Why Redistribution Fails by James Piereson

Author:James Piereson [Piereson, James]
Language: eng
Format: epub
ISBN: 978-1-59403-874-7
Publisher: Encounter Books
Published: 2015-02-17T16:00:00+00:00

With regard to providing aid to the poor, Americans have built a social-service state but not a redistribution state.

The poor are eligible to receive a bevy of in-kind benefits under Medicaid, the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps), rental assistance, college scholarships, energy subsidies, job training, and other programs too numerous to list. Next to Medicaid, SNAP is the most expensive and far-reaching of these programs. It provided in-kind food subsidies to some 47 million people in 2014, at a cost of $74 billion to the federal government (about $16 billion of which went to administration). A qualifying individual could receive (in 2014) a maximum benefit of $194 per month, and a family of four could receive up to $650 per month. The federal government pays out these benefits on the first of each month by reloading a government-issued credit card to be used solely for purchases of food and beverages at supermarkets and convenience stores. SNAP comes close to providing a cash benefit, since recipients can use their cards to purchase a wide range of items at retail stores, and, indeed, some exchange their cards for cash in an underground market. SNAP is supported in Congress by influential lobbying groups, including agricultural interests and food manufacturers, which supply the food distributed through the program; and major retail chains, where recipients redeem their benefits.

Of the $800 billion spent on poverty programs in 2012 (as listed in the House Budget Committee Report), it appears that less than $150 billion, or about 18 percent of the total, was distributed in cash income, if we include as a cash benefit the tax rebate under the EITC. The rest of the funds were spent on services and in-kind benefits, with the money paid to providers of various kinds, most of whom have incomes well above the poverty line. It is worth noting that when President Obama sought to build out the welfare state, he did so mainly by expanding in-kind benefit programs, particularly Medicaid and SNAP.

With respect to the recipients of federal transfers, the CBO study reveals a surprising fact: households in the bottom quintile of the income distribution receive less in federal payments than those in the higher-income quintiles. According to that study, households in the bottom quintile of the income distribution (below $24,000 in income per year) received on average $8,600 in cash and in-kind transfers; households in the middle quintile about $16,000 in such transfers; and households in the highest quintile about $11,000. Even households in the top 1 percent of the distribution received more in dollar transfers than those in the bottom quintile. The wealthier households received those transfers overwhelmingly through Social Security and Medicare; the poorer households from a roughly equal mix of Social Security, Medicare, Medicaid, TANF (cash welfare), and SNAP (food stamps). The federal transfer system may move income around and through the economy, but it does not redistribute it from the rich to the poor or near poor.

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The above programs accounted for more than 60 percent of all federal spending in 2014.

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