Via Religious Left Online, I ran into Dignan’s post on “The Politics of Poverty.” Dignan criticizes both the right and left approaches to fighting poverty (although the solution he settles on is fairly right-wing), but in this post I’m gonig to concentrate on his critique of income transfer programs (also know as welfare).
1.) Is The Government Inefficient?
As it relates to poverty reduction, government fills the role of the middleman. And no middleman in all of history has created more friction and additional cost than the federal government. Non-profit charities are often rated by their ability to direct the highest percentage possible of donated funds to those in need. The higher the administrative costs are, the less money goes to those the charity intends to help.
If the federal government was rated in the same manner, it would fail tremendously. A tremendous portion of money raised (i.e. taxes) for those in need (i.e. welfare recipients) actually goes to pay the salaries of government employees, retirement accounts, an unreal amount of office space, etc. If the US federal government actually were a non-profit charity, it would be on the cover of Time magazine for defrauding its donors.
Dignan should take a look at the federal Earned Income Transfer Credit (EITC), the largest cash grant for poor families in the US. The EITC spends less than 1% of its budget on administrative costs ((Internal Revenue Service, “Earned Income Tax Credit (EITC) Program Effectiveness and Program Management FY 2002 – FY 2003” (pdf link) )) , a ratio that I doubt any private anti-poverty charity can match. (The EITC is probably even cheaper to run than it appears, since state EITC programs save money by “piggybacking” on the Federal program’s administration; if the impact of state programs could be included, the EITC’s adminstrative costs to benefits paid out ratio might be less than half a percent.)
Of course, the EITC has an exceptionally low administration-to-outlay ratio, but the percent of their budgets most federal income transfer programs spend on administration – 9% to 13% ((Internal Revenue Service, “Earned Income Tax Credit (EITC) Program Effectiveness and Program Management FY 2002 – FY 2003” (pdf link) )) – is excellent by the standards of nonprofit charities. Here’s the advice Daniel Borochoff (President of the American Institute of Philanthropy) gives people considering giving to private charities:
Ask how much of your donation goes for general administration and fund-raising expenses and how much is left for the program services you want to support. AIP’s Charity Rating Guide recommends that in most cases 60% or more of your charitable donation should go to program services. Less than 40% should be spent on general administration and fund-raising costs.
Dignan’s belief that private charities are far more efficient than government transfer programs has no basis in truth. In terms of bang for the buck, income transfer programs are as good as private charities, and in some cases – such as the EITC – ten or twenty or fifty times better than private charities.
2) Are Income Transfer Programs “Coercion, Not Charity”
…Government aid is not charity. It doesn’t even have the ability to be charity.
By its very nature, government is coercive. That it, it has the power of the sword to command people to action. Almost everything the government does comes with the implication that if one goes against the government, they will be forcibly made to do as the government requires. It doesn’t make sense for the Religious Left to speak of helping the poor by the country giving more. It is too easy to be generous with other people’s money.
Dignan’s reasoning is atrocious. Even if the government is coercive, how does it logically follow that “it doesn’t make sense… to speak of helping the poor” through the government spending more on income transfer programs? There’s no logical reason to suppose that coercive money will have less of a poverty-reduction effect than non-coercive money would.
Dignan’s logical incoherance aside, I take issue with his discussion of coercion. Dignan ignores the difference between the coercion of a dictatorship and the so-called “coercion” of a representative democracy. In a dictatorship, it’s true that no one has any choice. But unless Dignan sees no difference between democracy and dictatorship, he must realize that US taxpayers do have a choice – a choice at the voting booth. ((As I’ve argued in the past, there’s more to freedom than the freedom to vote; a free vote is only meaningful in the context of other civil rights, such as free speech, the freedom to walk the streets, and so on. I stand by that, but I’m not going to discuss it in detail in this post because it would be too much of a digression.)) We choose to elect legislators who choose to spend a certain amount on income transfer programs. And in states with ballot measure elections, we can sometimes vote directly for specific taxes and programs. ((Dignan is inconsistent to object to coercion only when the government does it. What about God? Dignan says that Christians are commanded to help the poor. But isn’t a commandment from God – which always carries the implicit threat “do it or you’ll burn in hell” – at least as coercive as anything the IRS has to offer? Plus, I don’t get to vote for a different God if I don’t like this God’s policies, which makes God immeasurably more coercive than government.))
Dignan’s argument, because it dishonestly pretends that electoral choice does not exist, is too inaccurate to have any merit.
