.

What should be very clear by now is that we have been using our tax dollars, some three trillion of them in the last 12 months, to fix the wrong things. [Pop quiz: Do you know how many zeros are in a trillion?]

We may all still be sitting around the same Monopoly board, but we are no longer all playing by the same rules.

Wall Street has used at least twenty billion of our money as bonuses because they claim that they “need to keep the best people.” On Wall Street, people are still considered an asset, regardless of their performance.

On the other hand, General Motors and Chrysler are using a good part of the twenty billion they received to get rid of their people (people who, by the way, are building the best quality cars and trucks in automotive industry history), because they think they can find someone who will do the work cheaper.

Does anyone else see a cost versus price problem here?

Is this the new definition of value added?

Apparently, the sense is not “common.”

With tongue only slightly in cheek, Michael Lewis (the author of Liar’s Poker, The New, New Thing, and Moneyball, among others), wrote in the September 5, 2007 edition of Bloomberg News, as follows:

“So, right after the Bear Sterns funds blew up, I had a thought: this is what happens when you lend money to poor people. Don’t get me wrong; I have nothing personally against the poor. To my knowledge, I have nothing to do with the poor at all. It’s not personal when a guy cuts your grass; that’s a business. He does what you say; you pay him. But you don’t pay him in advance. That would be finance. And finance is the one thing you should never engage in with the poor. (By poor, I mean anyone who the SEC wouldn’t allow to invest in my hedge fund.)” [Italics added.]

The best and the brightest of our Business Schools have nothing but contempt for Jack Welsh and Steve Jobs. In their view, those poor fools build things, meaning they have to share their income with (and think about) workers, suppliers, and bankers. They are playing Monopoly by the old rules. [Ha, ha, ha.]

You see, to those less sophisticated ones of us, it now appears that the new rules are not about making things, but making money.

The idea apparently is to divert as much money as possible into Free Parking, land on it, and get on to the next game. For some, this must be the new definition of “business relationship."

There is no other way to make a constant 20% on your investments, and a resulting $20 million annual bonus.

If you want to borrow some of the money these new wave financiers (who have slaved and toiled so hard) have under their management, you have to get rid of as many of your workers as possible… to get your future margins up.

That you can’t build anything without workers is beside the point, Watson. They will package your loan and sell it to the Chinese before you exhaust your existing inventory.

The problem is that 18th century steam boat physics proved ultimately (although it was challenged at the time) that when all the passengers and crew run to one side of the boat, you’re “most likely” going to have difficulty “going forward,” as Wall Street likes to say.

And so it was with a great deal of interest that we noted an article entitled “Welfare Aid Isn’t Growing as Economy drops Off” in the February 2, 2009 edition of The New York Times.

BEFORE you read it, stop and consider the most logical explanations for why this might be occurring.

The mere fact that anyone would have to read that article to make sense of it strongly suggests that….

If you think that the welfare situation doesn’t make sense, whether “common” or not, try understanding the opposition by some to the “Buy American” provision in the stimulus bill currently being debated.

We’re not particularly well-versed in either micro or macro economic theory. However, whatever route we chose to reach this point, where it has become problematic for us to suggest that we buy our own goods, should be “revisited” so that we do not venture down that path again.

It obviously wasn’t a straight one.

It may make “economic sense,” at this point in time, to the intellectuals and those who stand to benefit. However, it just seems to us that it defies the “common sense” of the common citizen.

We guess that this is just one more thing that the “common man or woman” does not understand, the silly people that we are, along with derivatives and swaps.

We truly apologize for not understanding those vehicles. Simply color us "unimaginative." Apparently, a lot of our politicians and the politically sophisticated understand them, and we guess that is all that matters.

Imagine a parent being told, “Instead of choosing to focus on taking care of your kids, and buying lemonade from their stand, you should be cautious and continue to purchase the lemonade made by the kids of some distant relatives living abroad, because to do otherwise might come back to haunt you, and, oh by the way, it may actually be in YOUR best interests.”

