Charity provides not much bang for the buck
|September 13, 2008||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
Charity provides not much bang for the buck
Our Trillion-Dollar War on What?
We could lose the programs, the bureaucracies, and the favoritism. Until then, consider the wasteful way we share. This 2008 article is out of the Independent Institute (Sept 5). The writer is a Research Fellow at the Alfred F. Chalk Professor of Economics at Texas A&M University and the author of Stealing from Each Other.
by Edgar K. Browning
No, its not the War in Iraq — its the War on Poverty. Incredible as it may seem, Americans transfer more than a trillion dollars each year to low-income families through a bewildering variety of programs, all in the name of fighting poverty and inequality. Thats about seven times the cost of the Iraq war.
How do we spend so much? In 2005, $620 billion was spent on more than eighty welfare programs funded by federal, state, and local governments. But low-income persons receive benefits from other government programs that are not designated as welfare programs. Most notably, they receive benefits from Social Security, Medicare, and the public school system.
I estimate that Social Security benefits for those in the poorest fifth of the population totaled $100 billion in 2005. Medicare provided another $115 billion, and educating the children of low-income families cost $105 billion more. (These figures do not measure total spending on these programs but only the expenditures benefiting those in the lowest fifth of the income distribution.) To these sums we may add $40 billion in uncompensated medical care and $78 billion in private charity.
Grand total: $1.058 trillion in 2005. It would be larger today.
- * To put a trillion dollars in perspective, its more than twice the federal budget for the US military.
* Its larger than the total revenue collected by the federal individual income tax.
* Its about ten times as much as we spent on redistributive policies in the 1950s (in inflation-adjusted dollars).
Its equal to the total before-tax cash income of middle-income households. Thats right, we transfer to the low-income population an amount equal to the entire income of middle-income households, that is, households in the middle fifth (40th to 60th percentile) of the American income distribution.
If a trillion dollars were simply given to those counted as poor by the federal government (37 million in 2005), it would amount to $27,000 per person. Thats $81,000 for a family of three, higher than the median income of all American families, and far greater than the poverty threshold of $15,577.
By any reasonable standard, a trillion dollars devoted to fighting poverty and inequality is a substantial sum.
What do we get for it? That is the question we should be asking our politicians in this election year as they urge us to spend still more on the War on Poverty.
When Lyndon Johnson inaugurated the War on Poverty in 1964, he assured the public that . . . this investment [of tax dollars] will return its cost many fold to our entire economy. Now that this investment has reached a trillion dollars a year we should evaluate whether the returns have, in fact, been large. Some questions to consider:
Is the low-income population more independent and self-supporting than before the War on Poverty?
Has the trillion-dollar expenditure eliminated poverty in America? Reduced it dramatically?
Has the trillion-dollar expenditure reduced inequality? Are the egalitarians grateful to the American people for their sacrifices in this area, or are they continually carping about increasing inequality?
Are more disadvantaged children being raised in stable two-parent families today than before the War on Poverty?
Are the children in low-income families getting good educations that prepare them for productive lives as adults? Have the racial gaps in educational achievement been eliminated or greatly narrowed?
Has illegitimacy been reduced in the low-income population?
Is crime lower today than in the 1950s, before the War on Poverty?
The answers to these questions, I submit, paint a bleak picture of the accomplishments of the American welfare state. While a nuanced interpretation of the evidence may identify a few positive returns on our investment, we have a right to expect a lot more for a trillion dollars a year. Perhaps it is time to stop worrying about an exit strategy for the War in Iraq and formulate one for the War on Poverty.
JJS: Its not either/or. Its both/and. And the way to extract ourselves from both dilemmas is related and based on the gifts of Earth.
We must accept that the profit from oil is part of the commons. And raise oil royalties to full market value and pay oil dividends in Iraq as government does in Alaska. Everybody getting a fair share that way makes it hard for a few to use war to snag the lion’s share.
And we must accept that the profit from locations is part of the commons. And establish a joint agency in the Mideast to recover site rents and pay them out as dividends. Jews and Arabs getting a fair share that way mollifies a main motive for war: to fight for land.
And similarly in the US, we would shift taxes off our efforts and instead recover these natural rents, then share them via periodic dividends. Not only would everyone have a bare minimum but thered no longer be the stigma and disincentive to produce. Both the idle poor and the idle rich might learn to like contributing real value to their society.
Jeffery J. Smith runs the Forum on Geonomics.
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