I pretty much agree with this, but two caveats. a) Transfers really should be paid for out of taxes, not borrowing. Borrowing is OK for investments that will raise future income (and there are plenty of those that we need), but not just to raise the consumption levels of otherwise low-consumption people. b) Those taxes ought to be as much as possible progressive and on consumption rather than income.
Some corollaries of this, I think are:
Higher marginal rates on higher income people.
Partial tax credits instead of deductions for tax favored consumption
Finance of an expanded social safety net -- retirement income, health insurance, unemployment insurance, child care with general and consumption taxes, not wage taxes.
Deliver many of the more generous benefits with refundable tax credits.
I wonder if the moment just seems right because trump was using right wing populism to gain support, and as soon as dems try to do something populist the tribalism will kick in and we’ll all be talking about ayn rand again. “Socialist” = welfare programs when the other guys propose them
I like this write-up. I did have one comment though on a meta-level. You cite a few articles in support of the welfare state, but there is a tendency among pundits to cherry pick study results in order to bolster their arguments. I blame it on the fact that most pundits come from humanities backgrounds, and so their mode of analysis is hermeneutical. When you're arguing about a text, it's perfectly natural to ignore the parts that don't fit your narrative. But this doesn't work when it comes to statistical studies, where the aggregate result across studies is way more informative than any individual study.
All of this is a long-winded way of saying that it would be nice to get a sense of what the evidence is in the field as a whole, including whether there are studies that contradict your conclusions. 538 is good for this. Otherwise, I worry that I'm being bullshitted.
I think the race central or not issue is wrongly joined. Republics make "otherism" an issue all the time. The question for Democrats is how to meet it. I like the Stacy Abrams approach, "Don't let Republicans use race (otherness) as a way to divide us who want to level up society." I think the big novelty will be to talk a lot more about voter suppression, gerrymandering that make coalition building across race/class/ethnic/religions/gender lines more difficult.
Matt, to what extent do you think the focus on 'inequality' has caused this topic to drift a bit from the situation on the ground?
I've always felt that poverty should be the focus. There are more equal societies that are not great models for us (Yemen, Niger, Ukraine, plenty of others). It's not that inequality is entirely unimportant, but I fear it pulls the focus away from poverty and toward intra-elite debates.
Obviously, an anti-poverty push includes taxing the very wealthy, and there are inequality implications for that. It just seems that it drags us into an us vs. them fight, instead of the simple realization that we would like to live in a society with fewer instances of inter-generational poverty.
Summary of a lot of political dysfunction on the center-left is: "This idea we used to believe is now much more complicated due to [DEBATABLE ELITE POINT OF VIEW] and now we have to convolute our language and fight about rhetoric while doing very little to help everyone else (i.e. most people), who have very little idea what we're talking about."
Extremely good post, which lends itself directly to supporting UBI. Yes, it'd require broader tax reform to fund, but it's a goal, just like ONE BILLION AMERICANS. All the problems with means-testing and in-kind benefits you list are addressed by UBI, regardless of the future of work. Why, conceptually, would we want to replace the Child Tax Credit with a child allowance and not the EITC with a UBI?
Besides the political benefits of making programs universal (and thus reducing racial backlash to them), what is the policy advantage of removing targeting? Isn’t is possible that the combination of these proposals (like generous and universal family subsidies and “eliminating SNAP, Section 8 housing assistance, and weird stuff like LIHEAP”) would leave the neediest of Americans who rely on receiving a patchwork of means-tested benefits worse off?
To your other point, one thing to remember was the dramatic post war surge in crime due to lead in gasoline. That occurred at the same time as The Great Society programs of the 60s and people mistaken concluded that welfare was causing crime. I wonder how much further along we'd be in we didn't have the lead/crime issue?
Why shouldn’t these programs phase out for people earning high salaries? The benefit of the extra money to them seems like it would be less than the benefit of it being spent on poorer people, and giving someone earning 25k/year the same amount of monetary support as someone earning 5 times that amount just *feels* wrong to me.
