California’s ever-worsening budget situation has treated us to a variety of doomsday scenarios; these include some ideas that are so absurd and awful it is tempting to dismiss them as idle threats or paranoid fantasies. Sometimes, these are obviously not serious proposals so much as illustrations of the problem. For example, if every single state employee were laid off, we would save something like $18 billion, which is a lot of money until you compare it with a budget gap of around $24.3 billion and growing. And of course, with no state employees we might have trouble cutting the checks for those other bills that we would be able to pay once payroll is out of the way.
Another absurd and awful proposal is to eliminate the state welfare program. This might actually come to pass (and save us a whopping $157 million, almost 0.65% of the shortfall). I am among those who suspect that this is a bluff, an opening position for negotiations, so it won’t seem so bad when we only cut it by 1/3 or 1/2. It is all a matter of perspective, really.
Whether the state’s welfare program, CalWORKs, is killed or just severely wounded (or even if it is maintained at current levels in the face of exploding need), we are facing a colossal failure to meet our collective responsibility to take care of some 525,000 families that are not able to find enough income. Some may say that we don’t have any such responsibility, since those freeloaders should just get jobs. However, it is not clear where those jobs are to be found, with California unemployment officially running at 11% and actually higher than that.
That sentiment also ignores a dirty little thing called the “natural” rate of unemployment.
This concept, advanced by Nobel Prize winner Milton Friedman, suggests an equilibrium point that has been established at roughly five percent. If unemployment gets below this equilibrium, people are less afraid of losing their jobs and better able to spend money, and inflation kicks in. But before that can happen, monetary policy kicks in to tighten the money supply and slow down all that dangerous job creation. Think about this: the Federal Reserve actively keeps at least one out of twenty people unemployed. Most people ignore that structural unemployment means that being unemployed is a job, as vital to the economic stability of capitalism as those who actually do paid work. Their job is to be poor, spend less, and consume social services.
Deeper down the rabbit hole, consider what would happen if everyone got jobs, kicked their various drug habits, and stopped committing crimes: Utter economic chaos. We would no longer have any use for police or prison guards, drug counselors or social workers – which we might collectively refer to as the deviance industry. All of those people would be out of work; we might also have to lay off a lot of doctors and nurses. Would they turn to drugs and crime? Who knows? In any case, they would be unemployed. The point is that the system is addicted to unemployment and dysfunction, so it cannot live without people who are out of work and consuming the services of the deviance industry.
This points to a systemic problem, a way that capitalism inherently fails as a sustainable economic model. It is not clear that a cooperative-based market economy would fully address this issue, but it seems likely that removing profit from its throne will at least help. Of course, that’s another story that this little blog has attempted to address from various angles.
Whatever happens with CalWORKs, it is safe to assume that there will be an awful lot of people who fall through the holes in our disintegrating safety net. Sacramento County alone has 33,500 families who are currently getting help, including about 62,000 children. This is one out of every 15 households. But in reality, some zip codes may have a majority of households affected, so it is quite possible that some neighborhoods have thousands of families facing a devastating loss of benefits. On the bright side, this offers the opportunity for community-based solutions. On the dark side, this offers the threat of unrest.
An often overlooked result of welfare programs is that they help to preserve economic systems that look pretty unjust from the bottom (for example, one that keeps five percent of people unemployed to avoid inflation). Even though the poor might benefit from a revolutionary redistribution of wealth, welfare gives them a sort of investment in the system. As long as the poor are getting something from the government, they are likely to go along with the system it protects. Remove the addictive force of welfare for thousands of people at a time when there are no local jobs to be found and bus routes are being cut, and you have a dangerous brew. Such a neighborhood will be more vulnerable to violent agitators, or even spontaneous outpourings of rage.
Rather than stand by and wait for communities to succumb to unrest (which would be way more expensive than the $157 million saved by killing CalWORKs), citizens need to quickly begin building some sort of grassroots replacement system. What would that look like? Tune in next time, when your foolish friend Coopgeek takes a stab at answering that question.