quote:

However, concentrating on AFDC ignores the total value of welfare benefits, which include food stamps, Medicaid, public housing subsidies, and other benefits. As a 1995 Cato Institute study showed, the value of a full package of welfare benefits for a mother and two children ranged from a high of more than $36,000 in Hawaii to low of $11,500 in Mississippi, more than sufficient enough to support to provide an incentive for out-of-wedlock childbearing.

quote:

Robert Moffitt reviewed the findings of 68 studies on the effect of welfare on marriage and fertility. He concluded that, although there is a consensus that the AFDC program had a negative effect on marriage, there was “considerable uncertainty surrounding this consensus because a significant minority of the studies finds no effect at all, because the magnitudes of the estimated effects vary widely, and because there are puzzling and unexplained differences across the studies by race and methodological approach.

quote:

Mississippi has the second highest rate of children born out of wedlock in the country. It also has the lowest welfare and food stamp benefits for AFDC mothers in the country. This correlation generally holds across the nation as well -- states with higher-than-average AFDC benefits tend to have lower-than-average nonmarital birthrates.

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Harvard economists David Ellwood and Mary Jo Bane studied two groups of unmarried women: the first was eligible for benefits if they had children out of wedlock; the second was not. Even by limiting their comparison to states with high welfare benefits, they were unable to find a significant difference in either groups' rate of nonmarital child births.

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It should be acknowledged that the connection is not perfect. For example, Louisiana and Mississippi had approximately the same rate of out-of-wedlock births as did California but had much lower Aid to Families with Dependent Children benefits. 30 That would appear to contradict the argument that high welfare benefits lead to more out-of-wedlock births. But the actual rate of AFDC payments is of far less importance than the value of the entire welfare package within the context of the local economy. 31 In that context, the welfare packages being compared were essentially equal. It is therefore not surprising that they are correlated with similar rates of out-of-wedlock births.

quote:

Researchers William Darity and Samuel Myers studied the relationship between female-headed households and the size of welfare benefits in specific geographical areas between 1955 and 1972. They found that the higher the welfare benefits, the lower the rate of female-headed households.(5)

quote:

And as for welfare's influence in encouraging mothers to divorce, the General Accounting Office released a report in 1987 that summarized more than one hundred studies of welfare since 1975. It found that "research does not support the view that welfare encourages two-parent family breakup." (6)

quote:

The same results can be seen in studies of welfare systems in other countries. For example, a recent study on the impact of Canada’s social welfare system on family structure concluded, “providing additional benefits to single parents encourages birth of children to unwed women”. Studies of Britain have found similar results. Likewise, an Australian study indicated that an increase in out-of-wedlock births as a result of their country's welfare benefits.

quote:

Of course women do not get pregnant just to get welfare benefits. It is also true that a wide array of other social factors has contributed to the growth in out-of-wedlock births. But, by removing the economic consequences of a out-of-wedlock birth, welfare has removed a major incentive to avoid such pregnancies. A teenager looking around at her friends and neighbors is liable to see several who have given birth out of wedlock. When she sees that they have suffered few visible immediate consequences (the very real consequences of such behavior are often not immediately apparent), she is less inclined to modify her own behavior to prevent pregnancy.

Proof of this can be found in a study by Professor Ellen Freeman of the University of Pennsylvania, who surveyed black, never-pregnant females age 17 or younger. Only 40% of those surveyed said that they thought becoming pregnant in the next year “would make their situation worse.”(10) Likewise, a study by Professor Laurie Schwab Zabin for the Journal of Research on Adolescence found that: “in a sample of inner-city black teens presenting for pregnancy tests, we reported that more than 31 percent of those who elected to carry their pregnancy to term told us, before their pregnancy was diagnosed, that they believed a baby would present a problem…”(11) In other words, 69 percent either did not believe having a baby out-of-wedlock would present a problem or were unsure.

quote:

When the War on Poverty began, only a single welfare program—Aid to Families with Dependent Children (AFDC)—assisted single parents. Today, dozens of programs provide benefits to families with children, including the Earned Income Tax Credit (EITC), Temporary Assistance for Needy Families (TANF), the Women, Infants and Children (WIC) food program, Supplemental Security Income (SSI), food stamps, child nutrition programs, public housing and Section 8 housing, and Medicaid. Although married couples with children can also receive aid through these programs, the overwhelming majority of assistance to families with children goes to single-parent households.

