December 19, 2007

Cali’s Budget Crunch Commentators Avoid Looking at the Welfare Rolls

Filed under: Economy,MSM Biz/Other Ignorance,Taxes & Government — Tom @ 7:34 am

Barely four years after California’s historic recall of sitting Governor Gray Davis and Arnold Schwarzenegger’s landslide election to replace him, the Golden State is, again, in a budget crunch of its own making.

Oh, it’s not as bad as the Gray days — yet. The $35 billion budget deficit Davis papered over long enough to win reelection in 2002 over Bill Simon, with the help of the state’s ignorant and non-inquisitive news media, is 2-1/2 times higher than the $14 billion gap the state is facing over the next 18 months.

The state’s Old Media, as would be expected, is moaning about cuts that might have to be made, obsessing over the possibility that “universal health care” might be derailed, and of course giving visibility to anyone and everyone who thinks even more taxes will solve the problem.

As has been the case for well over a decade, nobody that I know of in California’s Old Media is considering the idea that the state is paying the price for failing to sufficiently go along with the rest of the country in aggressively reducing welfare rolls. But the numbers support the idea that if the state had done what the rest of the country has “somehow” done without visible suffering, it would be in a much better situation.

Welfare reform was passed in 1996, and became effective in 1997. During the first six years of reform, welfare rolls came down in California at pretty close to the same rate as the rest of the nation. By the end of 2002, the number of families on TANF, or Temporary Assistance for Needy Family Families (the new name for the deservedly stigmatized AFDC, Aid for Families with Dependent Children) was down 47% in the Golden State, compared to 52% for the rest of the country, and total caseload was down 55%, compared to 57% for the rest of the US.

But those percentage declines mask a huge problem: The state’s welfare rolls have for decades been twice as high, as a percentage of the population, as the rest of the country.

Despite having so much room for improvement, on Schwarzenegger’s watch, welfare rolls in California have gone up (you read that right), while the rest of the country has continued to enjoy significant declines.

Here are the raw numbers on recipients and families on welfare in California and the rest of the country since 2002:

CaliRawWelfareNumbers1207

The welfare situation in California is so bad that, rather than spend 4,000 words on it, I’ll provide four pictures (graphs) worth 1,000 each (:–>):

CaliWelfareGraphs1207

(Source Data: Office of Family Assistance Caseload Data by year; Census Bureau data for population estimates. Most data is available as web pages; the rest is in Excel-downloadable format.)

Taking the graphs one at a time:

  • Though the percentage of the population on welfare in the Golden State has fallen from an unfathomable 7.7% at the time Welfare Reform was passed to about 2.9% in at the end of 2006, that percentage is still more than double that of the rest of the US.
  • In fact, while welfare caseloads in the rest of the US have dropped almost 30% in the past 4-1/2 years, California’s caseload has gone up about 4%.
  • As a result, though it has only about 12% of the total US population, California’s share of the total US welfare caseload has risen from 22% in 2002 to almost 30% today. The rest of the country is paying a heavy price for the state’s failure to trim its welfare rolls.
  • Part of the reason for the caseload increase is that there are more welfare recipients per family in California, and that number has crept upward in the past couple of years. This would seem to indicate that California welfare mothers are bearing more children that those in the rest of the US.

One might think that immigration, illegal or otherwise, could explain California’s out-of-whack welfare rolls. But if that’s the case, it’s because the state is allowing it to happen, not because it has to happen. The immigrant-heavy states of Arizona, Texas, and Florida do not have welfare populations that are at all out of line with the rest of the country.

I’m not close enough to the situation in Sacramento to recommend a policy fix, but I can rough out a few estimates:

  • If California’s welfare caseload reflected the rest of the country, it would have over 300,000 fewer families on welfare, and a lower caseload of about 700,000 fewer individuals.
  • If those 300,000 fewer families stopped collecting a conservatively estimated $15,000 a year each in benefits, taxpayers (state and federal) would be saving $4.5 billion a year in welfare costs, even before considering the reductions that could be achieved in the state’s social-services bureaucracy.
  • If those 300,000 fewer families each had one additional adult in the workforce adding an estimated $30,000 yearly in value to the economy, the state’s annual economic output would be $9 billion higher. That higher output, plus the additional spending by the now-employed, would be generating a great deal of revenue to the state’s treasury.
  • The turnaround just described would not alone close the budget gap noted earlier. But if the state had gotten its act together on TANF several years ago, while cutting the social-services bureaucracy proportionately, the multi-year impact might come pretty close.

Arnold Schwarzenegger was very fortunate during his first few years of handling California’s finances. The economic growth created by the Bush tax cuts came at just the right time. The state also benefited greatly from a number of onetime windfalls, such as the hundreds of millions of dollars founders and insiders at Google coughed up when their stock options and restricted stock were cashed in.

Unfortunately, it appears that the good fortune enabled the state to avoid serious expenditure reform in welfare, and surely other areas, that should have been more aggressively undertaken when Schwarzenegger took office. Now the party’s over.

Will California’s Old Media ever cover the big problems the state still has with welfare and other items on the expenditure side of the ledger?

Cross-posted at NewsBusters.org.

