This is what happens when one tries to manage social choices with
money alone. It promotes fraud. The problem is that the solution
needs to be integrated into the social fabric and made seamless.
I have spoken to the idea that an agricultural based community
complex can be organized around the idea of providing a lifetime
financial base for all participants, including teenagers and the
elderly. We have tried to delineate rather than grey the boundaries
for those groups. It is my contention that such a vibrant community
can act as default employment for all while instilling lifelong
entrepreneurship.
In the meantime, the numbers are been fudged and we are really losing
economic base which is unfortunate. The same thing is true for
inflation figures in particular. Selective choices give a false
sense of security while effectively we have had a massive inflation
in the cost structure of the top third of the population.
This may not seem to count, but it affects investment because those
are the folks who do build businesses. This has also driven a cost
push in the medical services monopoly and the legal profession. We
have had a huge inflation in the professional services industry were
the only constraint is the practitioner’s greed.
My point is that the measurement system is politicized and it gets
progressively misleading. Remember that a generation ago, that there
were no homeless for all intents and purposes.
Unemployment
Numbers Scam
Posted by Arnold
Ahlert Bio ↓ on May 8th, 2012
When the jobs data
were released last week, it was revealed that only 115,000
new jobs were created, well below the 165,000 predicted by the
media-anointed economic “experts,” and significantly below the
125,000 jobs-per-month pace required just to keep pace with
the number of people entering the work force. Yet in an apparent
paradox, the unemployment rate dropped from 8.2 percent to 8.1
percent. Presumptive Republican presidential candidate Mitt
Romney explains half of it. “There is something
about that 8.1 percent figure you ought to know,” he told a crowd
at a town hall-style meeting in Cleveland yesterday. “You might
assume that that number came down from 10 percent to 8.1 percent
because of all the jobs that were created, and that assumption would
be wrong. The reason that percent came down was because of all the
people that dropped out of the workforce.”
Mr. Romney is correct.
Much of the lower number is indeed attributable to the fact that
342,000 Americans gave up looking for work, and those people are no
longer counted as being unemployed. Yet there is another, far more
ominous element to the paradox that is part of the equation as well:
the number of Americans receiving Social Security Disability
Insurance (SSDI) has soared.
Since 2010, and
directly coinciding with the time millions of Americans used up their
99 weeks of unemployment insurance, disability claims have risen by
2.2 million. And precisely like Americans who have given up looking
for work, those receiving disability payments are neither counted as
part of the workforce, or part of the unemployed. The rise in the
number of claims is daunting. From December 2007 to April 2012, the
number of workers receiving SSDI jumped 22 percent, from 7.1 million
Americans to 8.7 million. According to economists at JPMorgan Chase &
Co. and Morgan Stanley, that figure explains as much as one
quarter of the decline in the labor force participation rate.
“How we measure and
understand what’s going on in the economy can be influenced by the
degree to which various public-support programs are available and
being used,” said Michael Feroli, chief U.S. economist at JPMorgan
in New York. “With a rising number of disability beneficiaries,
there are both lower unemployment rates and lower participation
rates.”
That’s an
understatement. The latest drop in labor force participation,
from 63.8 percent in March to 63.6 percent in April,
represents the lowest rate since 1981–fully 31 years ago.
The Obama
administration’s “solution” to the problem? “Workers on
SSDI rarely return to the labor force, resulting in a loss to
society of the economic contribution those workers could have made,”
said a report written in December 2011 by the National
Economic Council, Domestic Policy Council, Labor Department and
President’s Council of Economic Advisers. “Thus, keeping the
long-term unemployed in the labor force should be a priority.”
Congress, undoubtedly influenced by election year politics obliged.
In February, unemployment benefits were extended through
the end of 2012 as part of the Middle Class Tax Relief and Job
Creation Act. That move was likely buttressed by research from David
Greenlaw, a managing director in New York at Morgan Stanley. In
March, he noted that more than 99 percent of all SSDI
beneficiaries remain in the program until retirement age.
In other words, give
people a temporary extension in unemployment compensation, or they
might go on the dole permanently.
A 2006 research paper
written by MIT economist David Autor and Mark Duggan at the
University of Pennsylvania’s Wharton School in Philadelphia gets
to the nub of the problem. SSDI “appears in practice to
function like a nonemployability insurance program for a subset of
beneficiaries,” they wrote. Less-stringent screening
procedures, more attractive benefits and a waning need for
less-skilled workers have bolstered SSDI rolls, they added.
Autor followed up
that report with one written in 2011, in which he
contended that while the “SSDI program is a central component of
the U.S. social safety net, it suffers from two
substantial ailments that limit its effectiveness and threaten its
long-term viability. First, the program is ineffective in
assisting the vast majority of workers with less severe disabilities
to reach their employment potential or to earn their own way.
