The Law of Unintended Consequences

I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. — Benjamin Franklin

There is one law that legislatures can never repeal. That is the Law of Unintended Consequences. When legislators rush into something that sounds good without carefully considering possible consequences, that is when they are apt to write a law that does more harm than good.

Thus it is a very good thing that the NH Senate held firm in requiring a careful study before implementing that part of ObamaCare known as Expanded Medicaid. As more and more people realize that ObamaCare is a “train wreck” in progress, it is all too likely that expanding Medicaid will worsen the train wreck.

ObamaCare itself provides multiple examples of the unintended consequences of rushing to pass a bill that nobody has had time to read, much less debate. One major section of the law comes into play when a business has 50 or more employees. It should be no surprise that many, many small businesses are becoming known as “49ers” because they are limiting themselves to no more than 49 employees. This is one reason for the extremely weak jobs market.

The New York Times’ Nicholas Kristof reported a tragic example of the law of unintended consequences. The Supplemental Security Income (SSI) program initially covered children with physical or mental disabilities so severe that parents often couldn’t hold jobs. Later it was expanded to cover kids with learning disabilities. The program pays families with such kids $698 per month.

The unintended consequence of SSI is that it creates a terrible incentive for parents to keep their kids illiterate. For some poor families, the disability check is their major source of income. If their child begins to do well in school, they risk losing the check. Parents have pulled their children out of literacy programs just to keep the check coming. They may love their kids and want them to succeed but they are desperate.

Kristof noted that “nearly two-thirds of these children make the transition at age 18 into SSI for the adult disabled. They may never hold a job in their entire lives and are condemned to a life of poverty on the dole — and that’s the outcome of a program intended to fight poverty.”

National Public Radio (NPR) also reported on some of the perverse results of the disability program. It noted one mother whose “teenage son wanted to work, but she didn’t want him to get a job because if he did, the family would lose its disability check.” NPR suggested several items that should be goals of a disability program, then concluded that “The disability program stands in opposition to every one of these aims.”

NPR noted that the disability program traps people into a lifetime of poverty. “… in most cases, going on disability means you will not work, you will not get a raise, you will not get whatever meaning people get from work. Going on disability means, assuming you rely only on those disability payments, you will be poor for the rest of your life. That’s the deal. And it’s a deal 14 million Americans have signed up for.”

It’s not just the disability program that traps people into dependency on government. The panoply of welfare programs has the effect of punishing people who try to move out of poverty and up the income ladder. Someone who works harder, takes a second job, learns more skills, might earn $10,000 more but lose $15,000 of benefits. Hence, many say “I can’t afford to take that job. I’d lose my benefits!”

The Pennsylvania Secretary of Public Welfare calculated that a single woman with two kids can be better off with gross income of $29,000 plus numerous benefits, than if she earned a gross income of $40,000, $50,000, or even $60,000, with fewer or no benefits. At $29,000 gross income her net income plus benefits could be as much as $57,327. She would have to earn $69,000 to have a net income plus zero benefits of $57,045.

Expanding Medicaid would enlarge the dependency trap. More people would find that they could not afford to better themselves because they would lose even more benefits. One cynical pundit often remarks that the political class wants more people trapped into dependency because “beggars are easier to satisfy.”

As a caring society we want to help the vulnerable. But do we want to trap them into a lifetime of dependency on government, where they are punished for trying to better themselves? Is it good for society to have millions of people unable to contribute their skills and energy? Is it good for the recipients themselves to live in poverty their entire lives with no hope of ever becoming self-sufficient and moving upward?

For Kristof, “a tentative lesson from the field is that while we need safety nets, the focus should be instead on creating opportunity — and, still more difficult, on creating an environment that leads people to seize opportunities.”

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