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5 Comments

  1. Oh, but it gets better Tom, check out: http://www.cbpp.org/2-1-06eic.htm The EIC from CA portion cost the US treasury $4.7 billion in 2007. check your NB email too. The EIC is quickly becoming the NIT Negative Income Tax. http://www.econlib.org/Library/Enc/NegativeIncomeTax.html

    To answer part of the reason why family size in CA is growing is due in part to state sanctioned paternity fraud. Having children is a cottage industry in CA. CA is one of the few states that simply takes the woman’s word for who is the father, then the courts promptly levy child support on the male without a paternity test. Even after the male protests and then proves via DNA that he is not the father, the court system drags it’s feet in halting the forced payments, then when the defrauded male tries to get his money back, the court says “Shame on YOU!” and won’t give it back. It’s a huge problem. What’s the incentive for the woman to make a false paternity claim? No punishment for doing so and all they need is 3 different fathers to pay child support. Why 3? Child support is NOT TAXABLE INCOME and they get 25% from each male, whereas if it was from same guy, she would only get 35% (25+5+5).

    The solution is to stop letting children be a profit center, making babies for the purposes of income is immoral. What do you think the effect is of those values being taught to the children of these women? Then we wonder why 70% of the people in our prisons come from single parent families. Between TANF, food stamps, child support and EIC, it is profitable to make babies. The solution must involve serious reform of the child custody laws and the attitudes of the courts and bureaucracy:
    1. no more default child custody for the mother, on the 2nd out of wedlock child, that child goes to the father by default and the mother pays child support. A strong disensentive to make babies.
    2. An actual child custody hearing, not the typical show trial that occurs. The kid’s best interest, not the mother’s best interest must be considered.
    3. Shared parenting, not sole custody or joint custody, with shared parenting, the kid spends half the time with each parent and ends all child support payments! No more reason for having babies just to collect a check.
    4. three strike rule on judges, and all the cadre of court officials involved in deciding child custody. There are 200,000 kids a year who are abused. Half of all child abusers are hand picked by the courts. When an officier of the court is so incompetent as to pick 3 child abusers to be custodians of a child, that person must be removed from the decision making process.

    Make these 4 reforms and it will revolutionize the country, within 20 years, crime will fall over 50% and the prisons will empty out. Welfare, TANF, EIC will wither and die along with unemploying all the bureaucrats needed to run these programs. Poverty is a big business in this country.

    Comment by dscott — December 19, 2007 @ 8:37 am

  2. #1, thanks for the info. The EIC, which has turned into de facto NIT, is at least proportionate to the rest of the US, unlike TANF. I’ve been aware of the paternity scams. Since the spiritual arguments aren’t working to solve the problem, maybe the churches need to concentrate on the guys and emphasize the financial exposure.

    I didn’t even touch Food Stamps, which may be an even worse situation. There are definitely more people on them than on TANF…..

    Comment by TBlumer — December 19, 2007 @ 9:01 am

  3. Kudos on this posting; first rate!

    I think it is important as we approach 2008 to look back at the events that took place during the time Arnold came forward. As various candidates emerged to run for governor, Arnold Schwarzenegger started working behind the scenes nationally to secure his position with the help of many in the entertainment and news media. Still with a significant amount of support was the stalwart Republican State Senator Tom McClintock, who incidentally is also a resolute Conservative.

    In what was described as a carnival like atmosphere, Arnold used the media in effect to “steal” the show in the second statewide debate, which was the only debate he participated in. After that debate the MSM were hailing Arnold as the savior of California and like sheep to a slaughter, most republicans turned their backs on McClintock in favor of the man with no experience nor any republican credentials and gleefully went to his camp. And rest of the story appears in your posting. The charlatan wins office, has no compass, and is currently leading the state in circles out in the wilderness.

    So here we are approaching 2008 and the manic atmosphere that surrounded California may not be matched, but reading the blogs, many folks have the same manic fervor for some candidates that resemble Arnold Schwarzenegger; and at the same time as seen through the polls, many republicans are endorsing the candidates with the “least” republican credentials.

    Sometime we have a tendency to blame the party for its lack of republican orientation, but I think sometimes they give us what the majority wants; CHAMELEONS IN EMPTY SUITS.

    Comment by Brian — December 19, 2007 @ 9:30 am

  4. Food Stamps cost: http://www.fns.usda.gov/pd/fssummar.htm
    As of Nov 30, 2007 $33 billion for the US!

    Main page: http://www.fns.usda.gov/pd/fspmain.htm

    By State: http://www.fns.usda.gov/pd/15fsfypart.htm
    California as of 2007 – 2,048,185 people of 26,466,181 for the US, i.e. 7.7% of all those receiving.

    http://www.fns.usda.gov/pd/17fsfybft.htm
    The cost of this largess: $2,569,806,318 or $2.5 billion in round numbers, what’s a few million, right?

    Comment by dscott — December 19, 2007 @ 11:24 am

  5. #3, great comment. But I believe that if McClintock had been the GOP fave, a biggie like Boxer or Feinstein would have jumped in and beaten him. One of those two was begged to run, but backed away because they knew they couldn’t take Arnold.

    That doesn’t change the fact that Arnold has been a big disappointment and frankly a deceiver in so many areas, and has done LT damage to conservatism in the state. My brother and his wife insist on seeing him as “conservative.” Zheesh.

    #4, So Food Stamps is the new Welfare in Cali. The only “consolation” is that it’s not as expensive as Welfare was.

    That 7.7% matches the % on welfare in Cali in 1996. Ouch. I really need to dig into the Food Stamp fiasco more. In a good economy, the Food Stamp rolls going up nationally by 18% or so in the last 4 years makes no sense.

    Also, the average benefit has crept up to to over $22 per person per week from the $21 the libs were using in their Food Stamp Challenge throughout this year. Finally, there’s probably room for improvement, but the admin costs, at least at the fed level, aren’t that brutal. At the state level, that might be a whole ‘nother story.

    Comment by TBlumer — December 19, 2007 @ 11:59 am

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