We Take Care of Our Own

As Bruce Springsteen points out in his recent song, We Take Care of Our Own, American don't seem to have much tolerance for moral hazard when it comes to the social safety net.

I've been knockin' on the door that holds the throne 
I've been lookin' for the map that leads me home 
I've been stumblin' on good hearts turned to stone 
The road of good intentions has gone dry as bone 
We take care of our own 
We take care of our own 
Wherever this flag's flown 
We take care of our own 

Despite a long great recession, rising poverty and high unemployment, Americans persist in their belief that the poor are culpable for their own plight. 

Nothing divides Americans more than attitudes towards the poor. A recent Kaiser/Kennedy School pool on the causes of poverty asks the question, "Which is the bigger cause of poverty today — that people are not doing enough to help themselves out of poverty, or that circumstances beyond their control cause them to be poor?" 

Americans are split down the middle on this one. 48% says the poor aren't doing enough and 45% say circumstance beyond their control.  This issue almost defines the difference between Republicans and Democrats - Republicans go 63-31 on not doing enough while Democrats end up 57-37 on circumstances.  Not surprisingly,  Europeans with their vastly more expanded welfare state, go for circumstances by more than a 2 to 1 margin.  

Americans who believe the poor aren't doing enough are worried about moral hazard. 

Moral hazard hazard arises when an individual does not take the full consequences and responsibilities for their actions, and therefore has a tendency to act less carefully than they otherwise would, leaving another party to hold some responsibility for the consequences of those actions. 

The social safety net provides assistance to people who for one reason or another have fallen on hard times. Divorce or pregnancy might lead to poverty for a single woman with a child. Mental illness including addiction might lead to the loss of a job and eventually a home. A serious illness could lead to bankruptcy and poverty.  During today's recession, long periods of unemployment leave people with few or little resources to make ends meet.  

The degree to which  the safety net helps or hurts a person varies. In some cases,  the availability of unemployment insurance, welfare, food stamps or other benefits might lead to people postponing their job search, or avoid seeking mediation in marriage.  The assistance could insulate people from the adverse consequences of their actions. 

The problem is that there is no way to calculate the absolute level of moral hazard in social programs. In reality, most safety net programs benefit a mix of people and thus a wide mix of motivations and behaviors. The public policy question is does the amount of moral hazard created by the program exceed the net benefit to those in need? How much moral hazard are we willing to tolerate to meet the need of those in real need?  If there are 500,000 people on food stamps and 25 of them use the stamps at a casino, should the program be curtailed cutting off another 25,000 people to prevent the abuse? 

Unfortunately, most people derive the answer to this policy question based on values or ideology rather than empirical data. As we can see from the recent survey on the causes of poverty, the question of moral hazard versus needs essentially defines the two political parties in the U.S.   

Those who believe in moral character versus circumstances continue to hold to their beliefs even as conditions change radically. It doesn't matter if unemployment is 4% or 8% or if poverty rates change from 11% to 16% - the conclusion is always the same - the safety net will lead insulate people from taking action to change their situation. 

Today, in one of the hardest times in American history, a near majority of Americans appear to have little or no tolerance for moral hazard. For them, taking care of our own is merely a crutch.