3) Is Helping The Poor Really About Helping The Rich Feel Good?
But isn’t it fruitless to try to end poverty since Jesus said that we would always have poor among us?
This made me think that there is more to this than is on the surface. Why would Jesus ask people to do something that he knew they would fail at?
Maybe Jesus thinks that it’s self-evidently worthwhile to help those poor people we can help, even if that’s less than 100%. It’s quite possible to answer Dignan’s question while remaining focused on trying to improve the lives of people in need. Unfortunately, Dignan goes in another direction, saying that the purpose of charity is to help the rich feel good:
Ask anyone who has spent time working in a soup kitchen or building a house for the homeless and they will tell you how good it made them feel. I don’t think that we should be motivated by the promise of feeling good about ourselves, but I don’t think there is any denying that great good does come from helping those in need. There also tends to be a relationship between how close we get to those in need and how we feel about our works of charity. Spending time with an inner-city fatherless child can have a tremendous impact upon our lives in addition to the positive impact on the child’s life. However, in those cases where we simply give money to a charity (still a laudable action), the impact upon us and those in need is lessoned.
So how much are we missing when we delegate charity to the government? How easy does it then become to avoid the poor and avoid getting messy with other people’s lives? How easy do it become for the poor to resent those better off in society that they have little interaction with? How easy does it become for some to foment class warfare?
* Dignan says “I don’t think that we should be motivated by the promise of feeling good about ourselves,” but a paragraph later he says “how much are we missing when we delegate charity to the government?” So despite his disclaimer, Dignan uses the supposed lack of benefits to the wealthy as a reason to oppose welfare programs. But that’s nonsense – income transfer programs should be supported based on how much they help the poor, not based on how little they do to help Dignan.
* Dignan’s argument is an obviously false dichotomy. We can support income transfer programs and we can participate in programs that provide direct services or mentoring to poor people. An argument that implies we must choose one or the other is dishonest.
4) What Actually Works
In his post, Dignan fails to ask the most important question: Can income transfer programs actually reduce poverty in the real world?
The answer is, yes they can. Look at this table ((United Nations Children’s Fund (Unicef), “A League Table of Child Poverty In Rich Nations.” (pdf link.) )) , comparing child poverty rates of various countries, before and after income transfer programs take effect.
If we ignore the effects of income transfer programs, child poverty in the US is comparable to that of many other wealthy nations – and less common than it is in some countries. But because other countries have much more generous income transfer programs, the child poverty problem in the US ends up being worse than the child poverty problem in any other rich country.
Some right-wingers claim that such international comparisons are unfair, because the poor in the US are richer than the poor in other countries. ((It’s also been claimed that such international comparisons are unfair because the US child poverty problem is linked to single parenthood. However, as figure 35 of this web page shows, income transfer programs in other countries are also better at helping single-parent families out of poverty. )) This is not true. When measured by purchasing power, the poor in other wealthy countries are generally better off than the poor in the U.S. According to international poverty scholar Timothy Smeeding ((Smeeding, Timothy, 2004. “Public Policy and Economic Inequality: The United States in Comparative Perspective” (pdf link.) )) :
…The real incomes of Germans at the 10th percentile are on average 2 percentage points higher than the real incomes of Americans at the 10th percentile. Low-income Canadians are even better off, with incomes 6 percentage points higher than low-income Americans. Only in Great Britain (whose GDP per person is less than 70 percent of that in the United States in Table A.1) were the living standards of low-income house holds measurably lower than in the United States (35 vs. 39 percent). Overall, lower-income Americans are no better off and often worse off than the low-income persons in other nations….
These real income measures are admittedly crude. They should be seen as measures of net spendable income rather than of total consumption, which would also include goods and services such as health care, education and child care that are provided at different prices and under different financing schemes in different nations. To the extent that low-income citizens elsewhere need to spend less out of pocket for such goods as these than do low-income Americans, the latter are at an even greater real income disadvantage.
If Dignan is really concerned with the poor, his primary question should stop being “is government in some academic sense coercive?,” or “what good does helping the poor do for non-poor people like me?” His primary question should instead be “what has been proved to work?”
By that standard, income transfer programs are an essential part of any serious poverty-reduction agenda. And that’s the choice – serious poverty reduction versus “free market” solutions that have never worked in the real world – that all voters, Christians and non-Christians, face in the voting booth. At the next election, I hope that Dignan decides to vote for what’s been proven to reduce poverty, rather than voting against helping the poor.