Pennsylvania Moves to Starve Poor People
That’s the message I came away with after reading an online article from a Philadelphia Inquirer reporter about a decision by the state of Pennsylvania to limit eligibility for food stamps. The article is a perfect example of the difficulty advocates for limited government face in communicating their ideas through the mainstream press.
At issue is the PA Department of Public Welfare’s decision to eliminate eligibility for food stamps for people under the age of 60 who have more than $2,000 in assets (the value of one’s house, retirement benefits, and car would be excluded). The DPW estimates that only “2 percent of the 1.8 million Pennsylvanians receiving food stamps would be affected by the asset test.” Indeed, the DPW’s website notes that “Because of changes to SNAP, most Pennsylvania households are not subject to a net income limit, nor are they subject to any resource or asset limits.”
(SNAP is the acronym for the federal Supplemental Nutrition Assistance Program, which was known as the Food Stamp program until 2008 when Congress changed its name to sound more palatable. The program is run jointly by the U.S. Department of Agriculture and state governments, but federal taxpayers pay for the direct benefits.)
One of the “changes” that the DPW refers to is categorical eligibility, which basically means that Pennsylvania households already receiving benefits from other welfare programs, including cash welfare and Supplemental Security Income, automatically qualify for food stamps. In recent years, both the state of Pennsylvania and the federal government have made it easier to qualify for food stamps benefits.
Unfortunately, the Inquirer reporter either wasn’t aware of these details or didn’t deem them important enough for inclusion. Instead, he quotes ten—let me repeat that, ten—critics of the DPW’s decision. The critics include a “national hunger expert,” the legal director of a “leading anti-hunger group,” the executive director of the Greater Philadelphia Coalition Against Hunger, the executive director of the “liberal Pennsylvania Budget and Policy Center,” and an older woman who says that she’ll “have to give up paying for my health insurance.”
It took me all of two minutes to get a quote from Nathan Benefield, the director of policy analysis at Pennsylvania’s pro-liberty Commonwealth Foundation:
Unfortunately for taxpayers, politicians in Harrisburg and Washington have for the past few years considered it a “success” to have more families on welfare. Pennsylvania welfare eligibility and spending—including for food stamps—has exploded, threatening to crowd out everything else in the state budget. Means testing for assets is a common-sense reform to ensure those who truly need aid get it.
There, was that so hard?
Of course, journalists who are interested in getting the pro-liberty take on welfare reform are welcome to contact my colleagues and me at the Cato Institute. Honestly, we don’t want people to starve in order to save a buck—we just believe that the federal government is an improper and less effective means for assisting those who are truly in need. Pressed for time? Here are Cato essays on food subsidies, welfare, and federal subsidies to state and local government.
Coburn Report on Subsidies for Millionaires
Sen. Tom Coburn’s (R-OK) new report on the various federal subsidies being collected by millionaires deserves applause for not resorting to class warfare rhetoric in making the point that it’s silly for wealthy folks to receive taxpayer handouts:
We should never demonize those who are successful. Nor should we pamper them with unnecessary welfare to create an appearance everyone is benefiting from federal programs.
Coburn says that “this reverse Robin Hood style of wealth redistribution is an intentional effort to get all Americans bought into a system where everyone appears to benefit.” That’s true. Whether it is food subsidies or unemployment benefits, the cheerleaders for federal redistribution schemes would have the public believe that it’s all about “helping those in need” when in fact it’s really about fostering dependency on taxpayers. A dirty little secret that the media typically fails to recognize is that many of the people pushing for these programs stand to financially benefit themselves. And as we have documented over at DownsizingGovernment.org, government programs do a poor job of helping the people that they purportedly serve.
Gov. Perry and Those DREAM Act Kids
Texas Gov. Rick Perry has been beaten up in recent GOP presidential primary debates over his signing of a bill in 2001 giving in-state tuition to illegal immigrant kids in Texas. Look for the issue to come up again at tonight’s debate in New Hampshire.
In a free society, so-called DREAM Act legislation would be unnecessary. Opportunities for legal immigration would be open wide enough that illegal immigration would decline dramatically. And higher education would be provided in a competitive market without state and federal subsidies. But that is not yet the world we live in.
On the federal level, the proposed Development, Relief and Education for Alien Minors Act would offer permanent legal status to illegal immigrant children who graduate from high school and then complete at least two years of college or serve in the U.S. military. Legal status would allow them to qualify for in-state tuition in the states where they reside, and would eventually lead to citizenship.