Is it just the administrative argument that “sending everyone checks is easier than sending some people checks”?
In addition to what JFO and Marc said, I also think the basic bargain of progressive taxes + universal programs feels more fair. Everyone contributes to society and everyone gets something -- it's not just a transfer from rich to poor.
That's especially the case if you (correctly) pitch the program as "this offsets the costs of child care" rather than "this will end child poverty".
It's not just that it saves the administration time by sending everybody checks, it's that it saves the recipients time and effort they may not be able to give. We want high participation rates from the poor in welfare. If the best way to do this is to also send some checks to middle class people--sounds ok to me.
Verifying income is a hassle for both individuals and the government and requires much more administrative overhead than verifying citizenship/legal residence/etc. Plus, there's tons of room for loopholes, what kind of income counts, etc., etc.
Separately, a program that's aimed at poor people is going to be seen as "that thing poor people get", and looked down on accordingly - may not be morally right, but it's a thing that happens in practice and needs to be taken into account.
All I want for Christmas is to replace the existing welfare state with a very generous negative income tax. Set it up so that someone with no income makes $40,000, phase it out over another $30,000, add in some child benefits and baby you got a welfare system going!
The lack of enthusiasm for EITC and Child Tax Credit among Progressives is astounding. From the media, you'd think Marco Rubio is the only supporter of higher Child Tax Credit.
Not 100% on topic, but I'd like to bring up another part of the "welfare state" that subsidizes particular kinds of favored consumption: health insurance, charitable contributions, and home mortgage interest through tax deductions. Tax deductions are great for high income people. I have a high enough marginal tax rate that I can joy in knowing that my fellow citizens are contributing X% to my favorite charities. But this is deeply unfair. If a poor social security recipient gives $5 per week to their church they get zero tax benefit. For the same fiscal cost we could give partial refundable tax credits that would equally subsidize everyone's preferred consumption choices.
Decoctions make more sense for S&LG taxes, which is no doubt why Republicans targeted them for limitation in the "Tax Cuts for the Rich and Deficits Act of 2017." :)
I find the mortgage interest deduction to be pretty gross. "You're not fully leveraged as you profit off of the housing shortage? Get more levered, we'll give you a tax break..."
I would have been so much happier if S&LG stayed and mortgage tax went.
There are two issues. Should a certain kind of expenditure be favored by the Federal tax system. Should it be favored with a deduction or a credit
I think that S&LG tax is more like just not having received that income and so a deduction seems the right way. I look at the mortgage interest favoritism as something that was very good in the past because is was one of the only ways to encourage saving for retirement (which I assume deserves favoritism because people are short sighted and do not save enough). Today there are other ways to favor saving like 401k, so home mortgages are less. But maybe still some. I guess there is something in the argument about encouraging people to be invested in their communities [Matt might think they are "too" invested - NIMBYism. :)] that makes owners different from renters, but on the other hand mobility has advantages, too.
“ And conceptually, I think you should probably consider eliminating SNAP, Section 8 housing assistance, and weird stuff like LIHEAP and instead just making monthly checks even bigger. You could also scrap the family size adjustment in EITC and turn it into a narrower wage subsidy.”
Why not just eliminate all of the welfare programs (which conservatives would like, because they are weird) and replace it with a UBI (with some benefits for dependents like your SS for parents scheme)? KISS, right?
I pretty much agree with this, but two caveats. a) Transfers really should be paid for out of taxes, not borrowing. Borrowing is OK for investments that will raise future income (and there are plenty of those that we need), but not just to raise the consumption levels of otherwise low-consumption people. b) Those taxes ought to be as much as possible progressive and on consumption rather than income.
Some corollaries of this, I think are:
Higher marginal rates on higher income people.
Partial tax credits instead of deductions for tax favored consumption
Finance of an expanded social safety net -- retirement income, health insurance, unemployment insurance, child care with general and consumption taxes, not wage taxes.
