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Obama's safety net didn't cause the government shutdown

October 1, 2013: 12:03 PM ET

The nation's safety net hasn't gotten any safer under Obama.

chart-obama-safety-net_614xaFORTUNE -- One of the main narratives of the government shutdown is about spending. President Obama, first with the stimulus, but later pushing through extensions of unemployment insurance, has seemingly vastly expanded the social safety net.

The interesting thing is that both sides have bought into this narrative. Republicans say the expansion of the safety net and all the spending that went with it is why the national debt is ballooning and why we are facing a crisis. Indeed, Obama's health care law, which some think will push many Americans into federally subsidized health exchanges, appears to be the impetus for the shutdown. Democrats say that Obama was right to widen the social safety net in the face of the Great Recession. What's more, spending money on the poor is good stimulus. They tend to spend the money they get from the government, because they need it.

The other interesting thing about this narrative is that it appears to be wrong. That's the conclusion of a new study from two University of California economics professors, one from Irvine and the other from Berkeley, which was published last week by the National Bureau of Economic Research. The study finds that the spending on the social safety net -- things like unemployment and food stamps and other forms of welfare -- as a percentage of the population did not greatly increase in the Great Recession, at least not relative to other recessions.

MORE: Biggest winners of the government shutdown

That's not to say that government spending didn't increase in the recession. Unemployment insurance and food stamps and other programs like it are generally set to automatically dispense more money when there are more people in need of assistance. But what the professors, Marianne Bitler and Hilary Hoynes, found is that all of the spending increases on social welfare programs under Obama appear because of this automatic spending in response to a worse-than-usual recession, not because of Obama's stimulus package or any policy changes.

One of the most interesting graphs (above) in the study compares federal spending on a number of programs in the second year of Obama's presidency, 2010, to the second year of Reagan's, 1982. Food stamp spending is up, but percent of Americans getting unemployment insurance is down. But everyone knows that Reagan was basically a socialist.

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About This Author
Stephen Gandel
Stephen Gandel

Stephen Gandel has covered Wall Street and investing for over 15 years. He joins Fortune from sister publication TIME, where he was a senior business writer and lead blogger for The Curious Capitalist. He has also held positions at Money and Crain's New York Business. Stephen is a four-time winner of the Henry R. Luce Award. His work has also been recognized by the National Association of Real Estate Editors, the New York State Society of CPA and the Association of Area Business Publications. He is a graduate of Washington University, and lives in Brooklyn with his wife and two children.

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