I’m a little surprised at student loan forgiveness wasn’t included in this conversation. I’ve seen a lot to talk about means testing and student loan forgiveness on Twitter. And then I’ll compare it with other programs. Which I always get annoyed at since the other programs like Social Security a universal, whereas student loans our only held by a minority of the population, and a large part of that minority are better off than average.
I am a huge proponent of the refundable child tax credit. Personally I think it’s sort of dumb to means test it, but I understand the political calculations around it. I don’t look at the child tax credit as a welfare program. I look at it as investing in the future of the country. Theoretically a rich person’s kids in a poor person’s kids will contribute equally, even if we know in practice that it’s more complicated than that.
I’ve learned a lot about welfare programs in the last year and a half, because my daughter became a single mom. And then a full-time student. This is the list of programs that she benefits from: and value per month.
GI Bill (mine) $1326
Pell Grant (full amount) $520
Article 32 Housing (cheap rent) $400 savings
WIC (free milk and stuff) $100
SNAP (food stamps) $200
Medicare (health care for my granddaughter… she is covered under me) $100
Subsidized Child Care (500 a month for full time day care) $500
Work Study (Part-time job she qualifies for because of income) $400
Student Loans (Probably didn’t need this, but we took it anyway just in case they forgive it and it’s a cushion) $500 (6K total)
Various scholarships targeted at single moms or low income. $50
CTC $300
$3896 per month not including student loans since she might have to pay that back. Or $45.5K a year.
Note, the G.I. Bill pays her tuition separately so I did not deduct that.
She got $6000 of student loans. But that money is sort of set aside for emergencies. And we hope it will be forgiven.
I have to confess, she is not doing poorly. But qualifying for many of these programs, and doing the paperwork is a chore. It’s not super easy for everything.
And just in case there’s anyone who resents all this welfare, she is going to school for mechatronics. It’s only a two year program. And then she will end up as a woman in a STEM field making good money.
No, I really don’t help her that much.
The father is Scottish, so no chance of child support.
The article 32 housing, was pure luck. I happened to walk into the apartment complex which was where her child care place was located at and just ask. And they happen to have a rare article 32 housing apartment coming open. We jumped on it. And if anyone has seen the news, I don’t know the Boise he has had the highest rent increase in the country. Up 39%.
I should mention that she qualifies for all of this, despite me making a good living, because she is a single parent. Once you become a parent, they no longer penalize you for your parents income.
She has healthcare on my plan until she hits 23 because she is a full-time student. But she’s about to start her last year. So she will graduate at 22.
Oh yeah. She is getting straight A’s, and kicking ass.
Totally lost track of the whole purpose of my post. So I’m going to end it here.
Yes this post was dictated on a iPhone. So forgive any grammar or spelling mistakes.
I think the entire tax code and conversation has gone off the rails. My parents make about 70k and pay about 7% effective income tax (and less last year if you count all the stimulus checks they received and didn’t need, as they are no longer working and on Social Security. )
I have been lucky and worked hard, and I pay something like 45% all in. 45% seems appropriate. I’d even be fine with 50% or 55%, but not if all the services added are means tested. The CTC pisses me off. That’s the kind of rhetoric and legislation that makes me want to vote Republican (if there were any Romney or Jeb type republicans who weren’t crazy).
Matt is right in a pragmatic sense of what can pass, but it would be great if lawmakers change the rhetoric to make things less an “everyone against the rich” and more about how these programs will lift up everyone. Change the narrative and see if we can get buy-in for broad-based service increases for broad-based (progressive) tax increases.
Matt, I really appreciate the inclusion of administrative burdens here, especially the thoughtful example of health insurance. I think administrative burdens are one of the key barriers to entry across a lot of social programs (not just for the poor!) and they don’t receive enough attention outside of the Twitterati-policy-wonk world.
One thing I’d like to point out is that administrative burdens can be more easily gamed by the rich. Case in point, my sister qualified for a Pell Grant because my family was able to make it appear as if our income was low enough through various legal but ethically dubious shenanigans. There is no reason a family like mine needed the Pell Grant but in four years nobody ever asked why a rich girl from the ‘burbs who grew up in gated golf course communities and went to private school also got the US taxpayers to find her degree from Auburn. War Eagle, I suppose.
Unhappy prediction: we will exit the Biden administration without congestion tolling having been implemented in New York. The political power class of NYC are 100% drivers, and if you’ve really made it here someone else drives you. Cuomo hates the idea and is actively trying to slow-walk it to death. DeBlasio hates it and has only taken up the issue in the last few months as a way of needling Cuomo. Eric Adams hates it and will only talk about it in the context of musing about which favored constituencies he can dole out exemptions to if it happens.