Deliver many of the more generous benefits with refundable tax credits.
Matt, this post, alongside your piece on gun control, is easily your best. Truly excellent, and a great recommended read for my friends.
I wonder if the moment just seems right because trump was using right wing populism to gain support, and as soon as dems try to do something populist the tribalism will kick in and we’ll all be talking about ayn rand again. “Socialist” = welfare programs when the other guys propose them
Excellent essay unfortunately undermined, destroyed and totally refuted by the fact that "fulsome" means "flattering excessively"
:-)
I like this write-up. I did have one comment though on a meta-level. You cite a few articles in support of the welfare state, but there is a tendency among pundits to cherry pick study results in order to bolster their arguments. I blame it on the fact that most pundits come from humanities backgrounds, and so their mode of analysis is hermeneutical. When you're arguing about a text, it's perfectly natural to ignore the parts that don't fit your narrative. But this doesn't work when it comes to statistical studies, where the aggregate result across studies is way more informative than any individual study.
All of this is a long-winded way of saying that it would be nice to get a sense of what the evidence is in the field as a whole, including whether there are studies that contradict your conclusions. 538 is good for this. Otherwise, I worry that I'm being bullshitted.
Here's a review I found: https://link.springer.com/article/10.1186/1471-2458-13-1234 Maybe it'll help!
I think the race central or not issue is wrongly joined. Republics make "otherism" an issue all the time. The question for Democrats is how to meet it. I like the Stacy Abrams approach, "Don't let Republicans use race (otherness) as a way to divide us who want to level up society." I think the big novelty will be to talk a lot more about voter suppression, gerrymandering that make coalition building across race/class/ethnic/religions/gender lines more difficult.
Matt, to what extent do you think the focus on 'inequality' has caused this topic to drift a bit from the situation on the ground?
I've always felt that poverty should be the focus. There are more equal societies that are not great models for us (Yemen, Niger, Ukraine, plenty of others). It's not that inequality is entirely unimportant, but I fear it pulls the focus away from poverty and toward intra-elite debates.
Obviously, an anti-poverty push includes taxing the very wealthy, and there are inequality implications for that. It just seems that it drags us into an us vs. them fight, instead of the simple realization that we would like to live in a society with fewer instances of inter-generational poverty.
Summary of a lot of political dysfunction on the center-left is: "This idea we used to believe is now much more complicated due to [DEBATABLE ELITE POINT OF VIEW] and now we have to convolute our language and fight about rhetoric while doing very little to help everyone else (i.e. most people), who have very little idea what we're talking about."
Extremely good post, which lends itself directly to supporting UBI. Yes, it'd require broader tax reform to fund, but it's a goal, just like ONE BILLION AMERICANS. All the problems with means-testing and in-kind benefits you list are addressed by UBI, regardless of the future of work. Why, conceptually, would we want to replace the Child Tax Credit with a child allowance and not the EITC with a UBI?
Besides the political benefits of making programs universal (and thus reducing racial backlash to them), what is the policy advantage of removing targeting? Isn’t is possible that the combination of these proposals (like generous and universal family subsidies and “eliminating SNAP, Section 8 housing assistance, and weird stuff like LIHEAP”) would leave the neediest of Americans who rely on receiving a patchwork of means-tested benefits worse off?
"core potential workers"
Can you define that?
To your other point, one thing to remember was the dramatic post war surge in crime due to lead in gasoline. That occurred at the same time as The Great Society programs of the 60s and people mistaken concluded that welfare was causing crime. I wonder how much further along we'd be in we didn't have the lead/crime issue?
https://www.motherjones.com/environment/2016/02/lead-exposure-gasoline-crime-increase-children-health/
The Mother's Pension Program also extended sons' lifespan by a year, not just the mothers and not just sons' earnings and health.
