The unintended consequences of 'pragmatic' policy making

Case-by-case 'pragmatic' problem solving has created the present recession. How did we get here, and where are we going next?

Lynne Sladky / AP
In this photo taken Sept. 8, day laborers wait to be called for work at Labor Finders, a Miami industrial labor staffing company. Well-intentioned problem solving has brought us here.

In the September 15th Wall Street Journal there is a chart that gives a quick view of the “pragmatic” expansion of entitlement programs that has led to where we are now. Who could have predicted the long-term consequences of case-by-case pragmatic problem solving? I suggest Herbert Spencer, Ludwig von Mises, and Friedrich Hayek.

The article itself is perhaps one of the most important that has appeared in quite a while.

The numbers of people getting entitlement benefits is very large and growing:

As recently as the early 1980s, about 30% of Americans lived in households in which an individual was receiving Social Security, subsidized housing, jobless benefits or other government-provided benefits. By the third quarter of 2008, 44% were, according to the most recent Census Bureau data.

That number has undoubtedly gone up, as the recession has hammered incomes. Some 41.3 million people were on food stamps as of June 2010, for instance, up 45% from June 2008. With unemployment high and federal jobless benefits now available for up to 99 weeks, 9.7 million unemployed workers were receiving checks in late August 2010, more than twice as many as the 4.2 million in August 2008.

Still more Americans—19 million by 2019, according to the Congressional Budget Office—will get federal aid to buy health insurance when legislation passed this year is implemented.

Now the challenge will be to reverse this unsustainable situation when so many people are now dependent. My own view is that there will not be an orderly reduction. This is because the various interest groups will seek to prevent major reductions. And the tax-paying public will resist higher taxes.

This should be interesting.

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