The Obama Edge
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|Arthur C. Brooks||August 7th 2012|
Within the space of just two weeks, Americans have witnessed two radically different philosophies about the free enterprise system from President Obama. In his notorious Roanoke, Va., speech of July 13, he said "If you've got a business—you didn't build that. Somebody else made that happen." That is, Americans have not fully earned their success.
Backpedaling after a public outcry, the president insisted he had been misinterpreted, and that he is fully committed to the values of competition, merit, and opportunity. In a speech to the National Urban League in New Orleans on July 25, he asserted that "America says we will give you opportunity, but you've got to earn your success." The sentiments expressed in these two speeches are inconsistent. To find the truth, we need to look at the administration's actions. As far as business is concerned, a great deal has been written about the myriad barriers the Obama administration has placed in the way of entrepreneurial success.
From stimulus spending that benefited politically connected firms to Dodd-Frank's expensive and onerous new regulations that disproportionately harm small banks, the deck is increasingly stacked against the entrepreneur. And proposed tax increases on "millionaires and billionaires" who allegedly don't pay their "fair share" (though the top 1 percent of earners already pay 38.7 percent of all federal income taxes, according to the Congressional Budget Office) seem like more of a punishment for earned success than an incentive to achieve it.
But one recent administration action in particular contradicts the president's claim that "you've got to earn your success." On July 12, the administration unilaterally weakened the federally mandated work requirements for welfare recipients. Since welfare reform was passed by Congress and signed into law by Bill Clinton in 1996, the states have been required to have at least half of adult welfare recipients in qualified "work activities"—actual jobs, or participation in education or training programs. Now, however, Mr. Obama's Department of Health and Human Services has announced that the agency will issue waivers to the federal work requirement.
This is a dramatic change in direction. As Rep. Dave Camp, R-Mich., chairman of the House Committee on Ways and Means, flatly asserts, "This ends welfare reform as we know it." The 1996 law was arguably the most successful policy change to help low-income Americans in the past 60 years. Welfare policies of the 1960s led generations of families to languish on the government dole at subsistence levels, never gaining the skills to work and with little hope to rise. It took more than a decade to get Congress to reverse course. But it was worth the effort.
According to the U.S. government, welfare reform helped to move 4.7 million Americans from welfare dependency to self-sufficiency within three years of enactment. The overall federal welfare caseload declined by 54 percent between 1996 and 2004.
Even more important, there is evidence that it improved the lives of those who moved off welfare. In the Berkeley Electronic Journal of Economic Analysis and Policy (2011), Santa Clara University's John Ifcher showed, using data from the General Social Survey, that single mothers—despite lost leisure time and increased stress from finding child care and performing household duties while working—were significantly happier about their lives in the eight years after reforms led them into the workforce.
The central insight from welfare reform is that people flourish when they earn their success, and this requires real market work. They escape poverty—and they live dignified, better-ordered lives. They don't just move out of welfare; they move up from dependence on the government. When it comes to earned success, the administration's actions—from business regulation to taxation, and now welfare—speak louder than the president's words.
Arthr C. Brooks is presidentof the American Enterprise Institute, from where this article is adapted.