Why shouldn’t these programs phase out for people earning high salaries? The benefit of the extra money to them seems like it would be less than the benefit of it being spent on poorer people, and giving someone earning 25k/year the same amount of monetary support as someone earning 5 times that amount just *feels* wrong to me.
Is it just the administrative argument that “sending everyone checks is easier than sending some people checks”?
In addition to what JFO and Marc said, I also think the basic bargain of progressive taxes + universal programs feels more fair. Everyone contributes to society and everyone gets something -- it's not just a transfer from rich to poor.
That's especially the case if you (correctly) pitch the program as "this offsets the costs of child care" rather than "this will end child poverty".
It's not just that it saves the administration time by sending everybody checks, it's that it saves the recipients time and effort they may not be able to give. We want high participation rates from the poor in welfare. If the best way to do this is to also send some checks to middle class people--sounds ok to me.
Verifying income is a hassle for both individuals and the government and requires much more administrative overhead than verifying citizenship/legal residence/etc. Plus, there's tons of room for loopholes, what kind of income counts, etc., etc.
Separately, a program that's aimed at poor people is going to be seen as "that thing poor people get", and looked down on accordingly - may not be morally right, but it's a thing that happens in practice and needs to be taken into account.
All I want for Christmas is to replace the existing welfare state with a very generous negative income tax. Set it up so that someone with no income makes $40,000, phase it out over another $30,000, add in some child benefits and baby you got a welfare system going!
Exactly. Plus it’s easy as hell and requires basically no bureaucracy.
The lack of enthusiasm for EITC and Child Tax Credit among Progressives is astounding. From the media, you'd think Marco Rubio is the only supporter of higher Child Tax Credit.
Not 100% on topic, but I'd like to bring up another part of the "welfare state" that subsidizes particular kinds of favored consumption: health insurance, charitable contributions, and home mortgage interest through tax deductions. Tax deductions are great for high income people. I have a high enough marginal tax rate that I can joy in knowing that my fellow citizens are contributing X% to my favorite charities. But this is deeply unfair. If a poor social security recipient gives $5 per week to their church they get zero tax benefit. For the same fiscal cost we could give partial refundable tax credits that would equally subsidize everyone's preferred consumption choices.
Decoctions make more sense for S&LG taxes, which is no doubt why Republicans targeted them for limitation in the "Tax Cuts for the Rich and Deficits Act of 2017." :)
I find the mortgage interest deduction to be pretty gross. "You're not fully leveraged as you profit off of the housing shortage? Get more levered, we'll give you a tax break..."
I would have been so much happier if S&LG stayed and mortgage tax went.
There are two issues. Should a certain kind of expenditure be favored by the Federal tax system. Should it be favored with a deduction or a credit
I think that S&LG tax is more like just not having received that income and so a deduction seems the right way. I look at the mortgage interest favoritism as something that was very good in the past because is was one of the only ways to encourage saving for retirement (which I assume deserves favoritism because people are short sighted and do not save enough). Today there are other ways to favor saving like 401k, so home mortgages are less. But maybe still some. I guess there is something in the argument about encouraging people to be invested in their communities [Matt might think they are "too" invested - NIMBYism. :)] that makes owners different from renters, but on the other hand mobility has advantages, too.
Right - I would argue that since it's the interest that is deducted, it's not about _savings_, it's about _speculation_.
“ And conceptually, I think you should probably consider eliminating SNAP, Section 8 housing assistance, and weird stuff like LIHEAP and instead just making monthly checks even bigger. You could also scrap the family size adjustment in EITC and turn it into a narrower wage subsidy.”
Why not just eliminate all of the welfare programs (which conservatives would like, because they are weird) and replace it with a UBI (with some benefits for dependents like your SS for parents scheme)? KISS, right?
I think of UBI as a mirage. If you run the numbers, they're really huge. A Canadian analysis: https://www.thefreelibrary.com/A+dubious+antipoverty+strategy%3A+guaranteeing+incomes+for+the+poor+is...-a0353517593