Posts Tagged ‘United States’

mike1june

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The majority of government expenditures in the United States go towards social insurance and means-tested transfers.* And the good news is, they work.

According to recent report by Bruce D. Meyer and Derek Wu, Social Security cuts the poverty rate by a third—more than twice the combined effect of the five means-tested transfers. Among those transfers, the Earned-Income Tax Credit and food stamps (officially, the Supplemental Food Assistance Program) are most effective. All programs except for the tax credit sharply reduce deep poverty (below 50 percent of the poverty line), while the impact of the tax credit is more pronounced at 150 percent of the poverty line. For the elderly, Social Security single-handedly slashes poverty by 75 percent, more than 20 times the combined effect of the means-tested transfers.** Supplemental Security Income, Public Assistance, and housing assistance have the highest share of benefits going to the pre-transfer poor, while the tax credit has the lowest.***

And the bad news?

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Even after all those expenditures, more than one tenth of Americans are still struggling to survive at or below the poverty line—12.7 percent according to the official poverty measure, 14 percent according to the Supplemental Poverty Measure.****

U.S. capitalism leaves such a large portion of the population in destitute circumstances that even massive public spending has not been able to solve the problem. In other words, anti-poverty programs work—but the mountain of poverty created by the American economy is simply too large to overcome.

But wait, it gets worse.

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Every year, the federal government doles out billions in “tax expenditures” to corporations (especially those that allow multinational companies to delay paying U.S. taxes on their foreign profits and “accelerated depreciation,” effectively a tax subsidy for spending on machinery and equipment) and individuals (through deductions for retirement savings, employer-sponsored health plans, mortgage-interest payments and, sweetest of all, income from watching the value of your home, stock portfolio, and private-equity partnerships grow). According to the Center on Budget and Policy Priorities, the total of all federal income tax expenditures in 2017 was higher than Social Security, the combined cost of Medicare and Medicaid, or the combined cost of defense and non-defense discretionary spending.

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The bulk of each year’s spending on individual tax expenditures is delivered in the form of deductions, exemptions, or exclusions.  The value of these tax breaks increases as household income rises: the higher one’s tax bracket, the greater the tax benefit for each dollar that is deducted, exempted, or excluded. As a result, these tax expenditures provide their largest subsidies to high-income people (27.5 percent to the top 1 percent in 2015), even though they are the individuals least likely to need financial incentives to engage in the activities that tax expenditures are generally designed to promote, such as buying a home, sending a child to college, or saving for retirement.  Meanwhile, moderate- and low-income families receive considerably smaller tax-expenditure benefits for engaging in these activities (only 22.3 percent for the bottom 60 percent of American taxpayers).

Eliminating those welfare programs for the rich would go a long way toward improving and expanding the anti-poverty programs for the nation’s poor.

Alternatively, the American economy could be reorganized so that it doesn’t generate such obscene levels of poverty in the first place, thereby eliminating the need for the endless debates about the size and nature of government programs to help the poor.

 

*Social insurance programs are available to all individuals who have experienced unfortunate circumstances or are aged. These programs include Social Security retirement and disability insurance, unemployment insurance, and Medicare. Means-tested transfers provide cash or in-kind assistance to only those with the lowest incomes. These programs include the Supplementary Nutrition Assistance Program (formerly, food stamps), Supplemental Security Income, and Public Assistance, as well as certain tax credits, housing assistance, and Medicaid. All told, according to my calculations (based on the historical tables from the White House Office on Management and Budget), these programs constituted 60 percent of all federal outlays in 2015, in addition to a large share of state and local spending.

**Another consequence of Social Security, as noted by Christina Gibson-Davis and Christine Percheski, is that the net wealth across the range of elderly households grew from 1989 to 2013 since “With stable income, fewer older people dipped into savings to pay their bills, and they had more money to invest”—in contrast to households with children most of whose wealth declined during that same period.