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Originally posted by lazybones
Well,no. Because your argument is that we should abolish welfare altogether. The 1996 reforms did not come even remotely close to doing this, and welfare spending continued to grow afterwards. My argument is that a disciplined welfare state is a good tool to reduce poverty, and the welfare reforms after 1996 show that is correct. You seem to be moving the goalposts here.

quote:

PRWORA replaced AFDC with the Temporary Assistance for Needy Families block grant. This effectively abolished most federal eligibility and payment rules, giving states much greater flexibility to design their own programs. The TANF block grant was a fixed amount for each state, largely based on the pre-reform federal contribution to that state's AFDC program. In addition, as mentioned above, the block grants eliminated welfare's "entitlement" status, meaning that no one would have an automatic right to benefits. 14 States could choose which families to help. States were however, required to continue spending at least 75 to 80 percent of their previous levels under the MOE provision.

quote:

Each year, the five states that achieved the greatest reduction in out-of-wedlock birth ratios (defined as the proportion of out-of-wedlock births to total births), while also decreasing the ratio of abortions to live births, would receive $20 million in additional federal funds. PRWORA also included other provisions targeted at out-of-wedlock births, including (1) unmarried mothers under the age of 18 are required to remain in school and to live with an adult; (2) states are allowed to prohibit additional benefits for women who conceive additional children while on welfare; (3) states are required to establish numerical goals for the reduction of teen pregnancy and out-of- to implement a comprehensive program to combat teen pregnancy and to ensure that at least 25 percent of American communities have teen pregnancy prevention programs in place by 2002; and (5) states are authorized to spend unused TANF funds on teen pregnancy prevention and teen parent services.

quote:

Most TANF adult recipients were women, as men only represented 14.8 percent of adult recipients. Ninety percent of adult recipients were the head of the household. There were about 94,800 teen parents whose child also was a member of the TANF family, representing 12 percent of recipients aged 13-19.

quote:

PRWORA contained few specific programs aimed at reducing out-of-wedlock births. 104 Nevertheless, welfare reform could be expected to reduce out-of-wedlock births by reducing the incentives to become a single mother and increasing the incentives to marry. In particular, work requirements, time limits, sanctions, and other assistance on the same terms as under the old Assistance to Families with Dependent Children program. Moreover, PRWORA gave the states both incentives and flexibility to develop their own programs targeted at reducing out-of-wedlock births. Many states took advantage of this opportunity and imposed requirements that teen mothers continue to live at home with their parents and established "family caps": refusing to increase benefits for women already on welfare who have additional children out of wedlock. States, however, did not appear to enact any new programmatic initiatives aimed at reducing out-of-wedlock births. The Center on Budget and Policy Priorities estimates that states are spending only about one-half of 1 percent of TANF funds on reducing out of-wedlock births.

quote: (post)

Originally posted by lazybones
No, because I support the reforms. I don't support a welfare state that gives money in an irresponsible manner, and the '96 reforms fixed many of those problems. You are moving the goalposts and defending a set of reforms that doesn't even enshrine your beliefs of the welfare system into law, and actually done nothing to stop the rise in welfare spending that you right wingers so constantly decry.

quote: (post)

Originally posted by lazybones The AFDC was a truly flawed element of the pre-96 welfare system, so I'm not going to defend it. I'll simply point to other welfare programs which can alleviate poverty whilst still encouraging work, like the EITC.

quote:

People within the EITC’s income range have an added incentive to find a job because the credit increases the reward for working. Most economists think that the EITC particularly encourages low-income single mothers to join the labor force, and there is solid empirical support for that positive effect.13
However, there is doubt about the strength of this effect.14 Supporters of the EITC often point to the strong gains in the participation of single mothers in the late 1990s as evidence of the EITC’s benefits. But while the number of EITC recipients soared between 1987 and 1994, the number was flat in the late 1990s, as shown in Figure 1. Yet the years from 1994 forward were precisely the years that labor force participation by single mothers was growing strongly.15 That suggests other factors caused much of the participation increase in the late 1990s-perhaps the strong economy at the time and welfare reforms that increased work requirements. Note that with the weaker economy after 2000, the participation of single mothers fell substantially, suggesting that it is the economy-not the EITC-that mainly drives participation changes.

quote:

In the phase-in region, the EITC leads to an ambiguous impact on hours worked due to the negative income effect and positive substitution effect.
In the flat region, however, the EITC produces a negative income effect leading to an unambiguous reduction in hours worked.
In the phase-out region, the EITC produces a negative income and negative substitution effect leading again to an unambiguous reduction in hours worked.

quote:

This paper examines the response of workers, in terms of hours worked, to the Earned Income Tax Credit (EITC). Several studies have consistently found that receipt of the EITC induces single women with dependent children to enter the labor market. These same studies, however, did not find the expected negative impact of EITC receipt on number of hours worked by single mothers already in the labor market. The possibility exists that this lack of finding is due to the methodology used in these studies. Employing a regression kink design, I exploit the discontinuities in the EITC benefit function to examine single mothers’ hours of work. Using 13 years of the CPS, with 9 of those years linked to IRS data, I examine single mothers whose earned income entitled them to a credit; in particular, I compare those just before a kink to those just after the kink under the assumption that these two groups of women will be similar on observed and unobserved characteristics. I find that mothers who face a high implicit tax induced by the EITC’s design reduce their hours of work. However, results are robust only for women with more than one child.

quote:

Previous work has focused on discerning the intensive response by using increases in EITC generosity as a source of identification (Eissa and Liebman, 1996; Eissa and Hoynes, 2006), or by exploiting the variation in state tax structure, including state-specific EITCs (Meyer and Rosenbaum, 2001). Many studies rely on a difference in-differences approach, using single women without children as a “control” for single mothers, or single mothers with one child as a “control” for those with more than one. These methods rely on the fact that single women receive different levels of benefit depending on their family structure; those with more children receive a higher benefit.

