The Problems of Using Entitlement Programs as Poverty Relief

I don't think anybody would consider themselves as pro-poverty.  On a national level, poverty holds back economic growth.  Individually speaking, abject poverty impedes on life, liberty, and pursuit of happiness.  Let's face it!  Poverty isn't fun, and no decent person wouldn't wish it on anybody else.    However, does sympathy for the poor justify the continuation of entitlement spending by the government?

This was the question I was asking myself while reading a study from Brookings Institute Senior Fellow Ron Haskins that is entitled Figthing Poverty the American Way today.  I was looking at the causes of poverty that Hasking had outlined in his work, mainly those of work rates, family composition, and education.  If we are to assume that his root causes are correct, then entitlement spending would not be conducive to mitigating the problem, especially when we see the trends spelled out by Haskins.

With work rates, Haskins shows that 75% of people who are in poverty do not have a job.  If you want to reduce your probability of poverty by 75%, get a job.  In this sluggish recovery, that would be easier said than done.  But again, joblessness is a huge indicator in poverty.  It would also help if job creation were encouraged rather than punishing the rich (i.e., the people who have the capital to create jobs).
 
Education is another big indicator.  The higher level of education you have, the higher the median income.  This causation makes sense.  Education measures level of intelligence and human capital.  More education leads to higher potential to contribute to society, which means a higher salary.  This discussion would obviously merit a discussion on education reform, a discussion which is too long to have at this time.  Although there are many reforms that one can discuss to better the education system in this country, it is safe to say that entitlement spending does not encourage the pursuit of higher education.  As I had outlined in a previous blog entry, entitlement programs such as Social Security creates shorter working life spans.  As such, the incentive to get a higher education wanes.

Family composition was an interesting argument because it would be something I would expect from Heritage Foundation, not the Brookings Institute, which is a centrist think tank.  Essentially, the argument goes like this: marriage creates stability, and in this specific argument, marriage creates economic stability.  The argument makes sense when looking at the statistics.  Poverty exists in 11% of households with two partners.  In households with single mothers, on the other hand, was at 44.3%.  That means that if you are in a household with a single parent, you are four times more likely to be in poverty!  This problem of single-head households because more pronounced when we see the number go from 6.3% in 1950 to 23.9% in 2010.  That is also an increase that is nearly fourfold. Since I have not considered family composition as a root cause of poverty prior to today, I have yet to dwell on solutions from a family composition standpoint.  The solutions that Haskins provides (e.g., tax incentives for married couples, sex education with government funding) are not libertarian in nature.  Being a libertarian, I would find it difficult to find a way to incentivize individuals to enter a [marriage] contract without it coming off as coercion.  Another blog entry for another time, I suppose.

Aside from not attacking the root problems of poverty, my main issue with these entitlement programs is that they are insolvent.  The crux of the debt ceiling debate that Congress has had lately is that spending exceeds revenue to a point where America will be unable to recover.  The big programs in question are Medicare, Medicaid, and Social Security.  The spending on these programs is no small matter.  According to the Center on Budget and Policy Priorities, a Left-leaning think tank, 20% of the federal budget goes to Social Security and another 21% goes to Medicare, Medicaid, and Children’s Health Insurance Program (CHIP).  If you want to add in the additional 14% for other safety net programs, the total of entitlement spending in this country is 55% of a $3.5 trillion budget!

There is clearly an issue with the rapid increase in expenditures, and it is common knowledge that the numbers will only get higher if left to their own devices.  A majority of Americans do not want a reduction in benefits, but they want the same benefits that are straining our economy further and further each day.  You can't have your cake and eat it, too.  Would tax hikes work?  I'm sure a majority of Americans are not susceptible to that idea, either.  Yet Americans want reform. 

The only reform that would actually work without bankrupting the economy would be a trend towards privatization of these services.  As I explained a couple of months ago, putting retirement funds in a private retirement account (PRA) would actually gain you more money in the long-run.  The Cato Institute outlines the issues involved with the centralization and price control of Medicare and how that can also be reformed through privatization.  If we are to alleviate poverty and assure that the American economy goes down the tubes, we need to find solutions that involve less government, not more.