WASHINGTON, June 19, 2014 — In Economics, rational choice theory says that individuals will take actions that they believe will be in their best interest. If that’s true then every time someone chooses to renounce their citizenship, or relocate their company outside of the U.S. or accept a handout, that reflects a rational decision.
This apparently is the fundamental change Barack Obama promised: Last year about 3,000 Americans gave up their U.S. citizenship. That number was more than six times higher than the average from 1998 to 2009. Since 2009 the number has increased rapidly (except for a dip in (2012). This year, we are on pace to exceed 4,000.
Why are so many Americans leaving when, at the same time, record numbers are entering, legally or not?
For those who live in countries like Honduras, much of which is lawless, walking to the U.S. makes sense. Staying home means a terrible life where basic survival may be impossible. Because the Obama Administration has said that it will not deport children, tens of thousands of young children and mothers with infants have somehow managed to cross the most difficult terrain to arrive at the Texas border. They have made a rational choice. Before Obama’s announcement that he would not deport them, the choice to come was less clear; it was possible they could arrive in the U.S. and then be sent back. Once Obama changed the policy, the rational choice was now to come.
Many of those who complain that too much of their hard-earned money is being taxed away and given to others by transfer programs would say that freeloaders are taking advantage. They might further argue that freeloaders are not really making rational decisions to take the government handouts. This is because the programs are supposedly temporary. But Obama changed that equation, too.
After Presidents Reagan and Clinton fixed the welfare system to encourage people to become self-sufficient, Obama changed it, making welfare easier to collect. It is so much easier that the program is now viewed as long-term by welfare recipients. This changes the equation and reduces the incentive to leave the welfare roles. The rational choice is to stay on as long as possible.
The same applies to unemployment benefits. The intention was to pay unemployment benefits for a six to nine month period. That was considered a sufficient amount of time to find another job. Obama increased the benefit period to up to three years. Since the Obama economy was producing few or no well-paying jobs, recipients collected benefits for as long as they could while not even looking for a job until 30 days before the benefits were due to expire. This was a rational decision also, since working at a full-time job added little extra income, but required significantly more effort.
The problem is the distortion of the alternatives. Obama’s taxing policies distort the view of America for high contributors. His taxing and regulatory policies have distorted the view of the American marketplace for entrepreneurs. Obama’s social programs distort the view of self-reliance. With those distortions, Americans are making rational decisions to leave the country, to continue collecting freebies and even to avoid making domestic investments.
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