We, the unsophisticated, suspect that macro economic principles applicable to the global economy are far more complicated than dealing with one’s little family. But try explaining that to the common man or woman whose taxes are paying for the corporate bailouts.

Simply put, addressing societal problems is evidently complex stuff, but even a homeless guy (or perhaps someone on that dreadful welfare) knows that a patchwork of band-aids, applied in haste in the ER, rarely stops the bleeding, although it might allow the attending to send you on your way.

When you get results from an initiative, which are diametrically opposed to what you expect the program to accomplish, you should consider returning to the drawing board.

Finally, to quote that bearded friend of ours from days long past:

“Horatio: He waxes desperate with imagination.

“Marcellus: Let’s follow. ‘Tis not fit for us to obey him.

“Horatio: Have after. To what issue will this come?

“Marcellus: Something is rotten in the state of Denmark.

“Horatio: Heaven will direct it.

“Marcellus: Nay, let’s follow him. [Exeunt.]”

© 2009, the Institute for Applied Common Sense

Editorial Note: This “whatever” was the product of collaboration between The Laughingman and The Logistician. Believe it or not, we originally thought that we were going to chat about welfare, but it evolved into this. For those of you failing to make “sense” of it –well, we guess that you just had to be there….


  1. I am going to posit a defense of the Wall Street bonuses. It's quite simple. The bonuses are based upon performance. Not future performance but past performance. Even in a tumbling market, securities change hands, maybe especially in a tumbling market. Each of these exchanges generates a fee. The performance of a broker is based on those fees. It is not based on the in house investments (which may have tanked), it is based upon something called "churn". This is what the bonuses are all about and not about the performance of stocks in the DOW, NASDAQ, et al.

    Now, having said that, it only makes sense that you not spread a lot of money around while going to Congress in rags with a tin cup in your hand. That part is stupid.

    I do believe in open markets. I do not believe in panic (in fact, I take to heart the advice of Douglas Adams in Hitchhiker's Guide to the Universe, "Don't Panic!"). I strongly oppose bailouts, I oppose "stimulus" bills which are simply huge spending packages, I favor something sometimes called Darwinian Economics.

    It will be tough, it will hurt many people. But sometimes painful things are the right things.

  2. Welfare. And welfare of millions. The subject to the heart of every humane leader. Making , keeping and refining is always there. This economic depressionary recession is different than before. Reason being deadly collapse of basic economic institutes and money & credit flow in the veins of world. It lead to vicious cycle of business impact, layoffs and lower spending. This brings common people to their knees. We the people of this mother planet Earth do realize that this will definitely change the future course of world economy, power play and peace efforts. Like bitter winter, like fire in forest, this recession will burn out all that which is bad or weak and will hibernate them who choose to wait for economic summer. Now our leaders may blanket common people (btw...I am one of them with humble voice) with their welfare so they can hibernate and survive this weather. It is also in everybody else best interest to focus on basics and look deep inside in ourselves to bring the best out in this period. We have to be savers, thinkers, educators and helpers. Welfare will arrive as time become ripe. The stimulus will boost the economy one way or other. But we humans need to think welfare ourselves.

  3. Log (and laughingman, if he'll join), I'd like to know what you think the purpose of government welfare is in today's world, if it accomplishes that purpose, and whether it should be limited in some way.

    I realize you pose questions, rather than offer opinions, but I would be interested in your views. Or anyone else's, for that matter.

  4. Corporations run on the legs of the working class, yet CEOs make exhorbitant amounts of money for their jobs, which is to keep their businesses in operation. If a business is failing, I see no reason for an executive to deserve any type of bonus (or severance). They were making enough money when they mucked up the works.
    When the ship is sinking, you don't pull out the deck chairs and take a dip in the pool. Not to mention the blood from the staff who died trying to save your ass is now on your hands and you will likely attract sharkes. So, as a CEO, if you are in dangerous waters, don't seek mercy from the working population.
    To the Logistician - how did you manage to maintain sobriety while writing this?!

