Editorial: Basic Economics and Welfare Spending


Not surprisingly, the Maine press this week rushed to deliver the news of a supposed 4,400 jobs that would be lost if Governor LePage’s DHHS budget cuts are approved. The jobs number comes from a cornerstone member of the left-wing political activism group Maine Can Do Better, run by Democrat operatives David Farmer and Ben Dudley. That the press would accept these numbers from a partisan organization without independent verification is problematic enough, but even worse is their inability to apply some basic common sense to the report.

Here’s the key question: if cutting $120 million from the DHHS budget ‘costs’ 4,400 jobs, how many jobs were ‘cost’ when that same $120 million was extracted from the pockets of business owners and taxpayers?

What liberal groups like Maine Can Do Better have a terrible time understanding is that money does not simply fall from the sky. Government funding comes directly out of the economy before it is redistributed to chosen recipients. What happens in between these two transactions is the critical problem with the idea that government spending creates or sustains jobs.

Money taken out of the economy and pushed through the DHHS machine comes out as less money on the other side. Government bureaucracy must pay for itself, and this strips a significant portion of the original tax revenue away for the sake of the distribution mechanism.

So let’s get back to the Welfare Industry’s report on 4,400 ‘lost jobs’. If $120 million in DHHS cuts will ‘cost’ 4,400 jobs, and if we agree that DHHS bureaucracy siphons off some percentage of the original tax revenue, we can safely say that more than $120 million was originally taken out of the economy through taxation. So if $120 million less in government spending represents 4,400 jobs lost in the social services sector, the original greater-than-$120 million in taxation extracted from the economy must have cost more than 4,400 jobs to begin with.

DHHS spending costs private sector jobs. And a further look at spending patterns shows that the bureaucracy of the social services industry, according to the logic of the Maine Can Do Better report, must certainly ‘cost’ jobs as well. Money is taken from taxpayers, funneled through the DHHS bureaucracy, then distributed to the Welfare Industry mechanisms. At this point in the chain, buildings are purchased, salaries are paid, and, as we saw in a report by Leif Parsell on this site last week, CEOs are often paid six-figure salaries. Further, many of these social services groups retain millions in property and cash assets at the end of every year. All of that money started out in the private sector, in the pockets of taxpayers – taking it out of the economy and placing into the investment accounts of social services organizations does not create jobs.

There is a big discussion that Maine needs to have about the bloat of the Welfare Industry. Every budget cycle we have the same silly debate about how much more money to take from the pockets of taxpayers, but we never examine the efficiency of the delivery of these funds to those who really need them.

Planned Parenthood of Northern New England, the recipient of more than $3 million in taxpayer funding in 2009, pays four executives nearly $200,000 a year. And they are active in the Maine Can Do Better political machine that advocates for increased social services spending. What these groups do is clear- they siphon off precious taxpayer funding to build an industry that allows them to fund a very comfortable lifestyle. And when that funding is threatened, they pack up the poor and destitute into buses and parade them in front of cameras. They use our most vulnerable as props so they can extract more taxpayer funds, buy more buildings, and pay more CEOs exorbitant salaries. All at the cost, according to their own logic, of private sector jobs.

The people of Maine certainly would not approve of this use of their precious tax dollars, especially at a time when everyone is struggling to make ends meet. As the discussion of ‘lost jobs’ continues around this DHHS budget, our state leaders would do well to remember where the money came from to begin with, and consider the private sector jobs that are sacrificed in order to fund a metastasizing welfare industry in Maine.