In fact, the program provides strong incentives to applicants
and beneficiaries to remain out of the labor force permanently, and
it provides no incentive to employers to implement
cost-effective accommodations that would enable disabled employees
to remain on the job….Second, the program’s expenditures are
extremely high and growing rapidly.”
How large is the
problem? According to a report by Richard Burkhauser and Mary
Daly in the spring issue of the Journal of Policy Analysis and
Management, a mind-bending 7 percent of the nonelderly
adult population could be receiving disability benefits by 2018.
That’s two years after the SSDI program will run through its trust
fund, according to an April report by the Social Security
trustees–which also reveals that the deficit of non-interest
income will reach “$66 billion between 2012 and 2018 before rising
steeply as the economy slows after the recovery is complete and the
number of beneficiaries continues to grow at a substantially faster
rate than the number of covered workers.”
As for the cost,
the SSDI program has grown substantially as well. In January,
the federal government sent disability checks to 10.5
million Americans including 2 million to spouses and children of
disabled workers. That amounts to a record-setting $200 billion per
year, much of which is driven by the spike in “mental illness”
claims that now account for 43 percent of the total, a 10 percent
increase in such claims prior to the economic turndown. Furthermore,
the overall cost has more than doubled since 2001. Michael
Feroli, chief US economist with JPMorgan, reveals the obvious reason
behind the surge. “It’s not like other support programs,
such as unemployment insurance, which you lose after a year or two,”
he noted.
How are such numbers
related to unemployment? Sitka Pacific Capital investment
advisor, Mike Shedock, explains. First he notes that,
despite the above total of 10.5 million disabled workers, Economic
Research by the Federal Reserve of St. Louis reveals that
there are 27.5 million non-institutionalized, civilian Americans 16
year of age and older with a disability. Based on a fraud rate of
only 10 percent, the “civilian labor force would rise to
157,145,000 from 154,395,000. The number of unemployed would
rise to 15,508,000 from 12,758,000.” If those people were counted
among the unemployed?
The rate would be
9.9%. Shedock further notes that the jump in claims continued after
the recession was ostensibly over.
Why is nothing being
done to separate the fraudsters from the legitimately disabled? “It’s
an epidemic nobody talks about because it could bleed into the
sensitivity associated with legitimate recipients of social security
disability insurance payments,” writes Townhall columnist
Charles Payne. “The program provides money to people too young to
get social security and unable to work.” Payne continues. “The
problem is that so many young people, especially men, are claiming
they are nuts. Yes, this is the biggest scam since the welfare queens
of the 1980s, and it’s getting worse. They call it ‘the crazy
check’ and there are wide swathes of men playing the system for
these checks…It’s a national tragedy. When so many brave young
men and women have been permanently injured fighting wars for this
nation others can shuffle to their mail boxes and get paid.”
Indeed. While there is
little question millions of Americans are legitimately disabled and
well-deserving beneficiaries of America’s safety net, there is
equally little question that there are substantial numbers of
Americans willing to game the system. Furthermore, there is no
question that any concerted effort to determine the distinction
between the two groups will be met with the predictable cries of
“heartlessness” such efforts invariably elicit.
Such resistance is
amplified by election year politics. First, the president is running
a divide-and-conquer re-election campaign whose success hinges on
turning various sub-groups of Americans against one another. Second,
an unemployment rate that can be “massaged” by omitting millions
of discouraged and “disabled” workers from the labor
participation force substantially helps to obscure the
administration’s miserable economic record. Third, and perhaps most
cynically, an ever-increasing number of dependent Americans who rely
on ever-increasing government for their well-being–regardless of
whether or not it bankrupts the nation in the process–is the
mother’s milk of progressive ideology that Democrats and their
standard-bearer in the White House hope to exploit at the polls next
November.
And while this article
focuses on disabled Americans it should also be noted that the number
of Americans on Extended Benefits (EB) and Emergency
Unemployment Compensation (EUC) has also soared. In 2008,
approximately two million unemployed workers had received EUC or EB.
As of October 2011, that number has increased
nearly nine-fold to 17.9 million.
Amanda Henneberg,
Romney campaign spokeswoman, illuminates the big picture. “After
a doubling of gas prices, declining incomes, millions of
foreclosures, and record levels of unemployment, Americans know
they’re not better off than they were four years ago,” she said.
Maybe they do, but
“better off” is a relative term for a substantial number of
people attuned to the siren song of big government. It is no secret
that many Americans actually prefer living off government than making
the kind of life for themselves that can only be achieved by working
hard and making sensible choices. Whether those Americans represent a
majority of the voting public will be one of the central revelations
of the November vote.
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