    The insanity of those trying to "fix" our country's financial woes is enough to make one want a drink. Think I'll go get drunk now ...

  5. I wouldn't concern myself about the welfare rolls not growing at this time because as soon as the Stimulus Bill passes the rolls will indeed grow. And it is going to pass in the Senate where it topped out at $780 billion because two Republicans defected so the Dems and Obama got their 60 votes.

    On welfare: Johnson's Great Society is a failure. It was supposed to eliminate poverty and failed. A greater percentage of people are on welfare now than when it got it's initial "stimulus" began in 1965. And on top of that it was directly responsible for destroying the Black lower class family by decreeing that only women and children alone could qualify for government aid which forced the Black men out of their homes. As a consequence the Black male /husband/father was made superfluous leading to the state of the Black underclass today and the 70+% illegitimacy rate of Black births, the one parent family and ultimately the young girls following in their mother's path and the young men either dying in our streets or spending their lives in prison. All of this because the government decreed poor families consisting of a mother and a father were not eligible for help.

    And added to this is the fact that not enough aid is given to allow the women with children to get off welfare. The entire program needs to be reevaluated to give women all the aid they need to train for jobs while their children are cared for in state supported child care.

    Then after the mothers/women have gotten a job the state must continue the aid until the parent can support the family without aid. As it stands women can not afford to go to work because they lose everything. Medicaid taken away before they have health insurance on the job. Support for housing taken away and no help with child care so it simply is impossible for the woman/mother to work and survive.

    Now our great leaders are passing another "Stimulus Bill" that is so huge that our great grandchildren will be paying merely the interest on the debt (if that) and will never be able to pay the debt. The actual deficit our country is carrying right now is not the 10 trillion we are told but closer to 54 trillion! That is right now before we add the 2.5 trillion debt burden inflicted in just these 4 months. The United States will be a nation of paupers with 20 years if not sooner.

    I think I agree with iris: this is a good time to start drinking even at 6:05 am! BB

  6. We'd appreciate it if you folks would keep this one going on your own for a while. We'd be curious to hear more what you have to say about the "common sense" and "common man or woman" theme throughout the article. Shouldn't the policies of the government, and the decisions made by businesses make "sense" to the common citizen, or are they too "heady stuff?"

    Very quickly Douglas, the Logistician's 88 year old Father, who grew up during the Depression in a family of 10 kids in South Carolina, often reminds us that "welfare" was originally called "relief," and was designed to offer assistance to struggling families for a brief period of time until they could get back on their feet. We, quite frankly, do not know much about welfare except for the generally negative news reports disseminated periodically. That leads us to a question? Does anyone have a positive thing to say about welfare, or an uplifting, inspirational story to share? If not, does that suggest that we should jettison the program? Some would argue that welfare is like affirmative action in that it does not engender respect for its recipients. What say yee?

  7. I think, like your father, that welfare should be relief. And it should be temporary. But, like all bureaucratic enterprises, it perpetuates itself. I have known a few people who entered the maze that is welfare. They had hoped for a chance to get back on their feet; some job training, some assistance during that period. For two of them, it became semi-permanent. For one, welfare paid for her apartment, her phone, provided food. It became a way to live and did not offer a way out. For another, it became a way of life.

    Welfare tends to punish you for trying to get out. You get some training, you get medical care, you get child care (while in school or training), along with housing and food. So, after awhile, you feel ready to get on your feet and you find a job. The job won't pay very well because it will invariably be entry level. It may pay minimum wage or just slightly better. Welfare gets cut off. All of a sudden, your rent, your phone, your food, your child care, your medical care is now your responsibility and the money you make is not enough.

    Changes need to be made but relief needs to be available.

