President Biden’s War against Work

By Cale Clingenpeel

Thursday, September 9, 2021

 

Labor Day this year marked not only the end of summer and an opportunity to celebrate American workers but also the first week since the onset of the pandemic in which millions of jobless Americans will no longer receive overly generous unemployment benefits that pay them more to remain unemployed and make it excessively difficult for employers to hire. Unfortunately, these employers’ woes may persist despite the expiration of these supplemental unemployment benefits. Amid a continued gulf between firms’ demand for workers and workers’ willingness to meet that demand, the Biden administration continues to propose, enact, and extend a web of policies that tax work — explicitly through statutory hikes and implicitly by reducing the economic return to work — and incentivize continued unemployment.

 

The federal government’s Federal Pandemic Unemployment Compensation (FPUC) program — the $300 weekly supplement to state-provided unemployment benefits — expired over the holiday weekend. While roughly half of U.S. governors moved to end this supplement months ago, the nationwide expiration comes after total unfilled job openings reached an all-time high in June of 10.1 million, exceeding the total number of unemployed Americans by nearly 600,000. The pervasiveness and seriousness of worker shortages is evident to most Americans and is acutely felt by small businesses, half of whom report openings they are unable to fill. While the FPUC program contributed to these issues, a number of other government policies that remain in effect will continue to limit the ability of the labor market to fully and rapidly recover.

 

These policies implicitly tax work by increasing the amount of government assistance to jobless Americans while not requiring the beneficiaries to work or look for work. Most recently, the Biden administration announced a massive permanent expansion of the Supplemental Nutrition Assistance Program (SNAP), which will result in food-stamp benefits increasing by nearly 30 percent in October. This influx of additional cash transfers comes on top of the numerous temporary pandemic-related expansions of food-stamp benefits. The increase in benefits alone represents a move toward a more permanent cradle-to-grave welfare state that separates income from work, made worse by the continued suspension of work requirements for Able Bodied Adults Without Dependents (ABAWD) that stemmed from what was supposed to be yet another temporary pandemic measure. This combination of increased benefits and suspension of work requirements will only serve as additional incentive to remain unemployed and sidelined from the workforce, slowing the labor market’s recovery.

 

President Biden’s war on work began early in his administration. Following the Trump administration’s pro-work efforts to authorize states to implement work requirements for Medicaid beneficiaries, the Biden administration has moved over the past six months to rescind those work-requirement authorizations in multiple states. Further, as part of the party-line American Rescue Plan Act (ARPA), Democrats transformed the Trump-expanded child tax credit (CTC) from a pro-work family-support provision of the tax code — aimed at encouraging labor-force participation at the lower end of the earnings distribution — to one that flirts with universal basic income through the federal government’s provision of monthly de facto welfare checks to millions of Americans with children, regardless of their work status. Now, Democrats are seeking to make these monthly Biden administration CTC payments permanent as part of their ongoing budget negotiations. This effort stands in stark contrast to the bipartisan consensus, ushered in by the 1996 welfare reform under President Clinton and House speaker Gingrich, that transformed the safety net from an open-ended entitlement to a policy that encouraged work.

 

The deluge of pandemic and post-pandemic cash-transfer programs infused into Americans’ bank accounts has already increased income dependence on the federal government to historic heights, tying family and federal financial fortunes closely together in a fashion not seen before in modern U.S. history.

 

This dependence, when paired with the untethering of receipt of benefits from the requirement to work or to search for work, repeats some of the same post–Great Recession policy mistakes that resulted in a weak and prolonged recovery. This year, government-provided social benefits as a share of aggregate personal income hit a record high. On average, since the onset of the pandemic, roughly a quarter — 22.5 percent — of aggregate personal income consisted of these government cash transfers.

 

In the early months of the pandemic, when households were prevented from making a living by excessive government mandates and lockdowns, the economic, moral, and practical rationales for this type of support were more grounded. Now, however, these policies are hurting the workers and families they were originally intended to help by implicitly taxing their ability to work. Instead of returning toward their pre-pandemic level, government-provided social benefits as a share of aggregate personal income have maintained a steady and heightened rate over the course of the summer, even increasing in July as a result of the first round of monthly Biden administration CTC payments. The consequence of Democrats’ efforts to make permanent many of these pandemic-era policies is a reorientation of the American economy away from self-sufficiency and toward endless government dependence. As of August, the economy still faces an employment shortfall of 8.7 million workers relative to the pre-pandemic trend. The increased dependence on government for income and diminishment of the expectation to work threatens the ability of the labor market to recover.

 

The expiration of the FPUC program is an important step toward resuming the robust recovery from the pandemic that began in 2020, though it remains only one step to returning the labor market to its historic pre-pandemic prosperity. Prime-age labor-force-participation remains far below its pre-pandemic rate and over the course of the past 14 months has risen just 0.3 percentage point. The American workers and families who have sacrificed through an unprecedented health and economic crisis deserve pro-growth policies — proven successful in the few years prior to the pandemic — to encourage domestic job creation, higher worker productivity, and robust real wage growth. Instead, President Biden — through his party’s complete control of the federal government — has implemented a web of policies that amount to nothing short of a war on America’s ability to work. Unfortunately, as Congress returns to the Capitol to debate a multitrillion-dollar budget, there is a clear danger that some of the proposals contained within it will only serve to expand and solidify President Biden’s war on work.