***The Supplemental Security Income program is a federal cash-assistance program specifically targeting individuals with low incomes and who are also aged (65 or over), blind, or disabled. Public Assistance broadly refers to benefits (often in the form of cash welfare) offered by state and local governments to needy families and individuals. An especially prominent program is the Temporary Assistance for Needy Families program, which is federally funded but run by states and targeted to low-income families with children. The Earned-Income Tax Credit is given to individuals and couples with positive earnings, especially those with qualifying children. Federal agencies as well as states and localities offer a wide variety of housing assistance programs, including rental houses or apartments that are managed by local housing agencies and funded by the Department of Housing and Urban Development and vouchers to tenants who are free to choose any housing that meets minimum health and safety standards.

****The supplemental measure extends the official poverty measure by taking account of many of the government programs designed to assist low-income families and individuals that are not included in the official poverty measure.

 

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The usual suspects have attacked Bernie Sanders’s proposal for the federal government to guarantee a job paying $15 an hour and health-care benefits to every American worker “who wants or needs one.”

According to Robert J. Samuelson, “The proposal would add to already swollen federal budget deficits. . .Then there’s inflation. The extra spending and higher wages might push prices upward.”

After listing a number of other “unavoidable” problems, Samuelson concludes:

Americans are suckers for great crusades that make the world safe for the pursuit of happiness. In this context, Sanders’s job guarantee seems a masterstroke. The chronically unemployed need jobs; and states and localities have large unmet needs for public and quasi-public services. It’s a bargain made in heaven.

Back here on Earth, the collaboration looks less noble. The object is to appear good and buy political support. Many of the suggested jobs seem best described as make-work. The irony is that, by assigning government tasks likely to fail, the advocates of activist government bring government into disrepute.

And here’s Ed Rogers:

Democrats want to talk about Republicans living in the past, but the new progressives, as they like to call themselves, are in fact a lot like the old socialists. They want free college, free cash, free health care, new mandates for this and that, and so on. The latest progressive policy du jour to be gaining traction among Democratic Party presidential hopefuls is the so-called “job guarantee.”

What they have in common, in addition to the usual red-blooded American red-baiting, is they both cite a liberal critic of the Sanders proposal, Mother Jones blogger Kevin Drum:

even our lefty comrades in social democratic Europe don’t guarantee jobs for everyone. It would cost a fortune; it would massively disrupt the private labor market; it would almost certainly tank productivity; and it’s unlikely in the extreme that the millions of workers in this program could ever be made fully competent at their jobs.

Let’s face it, Drum is right. The proposal would cost a fortune; it would massively disrupt the private labor market; it almost certainly would lower the official level of productivity; and millions of workers would probably never be fully competent at their jobs.

But that’s only because of how bad things are for workers in the United States right now. According to my calculations (illustrated in the chart at the top of the post), a quarter of full-time American workers currently earn less than $15 an hour. We’re talking about something on the order of 32 million people. And that’s not even counting part-time and unemployed workers. Plus all the workers, whether or not they currently have a low-paying job, who have costly or substandard health insurance.

Employing all those people—at $15 an hour, with medical benefits—would cost a fortune. But not employing them at decent wages already costs the United States a fortune, in individual and social costs. Moreover, there’s no doubt that, if people had a good shot at a federally funded job, they’d be more able to refuse the paltry pay and the indecent kinds of jobs private employers are currently offering. And workers on a federal jobs program might not achieve high levels of productivity—but they would be doing jobs, to repair the economic and social infrastructure, most people would benefit from. Finally, such workers might never become fully competent at their jobs. However, they would develop competencies above and beyond what they can manage to acquire when they’re unemployed or underemployed at their current low-paying jobs.

What Drum and others think is a hard-headed, realistic criticism of a job guarantee turns out to be a stinging indictment of American capitalism itself. The fact that there are “50 million people who would be better off with a government-guaranteed job than with the job they have now” calls into question the way the U.S. economy is currently organized.

That’s what’s really insane—sticking with the existing labor market, not the idea of proposing a Federal jobs program.