5. What the Wealthy Use Welfare For
Many of the wealthy use welfare. To ignore their use of entitlements and government subsidies to support their standard of living is an error. Economies are densely interdependent networks in which effects can’t easily be isolated to immediate interactions. And whether the wealthy like to see it or not, we're all in this safety net together.
The Economist website provides a useful example of this error, in a post called “Taxing the Rich,” by Will Wilkinson, an usually astute analyst and admirably clear thinker, who wrote: "Anyway, it's not the infrastructure of American capitalism that's busting the budget... Fiscal strain is largely a matter of buying health care for old people."
But Wilkinson is wrong. Government-provided health care is an integral part of the “infrastructure of American capitalism.” As are many other welfare programs, especially for businesses that employ low wage earners. Many corporations depend on the safety net, just as their employees do.
The “infrastructure of American capitalism” requires workers. Workers get old, and their health care and other needs must be met. They cannot be treated like inhuman resources to be consumed, and the residue conveniently and cheaply disposed of. Some capitalists would argue that those old, used-up workers should have saved enough to provide for their retirements. Some of these personal responsibility–preaching capitalists are the same ones who have “renegotiated” or gutted pension agreements (a favorite tactic for private-equity firms like Bain Capital). The New York Times on May 9, 2012, reported that more older Americans are working longer because, among other reasons, "many corporations have stopped providing health care to retirees... forcing them to work till Medicare is available." Those businesses have increased their profits by pushing employees into the publicly funded safety net. Private enterprise will always have incentives for this kind of cost shifting. And we must be vigilant against those who willfully ignore its impact.
Further, some of those personal responsibility–preaching capitalists pay their employees so little, they aren’t able to afford to eat, much less save for their retirement. Of the over 45 million Americans who are on food stamps, 40% live in a household that has at least one wage earner. In some low-profit industries, employers might have little choice, but in other more profitable businesses, employers simply prefer to profit by paying below-survival wages, knowing that the safety net will support their employees.
This is how the taxpayer-funded safety net nets increased profits for companies like Walmart, which is owned by the richest family in America. For example, in Ohio, 28% of Walmart’s 50,000 employees use Medicaid. Taxpayers subsidize—in effect send welfare payments to—the richest family in America. Surely this is an unjustified dependence on an entitlement program.
It’s not just corporations that have a codependent relationship with welfare. Anyone who employs a low-wage worker, such as a nanny, is likely in the same boat, kept afloat by the safety net. Medicaid costs employers only 1.45% of salary and if it weren’t available nannies would likely have to be paid more to be able to buy private health insurance. That’s how the government subsidizes private childcare, and it’s just one example of how many Americans benefit indirectly from welfare received by others.
Wilkinson’s remark reveals a not-in-it-together mindset at work in the hearts and minds of some American capitalists and their theorists. They willfully ignore INTER-dependencies that ripple widely through our economic networks. If anything, President Obama’s comments explaining to business owners that they “didn’t built that” didn’t go far enough: Some of these capitalists “couldn’t run that” without the support of the safety net, which is now an integral part of what the Founders called “the public good.”
The Economist website provides a useful example of this error, in a post called “Taxing the Rich,” by Will Wilkinson, an usually astute analyst and admirably clear thinker, who wrote: "Anyway, it's not the infrastructure of American capitalism that's busting the budget... Fiscal strain is largely a matter of buying health care for old people."
But Wilkinson is wrong. Government-provided health care is an integral part of the “infrastructure of American capitalism.” As are many other welfare programs, especially for businesses that employ low wage earners. Many corporations depend on the safety net, just as their employees do.
The “infrastructure of American capitalism” requires workers. Workers get old, and their health care and other needs must be met. They cannot be treated like inhuman resources to be consumed, and the residue conveniently and cheaply disposed of. Some capitalists would argue that those old, used-up workers should have saved enough to provide for their retirements. Some of these personal responsibility–preaching capitalists are the same ones who have “renegotiated” or gutted pension agreements (a favorite tactic for private-equity firms like Bain Capital). The New York Times on May 9, 2012, reported that more older Americans are working longer because, among other reasons, "many corporations have stopped providing health care to retirees... forcing them to work till Medicare is available." Those businesses have increased their profits by pushing employees into the publicly funded safety net. Private enterprise will always have incentives for this kind of cost shifting. And we must be vigilant against those who willfully ignore its impact.
Further, some of those personal responsibility–preaching capitalists pay their employees so little, they aren’t able to afford to eat, much less save for their retirement. Of the over 45 million Americans who are on food stamps, 40% live in a household that has at least one wage earner. In some low-profit industries, employers might have little choice, but in other more profitable businesses, employers simply prefer to profit by paying below-survival wages, knowing that the safety net will support their employees.
This is how the taxpayer-funded safety net nets increased profits for companies like Walmart, which is owned by the richest family in America. For example, in Ohio, 28% of Walmart’s 50,000 employees use Medicaid. Taxpayers subsidize—in effect send welfare payments to—the richest family in America. Surely this is an unjustified dependence on an entitlement program.
It’s not just corporations that have a codependent relationship with welfare. Anyone who employs a low-wage worker, such as a nanny, is likely in the same boat, kept afloat by the safety net. Medicaid costs employers only 1.45% of salary and if it weren’t available nannies would likely have to be paid more to be able to buy private health insurance. That’s how the government subsidizes private childcare, and it’s just one example of how many Americans benefit indirectly from welfare received by others.
Wilkinson’s remark reveals a not-in-it-together mindset at work in the hearts and minds of some American capitalists and their theorists. They willfully ignore INTER-dependencies that ripple widely through our economic networks. If anything, President Obama’s comments explaining to business owners that they “didn’t built that” didn’t go far enough: Some of these capitalists “couldn’t run that” without the support of the safety net, which is now an integral part of what the Founders called “the public good.”