quote:

In the work presented in this paper, I rely on the discontinuity in the EITC benefit function to discern hours worked response. The research design is well suited to the question, and constitutes an improvement over previous research since it permits comparison of female workers within the same group (those with one child or more than one 2 child), rather than relying on a comparison between groups. The analysis also relies on workers’ updating their information and on the time-order of questions on income, earnings, and hours worked asked in the March Supplement to the Current Population Survey (CPS).

quote:

The present study is also an improvement over earlier analyses in that it uses, for 75 percent of the sample under consideration, actual earnings reported on tax filings rather than CPS-reported earnings (which are subject to reporting error (Bollinger, 1998)). Use of administrative records for earnings and adjusted gross income improves the accuracy of the sorting of earners on either side of the kink points in the EITC benefit function, a necessary condition for the regression kink design.

quote:

Interestingly, the effects on the intensive margin of labor supply are quite different. As seen in Table 3, the EITC encourages single mothers in the labor force to work fewer hours per year. Notice that annual hours worked fall by approximately 10 percent for single mothers with one child, from 0.519 to 0.461 hours on average (hours are normalized to be between 0 and 1). A similar reduction occurs for single mothers with two children. For these women, the marginal tax rates they face are quite high with the EITC, as shown in Figure 2. Once their income reaches a threshold (of approximately $20,000), marginal tax rates go from approximately 10 percent without the EITC to approximately 31 percent as they are being phased out of the EITC. These high marginal tax rates discourage work. Both substitution and income effects work in concert to discourage work

quote:

Empirical work has produced a range of findings with respect to the effects of the EITC at the intensive margin. For example, Eissa and Liebman (1996) find no effects for unskilled single mothers. Others suggest that the effects on annual hours for single women may be negative (Dickert, Houser, and Scholz, 1995). However, getting clean estimates for the intensive margin is difficult because of the selection and endogeneity biases present in the nonexperimental data (Eissa and Hoynes, 2006). Our approach allows us to circumvent these difficulties

quote:

One particular set of studies demonstrates the danger of the income effect. Between 1968 and 1982, the federal government conducted four experiments to see how work levels would change if low-income families were guaranteed an income coupled with work incentives of varying strengths. The results showed clear income effects, in that work levels varied inversely with the grant level. But the work incentives showed less effect than statistical studies had anticipated. That is, varying the benefit-reduction rate in response to earnings and thus the effective wage had little impact on whether recipients worked.

Some say, again, that the problem here was that neither AFDC nor the income-maintenance experiments strictly required work in order to qualify for a benefit. So work incentives should be more effective in the case of the EITC, since only workers are subsidized. But in recent decades, several experiments have tried to motivate welfare mothers to work by linking various benefits to employment, and the effects have been uneven at best. These projects included the New York State Child Assistance Program, the New Hope Project, the Minnesota Family Investment Program, Canada’s Self-Sufficiency Project, JOBS-Plus, and the Opportunity NYC – Family Rewards Demonstration.

All of these efforts conditioned the benefits they offered in some way on employment. And some had sizable effects — MFIP and the Self-Sufficiency Project raised the employment of welfare mothers by a third.

But a pure substitution effect would operate by non-workers finding out about work subsidies, calculating that work now pays more, and entering jobs on their own. All the recent projects relied on a lot more than that to raise work levels. Except for CAP and JOBS-Plus, each of the programs required that eligible people work at least 30 hours a week to receive the benefits. Each program also used staff or other activities alongside the incentive to persuade eligible individuals to put in those hours and helped them to do so. MFIP even enforced participation for long-term recipients, on pain of cuts in their welfare payments. Some projects — CAP, New Hope, and Opportunity NYC — recorded no or small work increases even with a 30-hour rule and a staff structure. In no case did a work-incentive experiment achieve what the recent studies claim regarding the EITC: a large work increase based on the substitution effect alone.

quote:

Doubts about the effects of the EITC are also raised by the fact that many of the eligible individuals in these experiments declined the benefits offered. In CAP, only a sixth of mothers eligible for the program took up its offer to earn higher incomes through working. In SSP, only 36% of eligible people participated at any time, and only 25% or less in any given month. Most notably, New Hope offered a generous package of jobs paying at least poverty-level wages, plus child and health care, in return for working 30 hours a week. And it did so in two Milwaukee neighborhoods where 12,000 to 30,000 adults were eligible. Yet it took the program 17 months to enroll only 1,362 applicants. This appears to contradict the premise underlying work incentives, which is that non-working adults actively seek to work but are barred from doing so by adverse incentives.

quote:

During my own research on welfare reform in Wisconsin, I interviewed 60 welfare officials at the county and state levels. This was in 1995, when the state’s welfare caseload was plummeting, a fall closely linked to rising work levels. I asked respondents to explain this decline. They mentioned a wide range of factors, especially welfare reform, good economic conditions, and child-support enforcement.

