Fixing the Welfare State

If I said the biggest thing standing in the way of poor people getting out of poverty is the welfare system, would you believe me?

You'd better.

As much as the left rails on about regressive taxation, the -really- regressive thing in this nation is the welfare system.  For a single mother making less than $69,000 a year, on average a pay raise costs her money.

An unemployed single mother is better off than a single mother making $45,000 a year.

Why is this?  Because of the way the welfare system is organized.  Each benefit has a cut-off point - make less than this amount, you get the benefit.  Make more than this amount, you don't.

Around twenty years ago, this wasn't the case.  Welfare reform restructured the welfare system so that every dollar you earned improved your life.  Welfare rates started declining - and Clinton famously declared that his was the last presidency of the welfare state.

Unfortunately, these fixes weren't permanent.  They flattened the slope, but did so by adjusting benefits.  Benefits have since risen - significantly.  Which has recreated several "welfare cliffs" - that is, earning levels at which a raise will cost its earner money.

The community I grew up in was -filled- with people sitting at the welfare cliff.  Mechanics who refused to take any new customers, clerks who refused any additional hours, mothers who -did not want- child support, because all of these things would result in a dramatic reduction in their standard of living.  (Unreported income, of course, was a rampant thing there.)

The cost of welfare cliffs isn't just in the dollars of welfare.  It's in billions if not trillions of dollars of lost productivity from people who can't afford to make any more money, can't afford to do any more work.

The UK isn't much better; the marginal value of additional wages for somebody in poverty is 4%.  Because of the reduction in their benefits, additional work doesn't pay.

I don't care if you support welfare, or oppose welfare - what we have today -sucks-.  It's a system which -literally- traps somebody in poverty - if you have to make $20,000 more than you make today, -just to avoid being any worse off-, you have no incentive, whatsoever, to make a dollar more.

So whether you support welfare, or oppose it, one thing we -should- be agreed upon is to fix the broken system that exists.  A fixed system will cost us less money, will increase the productivity of the nation, and for those who care about such things, will improve tax revenues.

The simplest fix is a systematic overhaul to produce incremental reductions, rather than eliminations, of benefits.  The fix should ensure that, even after taxes, a person still keeps at least fifty cents of each new dollar they earn.  And it should require that any changes to benefits also update the fixes so we aren't fixing this problem yet again in another twenty years' time.

I oppose the welfare system, incidentally.  But if we must have one, I'd rather have one that doesn't make things worse for poor people.  It should incentivize the right behaviors, rather than punishing them.

And hell.  Maybe we'll actually see the end of the welfare state in our lifetimes if it doesn't primarily work to perpetuate itself.