How government pays people to be poor

by Frank Mazur

Our federal government is well over $14 trillion in debt. States and municipalities around the country are also struggling with budgetary and economic issues. However, calls to get our revenues and expenditures back in line are met by many on the left with howls of indignation.

A recent letter to the Burlington Free Press asked, “Why no pity for poor people?” The Tea Party has been labeled as “mean-spirited” for pushing for spending cuts. Rep. Paul Ryan (R-Wisconsin) has been vilified for putting forward a plan to reform entitlement programs in an effort to balance the budget.

Here in Vermont, Republican Party Chair, Pat McDonald was immediately attacked by Democrats for suggesting a freeze on all non-essentials, non-Irene related spending. The Vermont Democratic Party’s press release called the measure, “…an extraordinary abdication of the state’s responsibilities to all of our citizens. We do not cut heating assistance to Vermonters in the Northeast Kingdom because other parts of the states were hit by Irene….”

Since President Johnson’s War on Poverty, $16 trillion has been spent to eliminate poverty. According to statistics, poverty is winning the war. Today, more than 40 million are on food stamps and the number of people counted in poverty is higher today than it was in the 1970’s.

President Obama, among many others, thinks we need to spend more on the poor. His FY2011 budget would have increased programs for the poor 42 percent above FY2008 levels. Over the next 10 years he would spend over $10 trillion more on welfare programs. That’s a lot of money.

Let’s look at the facts before taxpayers succumb to pressure to foot the bill for this spending. The Heritage Foundation released a Federal Spending analysis for 2010. One chart showed the largest Anti-Poverty programs and how their spending has jumped 89% since 2000. I was able to determine the number of participants for each program and determined an equivalent hourly wage for each. Here are a few program examples:

Program        2010 bdg.  Participants  $/participant   Eqv. Hr Wage

Medicaid        $274.4B       50M            5,508             $2.75

Food Stamp   $72.5B         40M            1,812             $  .91

EITC                $ 49.5B        25.9M         1 ,913             $  .96

Housing         $ 35.8B        15.8M          2,265             $ 1.13

Child Care      $  6.3B         1.6M           3,949             $1.97

Child Nutri      $17.3B         3.3M           5,245             $2.62

TANF               $17.6B         4.4M            4,035             $2.02

Total Anti-Poverty Spending: $616.5B

Given these numbers, Federal Anti-Poverty income to recipients is $44,000. This is, of course, tax free and does not include money from any state programs, which can themselves offer somewhere between 20-40% additional in benefits.

Assuming a person is at the poverty level (which is $22,050 for a family of four) and they participate in all the anti-poverty programs, their total government provided income could potentially be $66,050 — tax free. Assuming the family uses ½ the benefits like housing, food stamps, child programs Medicaid and EITC, they’d have a total tax-free income of $44,050.

This goes a long way toward explaining the findings in another Heritage Foundation study on poverty that revealed:

Overall, the typical American defined as poor by the government has a car, air conditioning, a refrigerator, a stove, a clothes washer and dryer, and a microwave. He has two color televisions, cable or satellite TV reception, a VCR or DVD player, and a stereo. He is able to obtain medical care. His home is in good repair and is not overcrowded. By his own report, his family is not hungry, and he had sufficient funds in the past year to meet his family’s essential needs. While this individual’s life is not opulent, it is equally far from the popular images of dire poverty conveyed by the press, liberal activists, and politicians.

The mainstream media likes to stress people in poverty live in crumbling shacks and receive their meals in soup kitchens. But the above numbers show the American poor are better off than what the images convey. The payment by anti-poverty programs to the poor are not counted when the government measures that inequality.

We have heard a lot recently about the injustice in Warren Buffet’s secretary paying a higher tax rate than her boss. But what about the injustice of a hard working citizen who makes $40,000 a year, and pays taxes on that income so that someone on welfare can enjoy more than that amount tax (and work) free?

Even President Franklin Roosevelt said in his 1935 State of the Union Address that, “to dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit.”

There are those who genuinely need help, and it is for these people that the social safety net exists. But, too often, politicians see these programs as a way to create long term dependency rather than a short term bridge to self-sufficiency. The un-intended consequences will be when the working taxpayer will themselves qualify for these programs because their tax burdens will destroy the incentive to work.

One thought on “How government pays people to be poor

  1. Frank, excellent article with good stats. I can say that the first thing Obama did when he got in office is increase EITC to include a 3rd child. He eliminated the Clinton welfare reforms and he increased the income limits for food stamps. As a working person who counts every penny, I’m disgusted in our welfare system that gives low income and seniors $ at the first of every month (direct deposit no less). Its like Christmas at the supermarkets, Walmart & Costco on the first of the month. More people need to pay to balance our budget. I like Hermain Cain’s 999 plan, because the 9% sales tax will enforce that everyone pays.

    I also need to mention Act 60, property tax rebate & renter rebate, another form of welfare, just at the state level, with no requirement to pay back.

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