Not a single one cited the EITC or the state’s own wage incentive. In 2005, I asked several more senior welfare administrators in Wisconsin and New York whether they had seen or heard of an EITC effect on recipients going to work. The officials included Jean Rogers, who had headed welfare reform in Wisconsin; Jason Turner, one of her leading deputies in Wisconsin who later led welfare reform in New York City; Mark Hoover, who was a senior aide to both Rogers and Turner; and Swati Desai, longtime chief of welfare policy and evaluation in New York City. The city, like Wisconsin, underwent a radical reform, causing an extreme decline in caseloads. And New York state, like Wisconsin, provided its own low-income wage subsidies on top of the EITC. If the credit had any effect on going to work, it should have shown it here. But Rogers reported that “[t]here was no indication that EITC was any sort of motivating factor in people’s decision to go to work.” Recipients became interested in the credit only after they had been “working for a while” and saw what they could get from it. Turner said that front-line supervisors he had talked to in work programs emphasized a duty to work rather than the rewards.

But after recipients left welfare, EITC might operate as “an incentive for keeping people in the labor force, as opposed to a motivating factor getting them there.” Mark Hoover told me that he had tried and failed to get more welfare recipients to apply for the EITC in several states. In none of these states had he ever “had anyone claim EITC had an effect in the initial decision to go to work.” But after getting off welfare, the credit might help some recipients stay off.

quote:

Eliminating the EITC would:
Increase tax revenues by $56 billion on a static basis;
Increase GDP by $34 billion; and
Produce slightly more revenues ($64 billion) on a dynamic basis;
Increase employment by the equivalent of approximately 274,000 full-time workers; and
Produce little change in hourly wages.
Eliminating the EITC and trading the static revenue gains for individual rate cuts would:
Allow for an across-the-board rate cut of 5.7 percent;
Boost GDP by $125 billion per year; and
Boost federal revenues by $29 billion on a dynamic basis;
Increase employment by the equivalent of approximately 783,000 full-time workers; and
Increase hourly wages by 0.1 percent.

quote:

A study by Tax Policy Center (TPC) scholars examined marginal tax rates on a hypothetical low-income single parent with two children in each of the states.22 As her earnings rise, she pays more payroll taxes and possibly more income taxes, and the benefits from the EITC, food stamps, and Temporary Assistance for Needy Families are reduced. On average, across the states, the TPC study found that the parent would face a marginal tax rate of about 50 percent in moving from a poverty level of income to twice the poverty level. For a married couple with two kids, the marginal tax rate averaged about 60 percent.
When the TPC scholars added the effect of reduced Medicaid benefits as incomes rise, the calculated marginal tax rates were even higher. The rates exceeded 100 percent in some states, meaning that a worker would actually be better off with reduced market earnings.

The TPC study did not include the effects of health care subsidies under the Affordable Care Act (ACA). But generous ACA benefits also phase out as income rises above the poverty level, and thus further push up marginal tax rates for affected individuals

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Originally posted by lazybones
Well, that's exactly what happened. Here's the CBPP's analysis of results by Jeffrey Grogger.
(please log in to view the image)

quote:

Another serious doubt about the studies concerns the causal direction of the effects they imply. The assumption behind the idea of an EITC effect is that, as the credit was expanded in 1986, 1990, and 1993, non-working poor mothers heard about it and went to work in higher numbers than before, producing the noted increases in employment levels. But a precondition of getting the EITC is that one is working. So at either the individual or aggregate level, one would expect work levels to precede and predict rising EITC claims rather than the other way around. Of course, one might hear of the EITC and then go to work and claim the credit, as the substitution effect supposes. But in terms of what is measurable, work levels should still determine EITC levels rather than vice versa. The statistical studies would also lead us to assume that claims for the EITC grew as more mothers went to work. But that did not occur.

According to research by Joseph Hotz and John Karl Scholz, the number of EITC claimants reached 19 million in 1994 (from under 12 million just five years earlier) and then did not grow much further during the 1990s, even though labor-force participation by single mothers soared. The expansions of the credit in 1990 and 1993 apparently had little effect on EITC participation. How then could the credit explain rising work levels? If newly employed low-income women did not claim the credit in large numbers, how can the promise of the credit be what drew them into the work force?

quote:

The first question is whether eligible people even knew about the EITC. The studies noted above claim that, by 1993, a work increase driven by the EITC was well underway. Yet in 1993 and 1994, interviewers of low-income populations in Cambridge, Massachusetts, and Chicago found “virtually no awareness of the credit,” according to Nada Eissa and Jeffrey Liebman. Later, awareness of the EITC grew somewhat, but that was partly because many low-income workers heard about it from the tax preparers they consulted to calculate their tax returns once they were working, according to several contemporaneous studies. Few apparently responded to the credit purely on their own, as the substitution effect presumes. Of course, for the substitution effect to operate, recipients need not understand EITC in detail.

