CBO data show that government transfers now account for a historically large share of income among low-income households. Does today’s welfare system encourage mobility or entrench dependency?
President John F. Kennedy once said, “We must find ways of returning far more of our dependent people to independence.” President Lyndon B. Johnson sought to meet that challenge by launching the War on Poverty in 1964, insisting that its purpose was not to make people “dependent on the generosity of others,” nor merely to “relieve the symptom of poverty,” but to “cure it and, above all, to prevent it.”
Sixty years and some $20 trillion in welfare spending later, that message appears to have gotten lost. Rather than helping the poor climb out of poverty toward self-reliance, government handouts have instead pulled the ladder away by supplanting work as their primary source of income.
According to January’s Congressional Budget Office (CBO) report, average total income for the poorest households nearly doubled from 1979 to 2022. But most of that increase was fueled by government wealth transfers.
Cumulative Growth of Income Among Households in the Lowest Quintile of the Income Distribution, by Type of Income
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Welfare has always entrenched dependency. It's hard to avoid that outcome.
The first programs had these big "welfare cliffs", where earning an extra dollar could push you out of eligibility entirely, costing you tens of thousands of dollars. They've done a lot to smooth those out in various programs, but they still exist when you mush all the programs together.
The more fundamental problem is that reducing benefits as earnings increase is functionally the same as a very high marginal tax rate: i.e. losing $40 of benefits because you earn an extra $100 is a 40% tax as far as the individual is concerned.
These are all part of the case for replacing the vast morass of entitlements with one simple UBI, which has none of these problems.
This is an astonishing graph
I guess you could argue that in real terms the poor got worse off (during the 90s and then esp after the GFC) so we upped the transfers + perhaps the respectability/living standard demands increased so we again upped the transfers.
Still. Quite a lot about this is no bueno.
Does this include disability? If you include that, I wonder what it would look like.
It seems like so many people that I meet that have served in the military, have full or 75% disability. They must be giving those designations out like candy.
But here's the fun thing...they're not disabled! Some of them are, of course. But a close acquaintance who does long distance bike rides and just started an outdoor guide company is either 75 or 80% disabled, and gets paid a lot of money because of that.
His story is that when he was discharged, somebody in the military - a counselor or something - helped him put together multiple different little ailments and patch it into a lifetime disability payment.
And I've run into multiple other ex-service members like this.