Those who respond that such a law would amount to “amnesty” for illegal immigrants should keep a couple of points in mind.
First, kids eligible under the DREAM Act came to the United States when they were still minors, many of them at a very young age. They were only obeying their parents, something we should generally encourage young children to do.
Second, these kids are a low-risk, high-return bet for legalization. Because they came of age in the United States, they are almost all fluent in English and identify with America as their home (for many the only one they have ever known). “Assimilation” will not be an issue.
They also represent future workers and taxpayers. The definitive 1997 study on immigration by the National Research Council, The New Americans, determined that an immigrant with some college education represents a large fiscal gain for government at all levels. Over his or her lifetime, such an immigrant will pay $105,000 more in taxes than he or she consumes in government services, on average and expressed in net present value (see p. 334). In other words, legalizing an immigrant with post-secondary education is equivalent to paying off $105,000 in government debt.
According to estimates by the Immigration Policy Center, the DREAM Act as introduced in 2009 would offer immediate legalization to 114,000 young illegal immigrants who have already earned the equivalent of an associate’s degree. Another 612,000 who have already graduated from high school would be eligible for provisional status and would then have a strong incentive to further their education at the college level to gain permanent status. If all 726,000 of them studied at college and became legal permanent residents, it would be equivalent to retiring $76 billion of government debt.
In all, a potential 2.1 million kids could eventually be eligible for permanent legal residency under terms of the DREAM Act, representing a potential fiscal windfall to the government of more than $200 billion. Not to mention their potential contributions to our culture and economy.
Strong Cities, Strong Communities: Bad Idea
When government officials come up with what they claim to be a wonderful new idea, I often think of an old Saturday Night Live skit from 1990 poking fun at commercials for blue jeans. The skit’s scene is a group of middle-aged buddies getting ready to play basketball in their new “Bad Idea Jeans.” Each guy optimistically announces a plan to do something that is actually a “bad idea.” For example, a character says “I don’t know the guy but I’ve got two kidneys and he needs one, so I figured…” and “BAD IDEA” flashes across the screen. (The skit can be watched here.)
The White House’s new “Strong Cities, Strong Communities” initiative had that BAD IDEA screen shot flashing repeatedly in my mind as I read the press release:
Today, the Obama Administration launched Strong Cities, Strong Communities (SC2), a new and customized pilot initiative to strengthen local capacity and spark economic growth in local communities while ensuring taxpayer dollars are used wisely and efficiently. To accomplish this, federal agencies will provide experienced staff to work directly with six cities: Chester, PA; Cleveland, OH; Detroit, MI; Fresno, CA; Memphis, TN; and New Orleans, LA. These teams will work with local governments, the private sector, and other institutions to leverage federal dollars and support the work being done at the local level to encourage economic growth and community development.
Additionally, communities nationwide will be eligible to compete for comprehensive economic planning assistance through a grant competition designed to spark local innovation. By integrating government investments and partnering with local communities, SC2 channels the resources of the federal government to help empower cities as they develop and implement their vision for economic growth.
The Wall Street Journal reports that federal officials from HUD, Labor, Commerce, Transportation, and the Small Business Administration will be “deployed” to the cities. In other words, the Obama administration wants to send bureaucrats from federal agencies that are notorious for wasting other people’s money to help local bureaucrats do a more “efficient” job of spending other people’s money. That’s like asking Anthony Weiner to fix your Twitter account.
A couple of the cities chosen by the administration are ironic. Seriously, hasn’t the federal government done enough to New Orleans already? Detroit is an example of why decades of federal subsidies to urban centers in decline have been a failure. As I note in a Cato essay on HUD community development subsidies, of which Detroit has been the fifth largest recipient since 2000, federal handouts create a disincentive for local officials to pursue sound policy reforms:
Despite all the abuses, perhaps policymakers believe that Community Development Block Grants are nonetheless effective at stimulating growth. After 30 years and more than $100 billion it should be easy to demonstrate the program’s success, but it’s hard to find any examples of city rejuvenation created by the program. Instead, numerous cities, such as Detroit, which have been major CDBG recipients, have fallen further into decline. The reality is that no amount of federal money can overcome the local hurdles to growth in cities such as Detroit—including political corruption and destructive tax and regulatory policies. Indeed, just like international development aid, federal aid to the cities likely increases corruption and stalls much-needed local reforms.