  8. Wait a minute, is this the same Douglas who regularly comments on our blog? Douglas: we suspect that someone has hacked into your computer and overtaken your identity. We'd advise you to acquire some security software.

  9. Same one, Log. I managed to avoid welfare. I know what it is like to be at the bottom. I don't have a problem with the "helping hand". I know few who do. Most of them really only have a problem with the image of welfare, not the concept.

  10. I am well acquainted with the welfare system due to years of working as a volunteer with agencies that deal with people who are on welfare. I have petitioned law makers for years to change the system. I have begged for help for people who have gotten a job and are trying to become independent, but after being cut off of the necessary help they need they find they are forced to go back on welfare. In many cases I finally resorted to twisting the truth and actually helping people to cheat the system in order to retain this needed help until such a time as they were on their feet.

    The entire system needs to be scrapped and a totally new approach taken. After all these years what works and what doesn't work is well documented so changing the system can be done easily. Our government however refuses to make the changes necessary because initially there will be more costs keeping people on the rolls after they are working. But in the long run these people will eventually get off the system and become tax payers.

    There are also civil rights laws that interfere with government making available more permanent forms of birth control which would go a long way towards helping women get off welfare. There are birth control implants available that last for 5 years but the state can not offer them. So, many finding it impossible to make ends meet with the small amount of help they get with welfare take in men to help with expenses. Yes, these women are forced into prostitution in order to care for their children! If they marry they will be cut off, and besides not many men are willing to take on a family. This situation often leads to another child and the woman going deeper into the pit of welfare.

    You want an inspirational story or two? There ain't any! Welfare has become a way of life for far too many people and has therefore gained a measure of respectability, or at least being on welfare is no longer regarded as shameful as was the case when it was called "relief". so this also accounts for many making a life on the system. If one lives in an area where all ones neighbors are on welfare then the stima is gone.

    The only thing we can do with the current system is what Clinton and Wisconsin did and that is throw people off of the rolls after a given amount of time. This is something like throwing a non-swimmer in the deep end of the pool and telling them to sink or swim. Some somehow made it to the upper end of the pool where they can get their footing. This is usually only possible with help from parents or other organizations. Others, far too many, simply sink to the lower rungs of society into criminal activity to survive, homelessness, etc.

    As for society at large: most people have no idea what welfare really is like or what is involved. That is why you hear people who have never needed help because they have had support systems in place to help them, making detrimental comments about "lazy welfare mothers". These people are usually from the lower middle class (my class) who have had to work for a living and are closer to those on the welfare rolls. In fact, many are only a step away from being in that position themselves but somehow don't realize this fact. This situation our country is now in will teach many people in this class a hard lesson I am afraid.

    As for the "lazy welfare mother" I grant you there are some of those, but there are far more who want a better life but are trapped. The teen girl who gets pregnant is trapped sometimes for life unless she is very very lucky and has a family able to help her. the teen girl already in the projects doesn't have this support system. One stupid mistake made with pressure from peers and hormones and at least two lives are ruined (mother and child).

    Sorry Reggie, but you hit a real sore spot with me on the subject of welfare. BB

  11. Folks, we're running a little behind on responding to your comments right now. However, we will get to them shortly. Additionally, we'll be out of the state away from our headquarters for several days, so we would appreciate you folks continuing the discussion without our facilitation. That was always the ultimate goal of this vehicle: To get people with opposing / conflicting views to engage in a civil exchange of ideas. Based on the number of times when we've seen someone give someone else credit for good points or persuasive arguments, we doing a fairly decent job.