It is enough to know that going to work will somehow generate added income through the tax system. It is difficult for beneficiaries to perceive this, however: Though the program permits employers to distribute the benefit to employees on an advance basis (which would allow recipients to see rewards regularly), very few employers actually do this. Instead, the vast majority of recipients of the EITC see the benefit only once a year, when they file their tax return. It defies common sense to believe that a population that showed so little response in incentive experiments in which benefits were paid monthly could be strongly moved to work by a credit to be paid only months in the future.

quote:

We find Mead’s arguments unconvincing. Even if non working potential recipients of the expanded EITC knew nothing about it, the EITC could still have had an effect by reducing exit from the labor force among those who had worked and received the credit in an initial year. Low income workers have high rates of exit and entry, so a modest impact on labor force exit can accumulate into a large change in the stock of labor force participants.The studies on participation are generally silent on the specific mechanism for the observed changes, but it seems plausible given general ignorance about tax policy that impacts on net income are realized after the fact and influence subsequent behavior, keeping many single mothers in the labor force who otherwise would have exited.

quote:

All the studies have to gauge reform pressures indirectly, for instance by looking at the “waivers” that states obtained from Washington to run various work experiments prior to welfare reform. Due to these measurement problems, the studies could easily overestimate the effect of the EITC on work levels while underestimating that of welfare reform. The question of whether the EITC drove welfare recipients to work in the ’90s is ultimately a question about human motivation, and on this matter economic analysis alone cannot be trusted to provide a complete answer. Fortunately, these analyses are not our only source of insight regarding the psychology involved.

quote:

Part of the problem with the EITC is that unscrupulous tax preparation firms prey on unsuspecting workers, including many immigrants who have poor English skills. For a fee, firms help workers file claims, and they also provide loans in anticipation of EITC refunds. Typically, half of the EITC tax returns completed by paid preparers overclaim the credit.

quote:

Since 2002, the IRS has been required to report estimates of improper payments to Congress. In that time, "the IRS has made little improvement in reducing improper Earned Income Tax Credit payments," the inspector general wrote in 2013.

quote:

For the federal income tax, studies have found, on average, that the deadweight loss of raising taxes by a dollar is roughly 30 to 50 cents.32 Based on his pioneering work, Harvard University’s Martin Feldstein thinks that the loss may be higher, perhaps exceeding “one dollar per dollar of revenue raised, making the cost of incremental governmental spending more than two dollars for each dollar of government spending.”33 But other estimates are lower than Feldstein’s.
Suppose that Congress expands EITC spending by $10 billion a year. Does this expansion make any economic sense? The benefits would have to be higher than the total cost of about $15 billion, which includes the $10 billion direct cost to taxpayers plus another $5 billion or so in deadweight losses.

quote:

Analysts and reporters often point to the anti-poverty benefits of the EITC, claiming things such as the credit “pulled 6.5 million people out of poverty.”35 But that is a meaningless statistic. If the government gives low-income individuals $60 billion, of course they will have more money in their pockets, and fewer of them will be below a measured poverty line.

But why not double or triple EITC benefits and try to pull even more people out of poverty? The answer is that we need to worry about the costs of federal programs, which are the harms done to other citizens and the broader economy. Expanding the EITC would create more fraud, higher administration costs, and added disincentives to increase hours worked in the phase-out range.

Furthermore, expanding the EITC-or any other federal spending program-would ultimately mean higher taxes, and thus more tax distortions and higher deadweight losses. Indeed, the deadweight losses from higher taxes rise more than proportionally as tax rates rise, which means that additional federal spending is more economically damaging than existing spending.36

quote: (post)

Originally posted by lazybones
Except that actual studies on the matter found the expansion of the EITC almost as effective at alleviating single mother unemployment than welfare policies and labor market factors combined. See above graphic.

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Originally posted by lazybones
Or reforming them to better encourage work, while still keeping welfare and welfare spending intact? Because that is what the '96 reforms did. Okay, cuts in the immediate to short term, but the biggest changes were in how welfare was distributed and the welfare to work incentives.

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Originally posted by lazybones
Again, economists from MIT/Harvard have studied the effects of welfare payments and have concluded that they do not reduce work incentive. The Anchored Supplemental Poverty Measure Before Taxes and Transfers is obviously flawed because it literally does not factor in the benefits of these programs. And considering the fact that inflation has outpaced wages in many years, it is likely that abolishing welfare will just push poor people further into poverty and make the climb upwards more difficult. After all, the EITC actually gives extra $ when you earn and work more. The phase out is probably too soon, but it is ultimately an incentive to work harder. By removing this and other benefits, you would actually dampen the rewards for working harder and throw about 70 million into poverty, or further into it, from which they will find it hard to ascend from due to those stagnating wages.

quote:

Moffitt found that the work effort of welfare recipients was reduced as much as 30 percent.

quote:

As far back as the 1960s experts warned that welfare would discourage work. A panel investigating the Watts riots concluded that welfare was damaging the work ethic. The report noted that a minimum wage job paid about $220 per month in 1965 ($1,269 in 2003 dollars), out of which had to come such work-related expenses as clothing and transportation. In contrast, the average welfare family in the area received from $177 to $238 per month ($1,021 to $1,373 in 2003 dollars), out of which came no work-related

quote:

