An unpublished letter to the New York Times

Gary E. MacDougal (The Wrong Way to Help the Poor, 10/10/12) claims that the Federal government currently spends an average of $87000 a year on the typical family of four living in poverty. MacDougall’s calculation is out by a factor of at least four and probably more.

MacDougal’s source, Michael Tanner of Cato, treats all means-tested programs as anti-poverty programs. This includes the Earned Income Tax Credit, Family Tax credit and other programs for the middle and working classes. As Tanner admits, these programs have at least 100 million recipients, and probably many more. So, the average payment is less than $10 000, not the $20, 610 Tanner estimates.

It gets worse. The number of recipients doesn’t include children or adult dependents, but MacDougal’s calculation does. His family of four would include at most two benefit recipients, and would therefore receive less than the poverty line income of $23 050.

33 thoughts on “An unpublished letter to the New York Times

  1. These guys are always trying to pin the blame on poor people. When the GFC hit they were trying to blame people from minority areas because of some legislation encouraging bankers to lend to formerly discriminated-against areas. But the size of the bailout was so huge that they could have alternatively refinanced every outstanding mortgage in the US at 0% for a fraction of the largesse that has been subsidising the banker bigshots. Offloading properties to the poor end of town was just a way of losing that hot-potato.

    I don’t see poor people causing problems. I see the already rich benefiting from currency debasement and from being the other half in the bankers money-creation schemes. I see high-paid politicians and public servants. Subcontractors to these ludicrously waged wars, run in such a way as to keep the government loot rolling out for as long as possible. Wars by a superpower ought to be just about punishing a few of the top bigshots and getting home as soon as you possibly can. Beazley had it about right for our own commitment. He wanted us to come home a lot earlier. I’m sure he’s a fine ambassador but we really needed him here.

    We know what the Americans ought to do to help poor people. Stop taxing them. Keep the welfare low but don’t threaten to rip it away from them. Get rid of as much non anti-poverty spending as you can. And bring all those boys and girls home from overseas.

  2. @rog I hope you do not take this approach of an ever rising standard of evidence to other issues such as evidence on global warming.

    Labor struggled to get more than a 1/3rd of the primary vote for much of this and last year in various opinion polls. labor did worse at recent state elections.

  3. @Jim Rose It would be helpful if you had nominated the time period associated with this statement “Up to half the electorate used to vote Labor at elections. Labour is now struggling to win 30% of the vote.”

  4. Labor struggled to get more than a 1/3rd of the primary vote for much of this and last year in various opinion polls with trips below 30% as recent as June 2012. Labor did worse at the recent state elections getting 25% of the vote.

  5. @Jim Rose Well if you are going to confine your comments to the period <2 years then we have a reversal of polls in Victoria, a majority gain as preferred PM, a gain federally 2pp and a loss to Liveral in Sydney by election.

  6. This is an attempt at a repost without any links.

    There is an Australian version of this argument run by the IPA and Sinclair Davidson at Catallaxy.

    I commented on the IPA version at Club Troppo (Google “Club Troppo, could we abolish poverty if we didn’t spend so much on public servants) . Julie Novak of the IPA had argued that “the primary beneficiaries of big welfare are the middle-class bureaucrats who administer the welfare state in fine detail. To get a sense of how much welfare-state funding is being misdirected, consider this: based on an upper estimate of 13 per cent of Australians living in poverty, the Commonwealth’s social security and welfare budget of $117 billion could have been evenly shared among the poverty stricken with a $40,817 payment.”

    The most recent version of it can be found at Catallaxy (Google “What happens to our welfare spend”), where Sinclair Davidson suggest that we could reallocate our welfare spending: “Looking just at the Social Security and Welfare Budget of $131,656 million and then assuming, say, three million Australians living below the poverty line (even more generous than the ACOSS measure) that equates to (131,656,000,000/3,000,000) $43,885 per person.”

    Apart from the points made by John, the basic problem is that these commentators don’t seem to understand – or want to understand – that to estimate the impact of welfare spending on poverty you need to look at the difference in poverty before and after transfers, not how many people are left in poverty after they receive benefits.

    If it weren’t for current welfare spending, then there would be a lot more people in poverty than just 2 or 3 million.

    For example, in Australia we currently pay income support benefits to 5 million people (half of them age pensioners) and pay FTB to 1.8 million families with 3.4 million children (and around 25% of those families also receive income support benefits).

    Overall what we provide reduces relative poverty from a bit more than 6 million (before transfers) to roughly 2 million (after transfers), and of course those 2 million are a lot closer to the poverty line than they were before they received social security benefits.

  7. “I commented on the IPA version at Club Troppo (Google “Club Troppo, could we abolish poverty if we didn’t spend so much on public servants)”

    Thats one third of the story and an important third. But two more overlooked areas are 1. The relentless subsidy to the financial sector (and their favourites) and 2. The relentless subsidy to corporates.

    The Americans have to put up with this constant financial drain of overseas adventures. And this is a problem for us too, but in our case its more on the human then the financial level. But consider the subsidy to the medical-pharmaceutical industry (just for one case)…. The bill for the legal drug-dealers keeps growing.

    The least important drag on the economy is straight welfare transfer payments. Straight cash. If we deep-sixed all the pharmaceutical-doctor subsidies in their entirety, we could take one third of the savings to reduce the deficit, one third to increase the tax free threshold, and one third to boost sickness and elderly benefits, and everyone would be better off. People would change their health-care choices (mostly for the better by the way) economise on this over-use of what we get from the drug-dealers, and still have extra money in their pocket.
    But the silent thief in the room is the fractional reserve financial subsidy. I cannot for the life of me understand why leftists will sit still for this subsidy. Is there nothing that the hard right and the hard left can agree on when it comes to destroying parasitism? I would have thought I’d find allies thick on the ground when it came to destroying this most egregious menace.

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