The thing to remember about NYC is that it’s not in any way a pedestrian- or transit-friendly city. It’s just a city that _has a lot of pedestrians and transit users_, to the ongoing irritation of its political leaders who think that if we just resume building highways here everyone will finally come to their senses and buy a car and who at best see the MTA as a very large patronage jobs program that sometimes runs a train or two.
One way to partially thread the needle here is to abolish means testing but treat benefits as taxable income. Little claw back for the poor but much more for the rich particularly if you increase the top marginal rates.
I saw a post the other day that discussed how the root issue for most of these issues is the declining trust in institutions (including/especially the government). In theory you could have the government tax and provide a service, but if you don't trust the government to do that well, why would you agree to that.
At the end of the day, I think that is what kills people's willingness to pay taxes and makes all the programs so very hard to start. Its also what made me realize why hard core blue states with large Democratic supermajorities are not able to initiate true nordic like social democratic welfare programs within their state, even though they are clearly wealthy enough to do it.
I think what people generally mean by "means-tested" is: If I'm eligible for the benefit, it isn't means-tested, but if I'm not eligible for the benefit, then it is means-tested.
Good post, but I balk at the analogy with libraries, parks, etc. I don't think this is a fair comparison.
Much of what the government provides are public goods. National defense, national parks, airports, etc -- none of that is means-tested nor could be (like Matt's example of getting on a bus). Yet all those are effectively rationed. Lots of people use libraries (around 50%) but lots of people don't. We don't see 330 million people visiting national parks every year, nor does 80% of a city's population descend on the local park at once. And not everyone uses the bus because, well, duh.
That self-rationing makes these things affordable. That's very different from a cash-granting program like the CTC, where you qualify for a check by breathing (mostly). You can argue that it's worth sending checks to the ~30% of the population which is well off because it reduces the administrative burden by both the applicant and the bureaucracy, but that's still a pretty big chunk of change; I'm not sure it passes a cost-benefit analysis.
I'm pretty sold on the high marginal tax rate issue, however. Whether that means we have to make programs universal is another thing, though.
I agree with a lot of the economics arguments here, but one thing sticks out to me: "And the current thinking in the party seems to be that if you can implement your dreams, you should do half-assed versions of everything."
That isn't a recipe for efficient design of social programs, but earlier in this article you also point out that these sorts of programs are hard to expand but also hard to cut. So if your goal is to maximize the welfare state, wouldn't there be some value in just creating a lot of new social programs right now while Dems have power, even if they are kind of half-assed and inefficient, and then the next time the GOP has power do some bipartisan deals with moderates to make the programs better and more efficient?
What about the distinction between public goods and assistance to the poor? Nobody is proposing to means-test libraries and mass transit, but it makes sense to means-test cash assistance to the poor because it's VASTLY cheaper than a UBI, hence worth the administrative cost.
I tend to agree with Matt in that my bias is against means testing, but at the same time higher taxes or phase-outs or cost sharing are appropriate to begin introducing once you get above the median income. So we are on the same page. Some more specific comments:
(3) Parrott/Greenstein glossed over the fact that the highest effective marginal tax rates apply not to the very poor, but to those who are near and just above the poverty level. The true poverty trap closes most tightly just as you are about to escape it. http://tiny.cc/wkin
I wish making the EITC NOT exclude the poorest, making it more like a wage subsidy, were a much higher priority. Changing tax "deductions" into partial tax credits could increase revenues AND progressivity. And I'd like to hear the progressive case against financing pensions and health insurance for the poor and elderly with a VAT rather than the capped wage tax.
I think the worst is means tested and capped number of participants. So this poor person gets a house under section 8 and this one doesn’t because you snooze you lose. And like if the poor person gets a raise are they thrown out of the house? And one of the similarly poor people who is on a 10 year waiting list gets in? Section 8 is just really unfair to people who qualify but get nothing because of paperwork or they didn’t apply first.
I’m a little surprised at student loan forgiveness wasn’t included in this conversation. I’ve seen a lot to talk about means testing and student loan forgiveness on Twitter. And then I’ll compare it with other programs. Which I always get annoyed at since the other programs like Social Security a universal, whereas student loans our only held by a minority of the population, and a large part of that minority are better off than average.
I am a huge proponent of the refundable child tax credit. Personally I think it’s sort of dumb to means test it, but I understand the political calculations around it. I don’t look at the child tax credit as a welfare program. I look at it as investing in the future of the country. Theoretically a rich person’s kids in a poor person’s kids will contribute equally, even if we know in practice that it’s more complicated than that.