An analysis of interstate variation in labor force participation during the 1980s by Richard Vedder, Lowell Gallaway, and Robert Lawson found that such participation declined as welfare benefits increased. 53 Likewise, a study by Sheldon Danziger, Robert Haveman, and Robert Plotnick concluded that the cumulative impact of welfare payments reduced the U.S. labor supply by 4.8 percent.

quote:

Other studies show that as welfare benefits increase, women are more likely to leave the labor force and enroll in welfare programs. For example, Hill and O'Neill found that a 50 percent increase in monthly AFDC and food stamp benefit levels led to a 75 percent increase both in the number of women enrolling in AFDC and in the number of years spent on welfare.

quote:

He found little indication that the poor felt they needed to take charge of their own lives or find work to become self-sufficient. On the contrary, he found that most felt that the government had an obligation to provide for them and their children.

quote:

Other reports increasingly show young men and women in the inner city refusing to work for the "chump change" of low-wage jobs. No doubt that attitude stems in part from our general "get it now" culture. But another cause is the realization that there is no need to work for low wages. Welfare will always be there as a safety net. Confirmation can be seen in a study of inner-city poor in Chicago. While nearly all those who were unemployed expressed a desire for work, most also said they expected a job that paid well above the minimum wage. When they were asked how much a job would need to pay for them to take it, answers ranged from $5.50 to $10.20 per hour. 63 Welfare recipients themselves are not the only ones to develop a prejudice against work. Evidence suggests that anti-work attitudes trickle down to their children. As a recent report by the Maryland does not understand that in this society at least one parent is expected to rise five days of each week to go to some type of job." 64 As a result, children raised on welfare are likely The more welfare received by a child's family, the lower that child's earnings as an adult tend to be, even holding constant such other factors as race, family structure, and education. 65

quote:

The first problem I have is that the average American isn't the primary beneficiary of welfare programs, so we would expect them to pay in a little more than they get back.

But $2181 isn't that much. In fact, that's about $300 less than just the average EITC payment of $2477. Remember that Medicaid also shaves off about $1,500 off insurance costs for adults, which is almost as much as they pay in for that program by your calculations. So the net tax relief in terms of income tax for middle earners could drop to about $680 for some, which is trivial.

quote:

Comparing the cost of employer-sponsored insurance to the cost of either Medicare or Medicaid is a completely stacked comparison even if we fully adjust for every iota of age and health status differences between these three populations and use an apples-to-apples comparison of plans having the identical benefits and actuarial value. The premium cost for employer coverage essentially embeds the fully loaded cost to society of providing such coverage, inclusive of profits, insurance company tax payments and administrative costs. In contrast, the Medicare and Medicaid cost figures used by Prof. Reinhardt include only a portion of the administrative costs incurred by both programs and none of the hidden costs of taxation known as excess burden or deadweight losses. Once these hidden costs are taken into account, even Medicaid (whose provider payment rates are so abysmal that one third of primary care physicians refuse to see Medicaid patients) costs more than employer-sponsored coverage.

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Originally posted by lazybones
And that shouldn't be surprising, because in a progressive income tax system, the poor and lower-middle class pay a very low effective tax rate. And welfare payments are concentrated towards them, so they receive a net benefit and the average earners are slight net-cost, but not much. The notable issue with the current system is that the EITC is not expansive enough, and should cover more tax payers to ensure that people are always working towards a higher income and can get their money back in some way.

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Originally posted by lazybones
Including state taxes in this seems somewhat misplaced considering that we are talking about mainly federal welfare programs (so if they were abolished, only federal taxes would be affected). And most of the taxes that lower-income people pay are payroll taxes, which we could replace while still keeping welfare intact, as I have explained earlier citing the study by Nunn and Rosenberg.

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Originally posted by lazybones
Okay, I agree. Let's get rid of payroll tax. I simply believe that we should have the best of both worlds by replacing payroll tax with a more diverse and less punishing range of taxes. That way, we can still keep the welfare system in place while giving most people tax relief.

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Originally posted by lazybones
The average American would potentially receive less in tax relief than the average EITC payment, and even less when you factor the benefits from Medicaid. And although it does get less rosy when you include payroll tax, we can always replace payroll tax, reduce it, or make it more progressive. And also as I explained earlier, abolishing Social Security would see people at the age of 30 with few-little retirement savings needing to put more than 20% of their income away to retire comfortably, which is lower than the tax relief they would receive from abolishing payroll tax. The result? Crippling senior poverty and a more squeezed middle class.

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Originally posted by lazybones
Okay, but you need to explain what those other means are, and how they would alleviate poverty for about 70 million people like the current programs do. Eliminating payroll tax would indeed be a massive boost, but it would come at the cost of eliminating Social Security unless it was replaced with a sales tax. Social Security lifts millions of seniors out of poverty, and provides an essential safety net for poor people who cannot save and could not adequately save even with refunded payroll tax, so if you abolish it then you will certainly make things worse as far as poverty is concerned.

