Archives: November, 2013

Lindbeck’s Law: The Self-Destructive Nature of Expanding Government Benefits

Relevant foresight from Swedish economist Assar Lindbeck, “Hazardous Welfare State Dynamics,” American Economic Review, May 1995:

The basic dilemma of the welfare state …  is that the more generous the benefits, the greater will be not only the tax distortions but also, because of moral hazard and benefit cheating, the number of beneficiaries. This is a field where Say’s Law certainly holds in the long run: the supply of benefits creates its own demand… .

Serious benefit-dependency, or ‘learned helplessness’, may … emerge only in a long-run perspective. Possible examples of such gradual adjustments are an increased tendency to apply for social assistance, less job search and greater choosiness among unemployed workers, more absence from work for alleged health reasons, more applications for (subsidized) early retirement due to alleged inability to work, and more time and effort devoted to tax avoidance and tax evasion.

P.S. A 2007 empirical study by Friedrich Heinemann supported Linbeck’s hypothesis, finding that “transfer expansion or increasing unemployment tend to be associated with a larger readiness of the country’s population to cheat on benefits.”

Against ENDA

The U.S. Senate is expected to vote Monday on the Employment Non-Discrimination Act (ENDA), a bill to “prohibit employment discrimination on the basis of sexual orientation or gender identity” that’s been proposed in one form or another for nearly 40 years. It will be a symbolic vote at many different levels. First, the bill stands little chance of passage in the GOP-controlled House; the point of giving it prolonged attention now is more to inflict political damage on Republicans for resisting a popular measure than to get a bill on President Obama’s desk. Second, it seeks to ratify (and take political credit for) a social change that has already occurred through nearly all the country, including even very conservative locales. Most larger employers are now on record with policies against discriminating against gay employees, and even smaller employers without formal policies mostly hew to the same path in practice, for many good reasons that include not wanting to lose the talents of employees from any demographic. 

ENDA is a less salient bill than it looks in a second way as well; statistics from the many states and municipalities that have passed similar bills (“mini-ENDAs”) indicate that they do not serve in practice as a basis for litigation as often as one might expect. This may arise from the simple circumstance that most employees with other options prefer to move on rather than sue when an employment relationship turns unsatisfactory, all the more so if suing might require rehashing details of their personal life in a grueling, protracted, and public process. The forbidden group categories that tend more to drive HR managers crazy are things like age, disability, and criminal record consideration, where the law regularly tries to forbid behavior that in fact is perfectly rational for employers to engage in.  

On a level of sheer entertainment, the bill has certainly furnished more than one way for some conservatives and Republicans to make themselves appear ridiculous. Some GOP supporters in Congress, for example, seem to be tempted by ENDA as an “easy,” crowd-pleasing vote to show they’re not always on the anti-gay side. But consider the implication: lawmakers who take this path come across as willing to sacrifice the freedom of private actors—as libertarians recognize, every expansion of laws against private discrimination shrinks the freedom of association of the governed—even as they go to the mat to preserve disparate treatment by the government itself in the recognition of family relationships. Sorry, but that’s upside-down. A classical liberal stance can reasonably ask the government itself to behave neutrally among different citizens with their differing values and aspirations, but should not attempt to enforce neutrality on private citizens themselves. 

One may also smile to see some implacable Culture War conservatives suddenly emerge as “Libertarians for a Day” when it comes to adding gays to the list of protected categories. Race aside, few among them have previously crusaded against the earlier inclusion of categories like age, marital status, pregnancy, or, say, religious affiliation. 

And yet at some point we do need to stop adding new groups to the parade—either that, or see freedom of association turn into a presumption of something else. At what point do we say no to future demands that protected-group status be accorded to employees based on political and controversial systems of belief, physical appearance (the “looksism” issue), family responsibilities, résumé gaps because of unemployment or other reasons, or use of lawful products or engagement in lawful activities in off hours—to name just a few of the areas that in fact have been the subject of real-world agitation in recent years? If we say yes to all, we introduce a new presumption—familiar from the prevailing labor law in parts of Europe—that no employer should be free to terminate or take other “adverse action” against an employee without being prepared to show good cause to a judge. That is exactly the goal of some thinkers on the Left, but it should appall believers in a free economy.

That’s reason enough to oppose ENDA, as I see it.

Federal Overtime Pay Abuses

Thank goodness for whistleblowers in the government, whether regarding intelligence activities or the mundane bureaucratic waste that occurs in every department. Congress does a generally pathetic job of oversight and presidential administrations are rarely transparent—despite their promises. So the citizens who pay for our $3.6-trillion government rely on federal workers who witness illegal and unethical activities to come forward and inform the press.

The Washington Post reports today:

Federal employees at the Department of Homeland Security call it the “candy bowl,” a pot of overtime money they have long dipped into to pad their pay even if they haven’t earned it, whistleblowers say. This practice, which can add up to 25 percent to a paycheck, has become so routine over the last generation that it’s often held out as a perk when government managers try to recruit new employees…

The problem with government is that bad behaviors and anti-productive cultures become engrained over time because there is no built-in mechanism to rout it out. In the private sector, that is the role of profit-seeking and competition.

More from the Post:

“It’s pickpocketing Uncle Sam,” [whistleblower] Ducos Bello said in an interview. “Employees will sit at their desks for an extra two hours, catching up on Netflix, talking to friends or using it for commuting time.” He estimated that 27 employees in the Commissioner’s Situation Room, which is part of Customs and Border Protection, improperly put in for a total of $696,000. They ranged from managers, who received up to $34,000 each, to border patrol agents, who received $24,500 each, he said. “It was such misuse that I felt I had a legal obligation to report. I will sleep better at night,” said Ducos Bello, a 24-year veteran of government employment.

Another whistleblower, Jimmy Elam, a supervisory paralegal specialist for Customs and Border Protection in San Diego, reported that eight administrative employees at his location received a total of $150,000 of improper [overtime pay] a year. “It happens day after day, year after year,” Elam said in an interview. “They are sometimes working, sometimes goofing off or just unaccountable completely.”

Thank you, Mr. Bello and Mr. Elam. You are patriots.

James Madison famously noted: “In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.”

Whistleblowers are one of those controls. They inform citizens not only how the government is feathering its own nest, but what the government is doing to us. Most federal departments have far too many tentacles manipulating the affairs of state and local governments, businesses, and individuals.

Stay tuned for upcoming analyses at DownsizingGovernment on slimming down DHS.