04/11/2017

Government Makes The Poor Poorer

Stephen Moore, American Spectator

For all the obsession in Washington and in college faculty lounges over income inequality, why isn’t there more outrage over government policies that exacerbate the problem? There are hundreds of programs that make the poor poorer and increase poverty in America. Many of them were exposed last week by my colleagues at the Heritage Foundation forum on this very topic.

Economist ‎Don Boudreaux of George Mason University unmasked two such policies. One is trade protectionism. Trade barriers raise prices and “act as a regressive tax” on Americans, Boudreaux explains. They also stunt the very innovation process that makes goods and services widely available to people at affordable prices to begin with. Think about who the consumers are that shop for those everyday low prices at Wal-Mart. It’s not Hillary Clinton.

Minimum wage clearly fits into this category as well. In every other industry, Boudreaux notes, when something is more expensive, we buy less of it. Why do some economists think that isn’t so when it comes to buying labor? Especially for the young and the lowest skilled, minimum wage becomes a toll that prevents many from entering the work force and gaining the skills that can make a low income or middle class worker a high income worker. This is so obvious that one wonders why liberals keep championing the minimum wage cause.

Marlo Lewis of the Competitive Enterprise Institute points out that the fuel economy standards promoted by the leftist environmentalists add thousands of dollars to the cost of a new car. He estimates that these “green” policies could mean that 5 million fewer Americans each year can’t afford a new car. And, again, those 5 million victims are surely not people like Al Gore or the board members of the Sierra Club.

Another green policy that hurts the poor is the anti-fracking crusade of the environmentalists. In my book with Kathleen Hartnett White, Fueling Freedom, we point out that the lower cost of electricity due to cheap shale natural gas has benefited low income households to the tune of well over $4 billion a year. This is four times the benefit of the low income home energy assistance program. So if liberals really care about the poor, why not get rid of LIHEAP and promote fracking instead?

Social Security is the greatest swindle of the poor ever. A new study by Peter Ferrara for the Committee to Unleash Prosperity shows that the average poor person who works 40 hours a week during his or her working life would retire with a larger monthly benefit and would have $1 million or more in an estate that could be left to a spouse or children at death if they could simply put their payroll tax dollars into a personal 401k retirement account and tap into the power of compound interest.

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Thanks to "bracket creep," the inflation of the 1970s pushed millions of taxpayers into higher tax brackets even though their inflation-adjusted incomes were not rising. To help offset this tax increase and also to improve incentives to work, save, and invest, President Reagan proposed sweeping tax rate reductions during the 1980s. What happened? Total tax revenues climbed by 99.4 percent during the 1980s, and the results are even more impressive when looking at what happened to personal income tax revenues. Once the economy received an unambiguous tax cut in January 1983, income tax revenues climbed dramatically, increasing by more than 54 percent by 1989 (28 percent after adjusting for inflation).

 

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