Dependency: Learning from the Danish Welfare Experiment

Extraordinary increases in government dependency in the United States have become a regular headline. It seems that records are broken every week for food stamp recipients, those on the disability rolls, and the number of people living in poverty. These numbers are often dismissed by some as signs of a weak economy or the manipulation of data, but reality tells a very different story, and the picture is not pretty. The true story is one of rising reliance on America’s stretched tax dollars, and it should be a concern to all.

However, problems with dependency are not limited to the United States alone. As illustrated in a recent New York Times article, it is becoming clear that the welfare state in Denmark is not only being abused, but the country can no longer afford it. What provoked this rethinking has been the realization that many are receiving benefits greater than the income of most of the country’s full time workers. With the population aging and a dwindling tax base, the Danes will not be able to support their generous benefit system. The Danes, as with many other Scandinavians, have generations of liberal welfare policies that are now coming back to haunt them.

At home, the pattern of increased government dependency is clear. Since 2000, the percentage of the American public receiving means tested benefits has increased by 9.5 percent. In 1990, less than half of the federal budget outlays were devoted to entitlement transfers, and today over 60 percent of the budget is devoted to such activities. Since 2008, the percentage of the population receiving food stamps has increased from 9 percent to 15 percent, while unemployment hovers just a few percentage points above what we accept as normal.

I have worked for almost 50 years helping to move previously dependent people into jobs, and I have learned a great deal about dependence. Most people who rely on the government for subsistence prefer to work. Some believe these people are maligners or leeches manipulating the system for their benefit. Of course these people do exist, but the welfare queens of Ronald Reagan’s imagination and the 47 percent purposely dependent in the world dreamed up by Mitt Romney are less to blame than our public policies that encourage such dependency.

Today, almost 2 million New York City residents receive food stamps, up from over 1 million in 2007. The federal government has told New York City that it cannot require food stamp recipients to partake in work activities, thereby undermining an attempt to help recipients become self-sufficient.

Social Security Disability is no different. For almost 20 years, states have used it as a dumping ground for their most difficult welfare clients, kicking the cost to the federal government. Some law firms serve the sole purpose of helping clients apply for disability, and face no opposition in court. According to the Social Security Administration, the segment of the labor market currently receiving disability has increased by over 1 percent since 2000. Since 1996, over 8 million private sector jobs have been created, while more than 4 million Americans have been awarded disability payments. This pattern cannot continue.

The Danes, along with Great Britain, are retooling their disability to cull people who are capable of working. In Denmark, the government has proposed ending lifetime disability payments to those under the age of 40, making exceptions for those who truly are unable to work. In Great Britain, a new program called “The Personal Independence Payment,” will include a new face-to-face assessment and regular reviews – something missing in the current system. This will ensure the billions they spend can be better targeted to those who need it the most. Britain expects about a 20 percent reduction in the rolls. If the United States were to establish such a program, this could mean about 1.6 million people would be dropped from disability – a savings of $26 billion annually.

The unusual actions taken by countries with more generous and liberal safety net programs should serve as a wakeup call here in the US. We need to become more cautious and scrutinizing of programs that may have seemed benevolent at their birth, but have become abused, overly lenient, and unnecessarily bloated.

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