June 23, 2024

Keeping Media and Government Accountable.

WSJ: $1.9 trillion COVID bill pays Kansans more to stay home

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The $1.9 trillion “Covid-relief package” currently wending its way through Congress, could see Kansans paid considerably more to stay home — providing the state ever gets the unemployment system straightened out — than they made working.

According to an editorial in the Wall Street Journal by Casey B. Mulligan and Stephen Moore, “In Kansas, a family of four with two unemployed adults who had earned U.S. median wages could get paid, including the Biden add-on package, the after-tax equivalent of more than $135,000 on an annual basis without working an hour. In Massachusetts, where state unemployment benefits are the highest in the nation, the figure is $170,000. This doesn’t include any housing or rental assistance the family may also receive. The Biden package of benefits would exceed the wages and salaries of at least 85% of households.”

The median US income for families in 2020, according to the Department of Housing and Urban Development, was roughly $78,500. The median household income in Kansas, according to the Census Bureau was nearly $20,000 less in 2019, at $59,597.

Moore, in an email response to an inquiry by the Sentinel, noted this was unfair to working Kansans.

“In Kansas, welfare and unemployment under the stimulus plan will pay many families more than $100,000 on an annual basis,” Moore said. They will get more for not working than for going back on the job. That isn’t fair to Kansans who are working.”

Mulligan, a professor of economics at the University of Chicago, served as chief economist on President Trump’s Council of Economic Advisers. Moore is a co-chairman of the Committee to Unleash Prosperity, where Mulligan is a senior fellow.

The $1.9 trillion bill, according to Mulligan and Moore, would be “… one of the largest expansions in government welfare benefits since the birth of the modern welfare state.” And could cost between “five million and eight million” jobs in the next six months.

“In combination with December’s $900 billion package, the new bill would expand the safety net to include six months of weekly $400 bonus unemployment benefits on top of the normal weekly benefits, a $3,000-a-child tax credit, an expansion of food stamps and rental assistance, $2,000-a-person checks, and expanded health benefits,” the pair wrote. “The Biden plan is welfare reform in reverse. It would repeal many of the successful work requirements dating to the Clinton era, and it contains only minimal requirements in exchange for its cash payments and other benefits.”

Moreover, the pair predicted when the original Cares Act was passed, the added benefit would reduce employment by millions when jobs came back. 

“Sure enough, Labor Department statistics verified that millions of jobs went unfilled last summer even as unemployment was historically high,” they wrote, adding “What will happen this time around? The combination of benefits are likely to reduce employment by five million to seven million jobs. The $15 minimum wage, if it stays in the bill, would bring the total to more than eight million.”

Indeed, while may have touted a Congressional Budget Office report that said a $15 million minimum wage would “lift 900,000 Americans out of poverty,” most are conveniently ignoring that CBO estimates it would cost 1.4 million jobs, a net loss of 500,000 back into poverty — and would add $54 billion to the deficit.

“Those estimates are consistent with CBO’s conventional approach to estimating the costs of legislation,” the report reads. “In particular, they incorporate the assumption that nominal gross domestic product (GDP) would be unchanged. As a result, total income is roughly unchanged. Also, the deficit estimate presented above does not include increases in net outlays for interest on federal debt (as projected under current law) that would stem from the estimated effects of higher interest rates and changes in inflation under the bill. Those interest costs would add $16 billion to the deficit from 2021 to 2031.

Mulligan and Moore conclude by noting the damage to the incentive to work contained in this bill.

“Many Americans will always choose the dignity of work over government handouts. But the Biden benefit package makes going back to work a money-losing proposition,” they wrote. “If Mr. Biden and the Democrats want to encourage employment, they should suspend payroll taxes for jobs that pay $100,000 a year or less. This would provide all workers an immediate 7.5% raise and would cut the cost to employers of hiring unemployed workers back by the same percentage. This would cost the government less than $1.9 trillion.

“President Biden’s bill will make millions more Americans dependent on checks from the government, not an employer. Could that be the point?”

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