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Originally posted by lazybones
Okay, but the recent social trends like the decline of religion make more unlikely for steps three and four to be achieved. I know it is difficult to accept, but this way of life is simply dying. Welfare or no welfare, we will continue to see the decline of marriage and the family because of less religiosity.

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We know the statistics—that children who grow up without a father are five times more likely to live in poverty and commit crime; nine times more likely to drop out of schools and twenty times more likely to end up in prison. They are more likely to have behavioral problems, or run away from home, or become teenage parents themselves. And the foundations of our community are weaker because of it.[14]

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According to the 2015 American Community Survey, single mother families have a median family income of $33,342—less than half the family income of married families ($82,078).7) Non-intact families are more likely to receive welfare than are married couples.8) According to the 2016 Annual and Social Economic Supplement, children raised by single mothers are almost six times more likely than children raised by married parents to receive public assistance.9) The same Census report shows that 10.4 percent of married-parent families receive food stamps, versus 44.9 percent of single mother families and 22.3 percent of single father families.10) Moreover, the anti-marriage bias in the welfare system penalizes single mothers who marry an employed husband, therefore perpetuating single parenthood and out of wedlock birth, and necessitating continued reliance on government benefits.11) Dependence on government welfare programs can have harmful effects on children. After controlling for relevant social and economic factors, Congressional Budget Office Director June O'Neill and Anne Hill of Queens College report that the more years a child spends on welfare, the lower the child’s IQ.12) A similar study found that welfare also has negative effects on the long-term employment and earnings capacity of young boys.13)

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Originally posted by lazybones
More recent studies have found little correlation between welfare and work rates, because welfare is managed in a far more competent and smarter way now. I'm not sure if Goodman's findings really apply to contemporary society.

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Originally posted by lazybones
That's a pretty absurd graph. You can't just take previous trends and baselessly extrapolate them. After all, you have no idea whether poverty rates would have continued to decline in the same way without welfare. You are just assuming they would, and that such decreases would follow quite a linear trend.
And of course, we actually do have studies that show that poverty would be around 29% still if it were not for the welfare payments, so we know that your graph represents an over optimistic view. I'd also point to the fact that the post-war economic boom was coming to a close at the time the War on Poverty was implemented. And considering that economic growth is a massive factor on poverty, I would suggest that poverty rates would have stopped declining in the same way, because growth had slumped and there were more recessions.

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Originally posted by lazybones
The measure the CBPP uses is the Supplementary Poverty rate after transfers and taxes. So it does take into account the taxes, and we actually see a steeper decrease by that metric, which would suggest many net beneficiaries from these programs, which is hardly surprising given the low effective tax rate that poorer people pay.

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Originally posted by lazybones
The whole point of this discussion was whether welfare has reduced poverty. And you have accepted that welfare has indeed done so after I provided the figure of about 70 million people being either lifted out of poverty or being made less poor. You can argue on the other effects on welfare and potential alternatives, but all that ultimately detracts from the fact that the welfare system is a powerful anti-poverty tool once you actually factor them in the statistics.

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Originally posted by lazybones
As I have said, point conceded on productivity vs wages. But inflation vs wages is still unaddressed. Yes, that is the problem of the Fed, but every major country has a central bank. It's not like we could ever get rid of it. Thus, we need to work around through welfare payments which top up the earnings of low-middle income earners.

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The Bureau of Labor Statistics adjusts productivity for inflation using the Implicit Price Deflator (IPD) for nonfarm businesses. Analysts often adjust wages and compensation for inflation using the Consumer Price Index (CPI). These two inflation measures are not directly comparable. They use different methodologies and cover different goods and services. Comparing CPI-adjusted compensation growth to IPD-adjusted productivity growth produces inaccurate conclusions.

The CPI typically estimates higher inflation than many other more modern price indexes do. Consequently, economic figures adjusted for inflation with the CPI attribute more nominal growth to inflation than if they were inflation-adjusted with the IPD. For example, a worker making $10,000 a year in 1973 would—using the CPI—make $52,000 in today’s dollars. Using the IPD to adjust for inflation finds that same worker making $38,000 in today’s dollars. The CPI measures 36 percent greater inflation over the past four decades than the IPD.

Using different measures of inflation will lead to different conclusions. If that same worker’s pay rose from $10,000 in 1973 to $52,000 today, an analyst using the CPI would conclude that his real pay had not increased. An analyst using the IPD would conclude that his real earnings rose by $14,000—from $38,000 to $52,000. Making an apples-to-apples comparison of compensation and productivity requires using the same measure of inflation for both…

On the calculation side, economists know that consumers respond to shifting prices. As iPods become less expensive, consumers will buy more of them, and fewer of those goods and services for which prices have risen. However, the CPI accounts for this “substitution effect” only infrequently. For this reason, most economists believe that the CPI over-estimates inflation.[Over 14 studies corroborate this claim] [21] The CPI also uses less accurate data. In calculating the CPI, the BLS uses data from the Consumer Expenditure Survey (CEX) to estimate how much consumers spend on different types of goods and services. This survey has significant biases. Studies show that households recall large and repeated purchases quite well.

