First, put down all sharp objects. Now, meet Edith Calzado – maybe the single most successful and productive beneficiary of government assistance you’ll ever meet.
As NPR’s Planet Money’s latest podcast “The Art of Living At The Poverty Line” explains how many Americans are taking advantage of the welfare system…
“[Today], We hang out with a woman named Edith, a single mother who makes $16,000 a year and yet managed to fund a vacation at a Caribbean resort with an interest-free loan from one of the world’s largest banks. She is a fascinating woman, and you are going to hear all about her…
…she is perhaps the single most successful and productive beneficiary of government transfer payments you’ll ever meet. Transfer payments – think of welfare and food stamps.
Some people in the country earn more than they need to cover their basic necessities. And the government taxes those people and gives some of that money to people the government thinks don’t earn enough to cover their basic necessities. Those are transfer payments.
…And there’s obviously a really contentious debate about transfer payments. One argument you hear is that transfer payments just don’t make economic sense, that they punish productive work by taxing it and then reward other people for not being productive. Some people argue that it takes away the initiative to go out and get a job if you know you’re going to get this money anyway. And so the argument goes that everyone just ends up poor – the rich, the poor – that these payments aren’t good for anyone.
…No, and this is an economic argument, not a moral argument. There is a moral argument that says it’s fine if everyone is poor as long as we live in a fair society. So transfer payments make sense just on that. But there is also an economic counterargument as well, that transfer payments, if done right, actually improve the economy in the long run.
And this argument says basically, poverty itself is inefficient. Trying to keep your family fed while living at the margin, it doesn’t allow you to develop your human capital.In other words, extreme poverty keeps you from getting the education you need to get a good skilled job that would help make you and the whole society at large richer.
…Edith Calzado is the poster child for that second argument…”It’s wonderful. It’s a – I said that God was in the middle of this blessing because I have big apartment. My son has his own bathroom – you know? I don’t pay gas. I don’t pay electricity. I can have my washing machine at home, you know? I can have an air-condition in all the rooms, you know? I pay less rent. This is the more important thing.”
Of course, none of this is new, as we pointed out four years ago, some of the more politically biased progressive media outlets (who are quite adept at creating and taking down their own strawmen arguments, if not quite as adept at using an abacus, let alone a calculator) took offense at our article “In Entitlement America, The Head Of A Household Of Four Making Minimum Wage Has More Disposable Income Than A Family Making $60,000 A Year.” In it we merely explained what has become the painful reality in America: for increasingly more it is now more lucrative – in the form of actual disposable income – to sit, do nothing, and collect various welfare entitlements, than to work.
This is graphically, and very painfully confirmed, in the below chart from Gary Alexander, Secretary of Public Welfare, Commonwealth of Pennsylvania (a state best known for its broke capital Harrisburg). As quantitied, and explained by Alexander, “the single mom is better off earnings gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045.”
We realize that this is a painful topic in a country in which the issue of welfare benefits, and cutting (or not) the spending side of the fiscal cliff, have become the two most sensitive social topics. Alas, none of that changes the matrix of incentives for most Americans who find themselves in a comparable situation: either being on the left side of minimum US wage, and relying on benefits, or move to the right side at far greater personal investment of work, and energy, and… have the same disposable income at the end of the day.