Ed Glaeser on Welfare Reform
Harvard economist Edward Glaeser writes in a Bloomberg View column:
The Republicans should also demand consolidation of federal social policies. The U.S. has six large programs -- Temporary Assistance for Needy Families, Medicaid, food stamps, housing vouchers, unemployment insurance and the earned-income tax credit -- spread across four Cabinet departments and the Internal Revenue Service.
Every one of the six plans encourages recipients to earn less, because aid levels are tied to income. Although the adverse incentives in an individual program are moderate, collectively they can represent an effective tax rate far exceeding 50 percent. (How this works: The federal housing vouchers follow a 30 percent rule -- you spend 30 percent of your income on housing if you have a voucher. If your income goes up by a dollar, 30 cents of it goes for increased housing payments. With food stamps, for every extra dollar you earn, your allotment goes down by 30 cents. Putting the two programs together adds up to a 60 percent tax on earnings.)
The six programs should be better targeted, to provide more effective aid for the disadvantaged at less cost. Rather than extending unemployment insurance, which encourages long jobless spells, current recipients should receive a fixed payment for a limited duration that they will receive as long as they either look for work or find a job. Consolidation will also highlight the total amount of U.S. welfare spending, and will force serious thinking about the trade-offs between different types of spending.
This makes sense to me, though as a political matter it may be better for the Republicans to tackle welfare reform on its own rather than try to get it folded in to the fiscal cliff negotiations where the Democrats can then say the Republicans won't allow tax increases for millionaires, but they want to take away food stamp benefits from poor single mothers and children.
by Editor | Dec 12, 2012 at 10:04 am
Related Topics: FDIC, Government Spending, Unemployment
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