  12. Welfare was indeed established to be "relief", a temporary help in time of need just like Public Housing was when it was developed in 1948. Unfortunately it became a haven for Welfare families, no longer the temporary housing for those returning from WW2, just getting jobs and finding that housing was in shortage. Once in Public Housing it became a comfortable , cheap place to live and required absolutely no upkeep on the part of the resident other than sweeping the floor occasionally before the housing folks came by to check out the premises. Today, 60 years later it is nothing more than a haven for Welfare families. As a student I did a year of internship in Public Housing while working on my masters degree. I saw third and fourth generation families living well in public housing for rents as little as $20 dollars upward to the max at the time of $325.00. The Feds came along with a 203B(I believe that was the number but it's been a while so forgive me if I am wrong)which was a subsidized mortgage plan for those who were paying the maximum rents in PH where they could move into a brand new free standing house which would be theirs in 30 years or theirs to sell or do what ever they wished after 5 years of residency in the house. When the program was offered to these individuals they refused for the most part for they could see no reason to move to a house where they were responsible for upkeep and maintenance and insurance when they could live in PH and have all that paid for. If something broke, they called maintenance and demanded it be fixed immediately and if it was not fixed they were on the line to the local "community organizers" office screaming discrimination or 'these folks don't care cause I am poor'.
    These individuals could not be removed from PH and made to move into the 203b housing. In other words there was no teeth to the plan and it eventually failed as did 99% of the War on Poverty and Great Society programs. Living well on the government dollar had become a lifestyle and not one that these individuals were willing to give up. By lacking any type of consequences for not accepting the housing program it only enabled that lifestyle to continue. The same is true with Welfare, it is, within itself , a self defeating program for it lacks no plan or consequences for those who only continue to take advantage of living on the taxpayer dollar. I believe I remember Bill Clinton attempting to put some teeth into a Welfare Plan only to have it derailed by the members of his own party. Those in his party understood that as long as they could keep folks in bondage they had their loyalty and their vote.
    It won't change until some real teeth are put into the programs and time limits set with consequences for those who fail to complete what is necessary to break the chains of bondage. Clinton's Workfare worked, one of the few programs that has actually worked, not perfectly but it worked. Unfortunately those in his party did as BB said, cut the stings too short too soon to insure that these folks could survive as productive citizens and not slaves to the system.
    I could go on forever on this subject based on just what I have seen but few listen and there is no need to preach to the choir.

  13. Here's a question for you. How many people do you personally know who have been beneficiaries of any of the bailout money allocated thus far?

  14. Douglas: You mentioned that you favor open markets and prefer that Darwinian Economics be allowed to function. You further note that it will be tough, and that it will hurt many people. Isn't that the way we have always done things in the US? Some are really fortunate, others less so, and some not so. It's the nature of our economic model. Not everyone can make the playoffs, and if we, as a society, desired that they do so, we would have changed the system by now. And we haven't. Obviously our concern about the casualties is simply not significant enough to change the system.

  15. Hidden Gems: Thanks much for chiming in. The point which we were trying to make is that during bad economic times, one would expect the claims for welfare to increase, and they have not been. However, your comment made us think of this welfare issue somewhat differently. Perhaps after more people sink into economic distress, they will be able to relate to people who have been suffering economically for a longer period of time. We like you hope that this period will bring out the best in the people of our nation.

  16. Thanks Iris for your comment. You mentioned that "corporations run on the legs of the working class, yet CEOs make exorbitant amounts of money...." Some years ago, there was an analysis of how much each employee would receive if they divided the income of the CEOs of some major corporations, evenly amongst the workers. Our recollection is that it was not as much as what people would suspect. Perhaps it is more of a symbolic inequity. The CEOs are clearly lightning rods for criticism.

    There is another angle to this analysis. Several of us here at the Institute have been employers. It is not unusual for an owner/employer to work 80, 90, or even 100 hours a week. The employees go home after a certain point, and do not have to worry about ensuring that payroll is made the following week. There were many times that we did not pay ourselves as owner/shareholders.

    We have a tendency to think of corporations as the major employment force in this country; however, for some time, small businesses have been the major employer.

    Arguably if an executive can not keep his or her pay if the company does not fare well, a similar argument could be advanced against the workers. Would you be willing to support a reduction in the employee's salary, or a reimbursement of some kind, if the employee was part of a force which generated a poor quality product, or provided poor service?

