Government has replaced work and community for millions of Americans.
I appreciate Michael’s reply to my post from Monday and agree with the vast majority of it. (The only thing I’d dispute is the bit about the “two-income trap,” which Michael correctly attributes to Elizabeth Warren, who is a charlatan on all subjects economic. You can read a thorough demolition of her basic thesis here.)
My point in writing the original post was to say that government benefits targeted to families with married parents, at least one of which works full-time, will mostly go to families who are already very well off. Child-care subsidies, child-tax-credit expansion, mandated paid parental leave, housing subsidies, college subsidies/loan forgiveness, greater K–12 education spending, and universal pre-K — all ideas that at least one of the two candidates for president supports — would primarily benefit households that don’t need more money. If eligibility for those benefits were capped at, say, $50,000 household income, most American families would be excluded.
Adjacent to that point is Michael’s point, which is:
In the richest nation that ever existed, where the poor have enough calories to be obese and the spare income to own what were recently luxury electronics, they’ve lost something far more valuable — and the costs to the rest of the society are only going to compound over time.
Very true, and very bad. A big part of the reason for this is that the government has replaced family and civil society as the primary source of support for low-income people.
The Census Bureau income data that I cited has one major flaw: It does not include most transfer payments as income. Back in 2022, Phil Gramm and John Early wrote for the Wall Street Journal about how much the picture changes if those payments are included. (The picture is roughly the same today.)
The numbers are stunning:
In 2017, among working-age households, the bottom 20% earned only $6,941 on average, and only 36% were employed. But after transfer payments and taxes, those households had an average income of $48,806. The average working-age household in the second quintile earned $31,811 and 85% of them were employed. But after transfers and taxes, they had income of $50,492, a mere 3.5% more than the bottom quintile. The middle quintile earned $66,453 and 92% were employed. But after taxes and transfers, they kept only $61,350—just 26% more than the bottom quintile.
After taxes and transfer payments, working-age households in the bottom quintile, most of whom do not work, make only a little bit less than households in the third quintile, nearly all of whom work.
This result of government policy engenders enmity between people in the bottom half of the income distribution, not between the rich and the poor. Someone who is working overtime in a grinding job can look around his community and see others not working yet having roughly the same income. That’s dispiriting and unfair.
The especially tragic thing is that those who aren’t working are rationally responding to the incentives the government has created. “Given the surge in transfer payments since the war on poverty, it isn’t surprising that the percentage of working-age people in the bottom quintile who actually worked plummeted from 68% in 1967 to 36% in 2017,” Gramm and Early wrote. How big was that surge? “Real government transfer payments to the bottom 20% of household earners surged by 269% between 1967 and 2017, while middle-income households saw their real earnings after taxes rise by only 154% during the same period.”
The decline in employment among the poor denies them the opportunity to develop the skills that would help them improve their situation. It also denies them the dignity that comes with work, and their children the example of adults working.
It removes many of the incentives for private civic associations to help the poor. It encourages the mindset, “If the government is already doing it with the taxes it already took, what’s the point?” Many poverty nonprofits today act as conduits for government money rather than bottom-up associations funded by voluntary donations. They excel in federal grant applications more than in aiding the poor.
Work requirements for all welfare benefits would be a good — and popular — policy that could help alleviate some of these problems. Further expanding government benefits to families with above-average incomes would expand the maladies government benefits have already created, and do so with money that the federal government does not have.