I’ve learned a lot about welfare programs in the last year and a half, because my daughter became a single mom. And then a full-time student. This is the list of programs that she benefits from: and value per month.
GI Bill (mine) $1326
Pell Grant (full amount) $520
Article 32 Housing (cheap rent) $400 savings
WIC (free milk and stuff) $100
SNAP (food stamps) $200
Medicare (health care for my granddaughter… she is covered under me) $100
Subsidized Child Care (500 a month for full time day care) $500
Work Study (Part-time job she qualifies for because of income) $400
Student Loans (Probably didn’t need this, but we took it anyway just in case they forgive it and it’s a cushion) $500 (6K total)
Various scholarships targeted at single moms or low income. $50
CTC $300
$3896 per month not including student loans since she might have to pay that back. Or $45.5K a year.
Note, the G.I. Bill pays her tuition separately so I did not deduct that.
She got $6000 of student loans. But that money is sort of set aside for emergencies. And we hope it will be forgiven.
I have to confess, she is not doing poorly. But qualifying for many of these programs, and doing the paperwork is a chore. It’s not super easy for everything.
And just in case there’s anyone who resents all this welfare, she is going to school for mechatronics. It’s only a two year program. And then she will end up as a woman in a STEM field making good money.
No, I really don’t help her that much.
The father is Scottish, so no chance of child support.
The article 32 housing, was pure luck. I happened to walk into the apartment complex which was where her child care place was located at and just ask. And they happen to have a rare article 32 housing apartment coming open. We jumped on it. And if anyone has seen the news, I don’t know the Boise he has had the highest rent increase in the country. Up 39%.
I should mention that she qualifies for all of this, despite me making a good living, because she is a single parent. Once you become a parent, they no longer penalize you for your parents income.
She has healthcare on my plan until she hits 23 because she is a full-time student. But she’s about to start her last year. So she will graduate at 22.
Oh yeah. She is getting straight A’s, and kicking ass.
Totally lost track of the whole purpose of my post. So I’m going to end it here.
Yes this post was dictated on a iPhone. So forgive any grammar or spelling mistakes.
I think the entire tax code and conversation has gone off the rails. My parents make about 70k and pay about 7% effective income tax (and less last year if you count all the stimulus checks they received and didn’t need, as they are no longer working and on Social Security. )
I have been lucky and worked hard, and I pay something like 45% all in. 45% seems appropriate. I’d even be fine with 50% or 55%, but not if all the services added are means tested. The CTC pisses me off. That’s the kind of rhetoric and legislation that makes me want to vote Republican (if there were any Romney or Jeb type republicans who weren’t crazy).
Matt is right in a pragmatic sense of what can pass, but it would be great if lawmakers change the rhetoric to make things less an “everyone against the rich” and more about how these programs will lift up everyone. Change the narrative and see if we can get buy-in for broad-based service increases for broad-based (progressive) tax increases.
Matt, I really appreciate the inclusion of administrative burdens here, especially the thoughtful example of health insurance. I think administrative burdens are one of the key barriers to entry across a lot of social programs (not just for the poor!) and they don’t receive enough attention outside of the Twitterati-policy-wonk world.
One thing I’d like to point out is that administrative burdens can be more easily gamed by the rich. Case in point, my sister qualified for a Pell Grant because my family was able to make it appear as if our income was low enough through various legal but ethically dubious shenanigans. There is no reason a family like mine needed the Pell Grant but in four years nobody ever asked why a rich girl from the ‘burbs who grew up in gated golf course communities and went to private school also got the US taxpayers to find her degree from Auburn. War Eagle, I suppose.
I think Matt needs to start paying the commentariat royalty checks when he takes our bickering and turns it into an article topic.
Unhappy prediction: we will exit the Biden administration without congestion tolling having been implemented in New York. The political power class of NYC are 100% drivers, and if you’ve really made it here someone else drives you. Cuomo hates the idea and is actively trying to slow-walk it to death. DeBlasio hates it and has only taken up the issue in the last few months as a way of needling Cuomo. Eric Adams hates it and will only talk about it in the context of musing about which favored constituencies he can dole out exemptions to if it happens.
The thing to remember about NYC is that it’s not in any way a pedestrian- or transit-friendly city. It’s just a city that _has a lot of pedestrians and transit users_, to the ongoing irritation of its political leaders who think that if we just resume building highways here everyone will finally come to their senses and buy a car and who at best see the MTA as a very large patronage jobs program that sometimes runs a train or two.
One way to partially thread the needle here is to abolish means testing but treat benefits as taxable income. Little claw back for the poor but much more for the rich particularly if you increase the top marginal rates.