  17. Thanks Brenda for your recent visit.You made reference to Johnson's Great Society program as being a failure. It should be kept in mind that the program also occurred when we were paying for Vietnam. However, on another level, we have always argued that it is very difficult to determine what works and what does not work, except on a local basis. There are too many factors contributing to any condition SIMULTANEOUSLY to be able to clearly assess what works and what does not work. Additionally, if society really could establish a cause and effect relationship, with any degree of certainty, between certain policies and their results, we would have figured it out by now, and would have taken the appropriate steps.

    Your recounting of the complexities of the welfare system were appreciated. We do believe, like you, that we may never be able to pay the debt on this purported stimulus package; however, as someone said recently, the government may be the spender of last resort when people do not have the confidence to spend their money, even if tax reductions are enacted.

  18. Douglas: You and Brenda both described the welfare system in a manner which helps us appreciate some of its complexity and why some recipients find it difficult to escape its grip. Hmmm, "Welfare tends to punish you for trying to get out." We had to think about that one for quite some time, since it is what also happens in some other situations in life. When thinking about what it had in common with those other situations, we realized this common thread. It is a system that does not respect the people that it serves. Inherent in its administration is the subjective notion that the people in the system really are not worthy.

    When you think that people can not get out, are not sufficiently motivated to get out, or do not deserve to get out, they will not get out. Lots of things in life are like that.

    Douglas, you're a fan of Economic Darwinism, so you say. Let's say that we had $100 million allocated to welfare and under the current system, you had all similarly situated recipients receiving the same amount of money and assistance. What if we had the same pool of money, and we informed the recipients that hereafter, the funds would be divided according to effort and energy put into trying to get out of the system, and that those getting better jobs, attending school, or complying with other goals, would get more than those who didn't. Furthermore, what if the limited pool of funds meant that the poorer performing recipients, including their children, would not receive anything, would that work as a system?

  19. Brenda: You are a woman after our own hearts! We are in agreement with you that "the entire welfare system needs to be scrapped and a totally new approach taken." We've always felt that bad only gets worse as time moves on, and the size of the population increases, plain and simple. Survival is survival, and it may not always take the form which many people recognize as appropriate, but once someone travels to developing countries around the globe, you will quickly realize that "it ain't always about us and our way of doing things."

  20. After making all these comments on the welfare system I read a TownHall article by Star Parker "Back on Uncle Sam's Plantation" on the system. Ms. Parker is a Black woman who knows the system from the inside and now out. Interesting.

    Having traveled I can tell you that citizens of many countries, even some European countries, live at the level of our welfare recipients. We in the United States have no idea what the word "poverty" really means. BB

  21. Out of curiosity, if, let's say 5 years from now, the economy was still declining, and you had lost your job, would you apply for welfare? Additionally, if you get laid off from your current position anytime soon, would you immediately apply for unemployment benefits?

  22. Here's a question for you. How many people do you personally know who have been beneficiaries of any of the bailout money allocated thus far?

  23. Same one, Log. I managed to avoid welfare. I know what it is like to be at the bottom. I don't have a problem with the "helping hand". I know few who do. Most of them really only have a problem with the image of welfare, not the concept.

  24. Corporations run on the legs of the working class, yet CEOs make exhorbitant amounts of money for their jobs, which is to keep their businesses in operation. If a business is failing, I see no reason for an executive to deserve any type of bonus (or severance). They were making enough money when they mucked up the works.
    When the ship is sinking, you don't pull out the deck chairs and take a dip in the pool. Not to mention the blood from the staff who died trying to save your ass is now on your hands and you will likely attract sharkes. So, as a CEO, if you are in dangerous waters, don't seek mercy from the working population.
    To the Logistician - how did you manage to maintain sobriety while writing this?!

    The insanity of those trying to "fix" our country's financial woes is enough to make one want a drink. Think I'll go get drunk now ...


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