Consequently, the CEX measures the amounts that Americans spend on rent and utilities reasonably accurately. However, people often forget smaller and less regular purchases during their interviews. This under-reporting makes it appear that Americans spend far more of their income on housing, gas, or utilities than they actually do.[22] The costs of these goods have increased faster than other goods and services. This “recall bias” increases CPI-measured inflation—and decreases CPI-adjusted compensation.[23] The implicit price deflator does not suffer from these problems.

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Originally posted by lazybones
Yeah, not convinced that the words of a long-dead Chinese philosopher have any sort of relevance to a debate on modern welfare payments. And if your quote of him is meant as a suggestion that we could teach people to live without welfare, then that is simply ridiculous. After all, wages are being outpaced by inflation in many years, so it'll be extremely difficult for people to work their way up (as their pay increases will be shredded).

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Originally posted by lazybones
This is interesting, but other studies on this have found that government spending cuts reduce growth, which would suggest that government spending increases would boost growth as long as they were well targeted. In particular the study done by the Bureau of Economic Analysis, its findings which you can find below.
http://uk.businessinsider.com/data-...1?r=US&IR=T
Although I suppose the multiplier effect was not as powerful as I first thought, so point conceded there. But there does seem to be at least a modest to moderate benefit from govt spending.

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Edwards seems to think that the above chart shows at least a correlation between government spending and economic growth. After all, he wrote that the BEA chart “seems to show that government has a pretty straightforward effect on GDP.” But as Scott Sumner pointed out in amusement when he saw the article, the chart does nothing of the kind.

Look carefully at the legend. The various colored rectangles are different components of government spending. Specifically, the rectangles indicate how the change in each component — positive or negative — relates to the change in overall GDP. The black line is not GDP growth, but is instead the sum of the various components of government spending. In short, Matt Klein at the FT is telling us that if we take the BEA’s word for how much each component of government spending contributed to GDP growth in each quarter, then we can stack those numbers on top of each other and even add them up! Contrary to Edwards, the FT chart doesn’t “show” anything at all, except that the BEA each quarter announces how much various components of government spending contributed to, or subtracted from, GDP growth.

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Originally posted by lazybones
Except the evidence shows it to be absolutely true. Without welfare, the poverty rate would be around 29%, which was its rate in around 1947.

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Originally posted by lazybones
Eh, it's more of a consensus among economists and historians. Many 'economic miracles' occurred after WW2. The Marshall Plan turbocharged economic growth and lead to a prolonged era of prosperity, which ended in the 70s (which may explain why poverty rates were declining up until that point and also reinforces my point that such poverty rate declines would not have continued, because the economic boom times were over by that point).
https://en.wikipedia.org/wiki/Post%...nomic_expansion

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Originally posted by ILS
It's a masterpiece, and you know it.

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Originally posted by lazybones
Can't deny that, but this is a 12-13(?) post reply to 3 posts of argumentation. Doesn't make it any less stunning in terms of content, but I'm just saying. Because from what I can see, there are some things in there that may have not even needed explaining, like deciding to explain why marriage is beneficial and lack of it harmful. I already conceded that it is a long time ago, I believe. Doesn't need explanation, and just makes it harder to sift through.

Although that's not to demean him or his work, because he clearly has a greater wealth of knowledge than I do, and has managed to totally exceed expectations here. But a far more concise reply would have been preferable, because then I could actually reply to it. And large posts like that risk losing the original point of this discussion.

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Originally posted by DarthSkywalker0
Yea, I totally understand that. The post also kinda serves as a way for me to have all of my welfare notes in one place. But, I will admit I did kind of go overboard.

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Originally posted by DarthSkywalker0
Yea, I totally understand that. The post also kinda serves as a way for me to have all of my welfare notes in one place. But, I will admit I did kind of go overboard.

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Originally posted by dadudemon
Why do you have all of this time?


Based on my estimate for posting time, that took you over 4 hours to compile, format, and post.


Four hours, man. That's a long time to invest into a post. It would have been far easier to type it all up in a word document, post it to google docs, and link it.


Or just make a video and talk through the points.

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Originally posted by lazybones
Hey look, that's cool. I respect that you have a lot of knowledge on this topic, and I think that this has been a good and informative experience for me. And if others are spectating, perhaps for them as well. I'm not here to settle any score so I don't really mind conceding here, although I'll have to sift through some of your individual points to see which ones to address, because there might be some things here that I can still object to. But if you ever need to debate welfare again, maybe this will help save some time in the future.

It seems that the general agreement here is that welfare (in the form of cash transfers) can help poverty on some level and by some metrics, but that there are alternatives and other negative effects that are not accounted for. I'm far more open on that latter point now, particularly considering the depressing effects of payroll tax. Although on that point, I still think a sales tax would be a lot better than a payroll tax and could allow for some limited preservation of the safety net for poorest people.

All taxes decrease growth, yes, but some decrease them less than others. Taxing someone's income at 25% directly is going to have a considerably more detrimental effect than taxing the things that they purchase at that number. Still a negative effect with the sales tax as you said, but it would be far easier to offset than the payroll tax simply because it is not as blunt and harmful as the payroll tax is.