I saw a post the other day that discussed how the root issue for most of these issues is the declining trust in institutions (including/especially the government). In theory you could have the government tax and provide a service, but if you don't trust the government to do that well, why would you agree to that.
At the end of the day, I think that is what kills people's willingness to pay taxes and makes all the programs so very hard to start. Its also what made me realize why hard core blue states with large Democratic supermajorities are not able to initiate true nordic like social democratic welfare programs within their state, even though they are clearly wealthy enough to do it.
I think what people generally mean by "means-tested" is: If I'm eligible for the benefit, it isn't means-tested, but if I'm not eligible for the benefit, then it is means-tested.
Good post, but I balk at the analogy with libraries, parks, etc. I don't think this is a fair comparison.
Much of what the government provides are public goods. National defense, national parks, airports, etc -- none of that is means-tested nor could be (like Matt's example of getting on a bus). Yet all those are effectively rationed. Lots of people use libraries (around 50%) but lots of people don't. We don't see 330 million people visiting national parks every year, nor does 80% of a city's population descend on the local park at once. And not everyone uses the bus because, well, duh.
That self-rationing makes these things affordable. That's very different from a cash-granting program like the CTC, where you qualify for a check by breathing (mostly). You can argue that it's worth sending checks to the ~30% of the population which is well off because it reduces the administrative burden by both the applicant and the bureaucracy, but that's still a pretty big chunk of change; I'm not sure it passes a cost-benefit analysis.
I'm pretty sold on the high marginal tax rate issue, however. Whether that means we have to make programs universal is another thing, though.
I agree with a lot of the economics arguments here, but one thing sticks out to me: "And the current thinking in the party seems to be that if you can implement your dreams, you should do half-assed versions of everything."
That isn't a recipe for efficient design of social programs, but earlier in this article you also point out that these sorts of programs are hard to expand but also hard to cut. So if your goal is to maximize the welfare state, wouldn't there be some value in just creating a lot of new social programs right now while Dems have power, even if they are kind of half-assed and inefficient, and then the next time the GOP has power do some bipartisan deals with moderates to make the programs better and more efficient?
I'm curious why this post got so little engagement
What about the distinction between public goods and assistance to the poor? Nobody is proposing to means-test libraries and mass transit, but it makes sense to means-test cash assistance to the poor because it's VASTLY cheaper than a UBI, hence worth the administrative cost.
I tend to agree with Matt in that my bias is against means testing, but at the same time higher taxes or phase-outs or cost sharing are appropriate to begin introducing once you get above the median income. So we are on the same page. Some more specific comments:
(1) A simple fact check: SNAP does have work requirements, although they were eased during the pandemic. Here is the USDA's own guide to work requirements: https://www.fns.usda.gov/snap/work-requirements . During the Trump administration there was a big push for tighter work requirements on noncash welfare programs in general. https://www.niskanencenter.org/expanded-work-requirements-in-non-cash-welfare-programs/
(2) Lower taxes are not the only benefit higher-income employees get from our absurd system of employer-sponsored health insurance. They are also far more likely to be covered and get far more value for money when they are covered. https://www.niskanencenter.org/whats-wrong-with-employer-sponsored-health-insurance/
(3) Parrott/Greenstein glossed over the fact that the highest effective marginal tax rates apply not to the very poor, but to those who are near and just above the poverty level. The true poverty trap closes most tightly just as you are about to escape it. http://tiny.cc/wkin
(4) Progressives need to think more carefully about the problem of work incentives and benefit reduction rates as they suggest new programs to add on top of existing programs. https://www.niskanencenter.org/guaranteed-income-for-the-21st-century-a-proposal-with-promise/ It is hard to see how this problem can be overcome without a deep reconstruction of poverty programs that eliminates many of those that now exist. http://tiny.cc/iCa
SNAP has work requirements for “ABAWDS”. https://www.fns.usda.gov/snap/work-requirements
I wish making the EITC NOT exclude the poorest, making it more like a wage subsidy, were a much higher priority. Changing tax "deductions" into partial tax credits could increase revenues AND progressivity. And I'd like to hear the progressive case against financing pensions and health insurance for the poor and elderly with a VAT rather than the capped wage tax.
I think the worst is means tested and capped number of participants. So this poor person gets a house under section 8 and this one doesn’t because you snooze you lose. And like if the poor person gets a raise are they thrown out of the house? And one of the similarly poor people who is on a 10 year waiting list gets in? Section 8 is just really unfair to people who qualify but get nothing because of paperwork or they didn’t apply first.