Tuesday, May 1, 2012

Real (non-EBT) Help for the Poor

Massachusetts legislators recently passed reforms to the Electronic Benefits Transfer Card (EBT) system in hopes of stamping out abuse. Unfortunately, the focus only tangentially addresses the issue of how to help the poor. The government merely exacerbated the problem by strengthening the control it has over spending decisions. EBT promotes the kind of nanny statism that enhances the dependency of the poor on government. To effectively help the poor in Massachusetts, the government can and should do the following:

Just give cash. If the government is going to make transfers to poor people, the form should simply be cash. Specialization and designation of government aid programs are wrought with inefficiency and waste. It further distances the decision making from the consumer. The most effective form of assistance is a cash payment. Empower the people to make choices for their families. They are in a position to know best what they need. Education reform. Perhaps the most effective method of elevating from the depths of poverty is through education. Government at the state level should be focused on programs that provide the most benefit to disadvantaged children. For example, the Neighborhood House Charter School has been highly effective. The government should promote these kinds of charter schools. School choice should also be an option, and parents be given direct assistance to send their children elsewhere if local schools are failing.

Reduce or eliminate the minimum wage. Though ostensibly created to boost income and help low income earners, the minimum wage actually creates a cap on employment. The negative effects most directly impact the poor – the unskilled and undereducated. A simple supply-demand chart demonstrates the adverse impact on jobs. The minimum wage does not raise income levels, but rather reduces the supply of low paying jobs – the bottom rung of the ladder people need to climb out of poverty.

Cut taxes and regulation on employment. To create more of something, it needs to be taxed less. By reducing the taxation on employment, more jobs will be created which will help the poor. Unemployment taxes and various fees and regulations are a drag on job creation. They should be reduced.

Promote economic growth. The logic is straightforward: a greater supply of jobs leads to higher income thus helping the poor, and jobs are created through economic growth. The greatest impact the government can have on economic growth is by reducing taxation and spending and regulation. Encourage companies to set up shop in Massachusetts by lowering the tax burden on income.

EBT abuse and reform has recently been a hot topic in Massachusetts, and the legislature is taking action to address the issue. However, poor people in need of real assistance are being done a disservice. Government should focus on real and substantial solutions.

No comments: