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Posts Tagged ‘Self-Reliance’

I wrote last year about the way in which welfare programs lead to very high implicit marginal tax rates on low-income people. More specifically, they lose handouts when they earn income. As such, it is not very advantageous for them to climb the economic ladder because hard work is comparatively unrewarding.

Thanks to the American Enterprise Institute, we now have a much more detailed picture showing the impact of redistribution programs on the incentive to earn more money.

It’s not a perfect analogy since people presumably prefer cash to in-kind handouts, but the vertical bars basically represent living standards for any given level of income that is earned (on the horizontal axis).

Needless to say, there’s not much reason to earn more income when living standards don’t improve. May as well stay home and goof off rather than work hard and produce.

This is why income redistribution is so destructive, not just to taxpayers, but also to the people who get trapped into dependency. Which is exactly the point made in this video.

P.S. Most of you know that I’m not a fan of the Organization for Economic Cooperation and Development because the Paris-based bureaucracy has such statist impulses. But even the OECD has written about the negative impact of overly generous welfare programs on incentives for productive behavior.

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I may have to stop being a New York Yankees fan. The state of my birth is a national embarrassment. People in the Empire State are national champions in the contest to rip off their fellow citizens according to analysis from USA Today. West Virginia, however, is the biggest deadbeat state if handouts are compared to state income.

But kudos to the folks in Utah for swindling the least amount of money from other Americans (and perhaps secondary congratulations to the Mormon Church for emphasizing self reliance). Here’s an excerpt from the article.

New Yorkers get more government aid per person from social programs than residents of any other state, a USA TODAY analysis finds. …The state’s Medicaid program is the most expensive in the nation, driving the average cost of all government benefits in New Yorkto $9,442 per person. …USA TODAY analyzed data from the Bureau of Economic Analysis and the Census Bureau to determine the importance of government benefits in each state. The benefit numbers represent average amounts received per person — not just for those in a program. The benefits include what people receive for Social Security, Medicare, Medicaid, food stamps, veterans’ programs, college scholarships and many other government programs. …West Virginia…gets 28% of its income from government programs, more than any other state. The state’s residents are the second oldest, after Florida’s, and 20% collect disability.

Data for all states can be seen by clicking on the USA Today story, but here are the highlights (or lowlights), featuring the five states that have the highest per-capita mooching from the federal trough. And we also list the five states that deserve credit for being the most self-reliant.

Five Biggest Moocher States                          Top States for Being Self-Reliant

New York               $9,442                                  Utah                      $4,731

West Virginia         $9,138                                  Colorado               $5,632

Rhode Island         $8,955                                  Virginia                  $6,001

Maine                     $8,864                                  Nevada                  $6,080

Pennsylvania         $8,616                                   Texas                     $6,167

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Here’s a passage from a speech by a well-known political figure, but it wasn’t Ronald Reagan, Ron Paul, or Milton Friedman.

The lessons of history, confirmed by the evidence immediately before me, show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fibre. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit. It is inimical to the dictates of sound policy. It is in violation of the traditions of America. …The Federal Government must and shall quit this business of relief.

Interestingly, it was Franklin Delano Roosevelt, in his 1935 State of the Union address. FDR recognized that welfare was akin to a drug that sapped people’s independence. (Or he at least was politically astute enough to realize he should pretend to be concerned about the impact of government-induced dependency.)

Here’s a more recent example, which was cited in a National Review Online column by my Cato colleague Mike Tanner. A prominent politician in DC said that welfare leads to “a cycle of generational poverty, government dependency, and economic disparity.”

But the person who said this wasn’t Jim DeMint, Barry Goldwater, or Friedrich Hayek. It was the former Mayor of Washington, DC, Marion Barry.

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