Some people will view this initiative as a crass effort to shore up urban support for the president’s reelection campaign. There’s probably a good bit of truth to that criticism. But both parties have been using subsidies to state and local government to curry political support for decades. Therefore, Republicans who raise a stink over the administration’s initiative should be prepared to work for the involved programs to be abolished. Otherwise, the complaints will amount to little more than political hot air.
See this Cato essay for more on federal subsidies to state and local government.
Breastfeeding and the Government
The media is reporting on a new study that finds long-term benefits to kids of breastfeeding.
Yet if health experts agree on the advantages of breastfeeding, why does the federal government subsidize mothers to use formula through the $7 billion Women, Infants, and Children program?
The WIC program is run by the Department of Agriculture, which summarized the subsidies as follows (page 1):
…infants participating in WIC consume about 54 percent of all formula sold in the United States. In most states, WIC participants use food vouchers or food checks to purchase their infant formula, free of charge, at participating retail grocery stores.
It’s true that in addition to handing out free formula, WIC administrators counsel women on the advantages of breastfeeding. But the counseling apparently isn’t working if WIC infants consume more than half of all formula. I am told that breastfeeding isn’t easy, so if you give moms a free alternative, many of them take it.
This is one of many examples we see of the government’s right hand working against its left. The Army Corps of Engineers destroys wetlands, while other federal agencies protect them. Milk and sugar programs push up food prices, while other programs subsidize food costs. Politicians complain about energy companies gouging consumers, yet federal ethanol policies push up energy costs.
The winners in each case are the political class — high-paid government administrators, members of Congress, and the groups hooked on federal subsidies. The losers are the rest of us — average taxpayers and consumers.
For more on federal food subsidies, see here.
Higher Education Subsidies Wasted
A study from the American Institutes of Research finds that federal and state governments have wasted billions of dollars on subsidies for students who didn’t make it past their first year in college. The federal total for first-year college drop outs was $1.5 billion from 2003 to 2008.
Due to data limitations, the figures are only for first year, full-time students at four-year colleges and universities. Community colleges have even higher drop-out rates, and part-time students or students returning to college are more likely to drop out. Therefore, the numbers in the report are “only a fraction of the total costs of first-year attrition the nation and the states face.” Moreover, it doesn’t include the cost for students who drop out some time after their sophomore year.
Federal policymakers from both parties are fond of lavishing subsidies on college students. Proponents argue that without federal subsidies, an insufficient number of future workers will possess the skills necessary to compete in a global economy.
However, a Cato essay on federal higher education subsidies argues that students wishing to attend college already have plenty of incentive to save or borrow from private sources:
Supporters of student aid subsidies argue that higher education is a “public good” that would be underprovided in a free market. However, that is probably not the case. People have a strong incentive to invest in their own education because it will lead to higher earnings. Those with a college degree will earn, on average, 75 percent more during their lifetime than those with just high-school degrees. That is a big incentive for people to save or borrow in private markets to pay for their own college costs. There is no “market failure” here.
In fact, higher education subsidies drive up tuition prices:
It is matter of supply and demand. More and more Americans have sought a college education, which has pushed prices higher. Ordinarily, such upward pressure would be restrained by consumers’ willingness and ability to pay, but as government subsidies have helped absorb tuition increases, the public’s budget constraint has been lifted. Peter Wood, a professor at Boston University noted that federal subsidies “are seen by colleges and universities as money that is there for the taking . . . tuition is set high enough to capture those funds and whatever else we think can be extracted from parents.”
But isn’t it great that Uncle Sam is helping put more young folks in college? Not necessarily:
Many of those additional students may not have been ready, or suited, for college. As evidenced by the rising shares of college students who require remedial work. Further evidence of the problem is that institutions have lowered their standards to adapt to the rise in second-rate students. The American Academy of Arts and Sciences reported that from the mid-1960s to the mid-1990s, college grade point averages grew steadily but Scholastic Aptitude Test scores declined. The share of entering college students who complete degrees has also fallen over the decades. In addition, while college attendance is up, overall adult literacy has barely budged over the last 15 years.
The essay also notes that college students devote 3.2 hours to education on an average weekday, versus 3.9 hours to “leisure and sports,” and that the six-year graduation rate for bachelor’s students is only about 56 percent, indicating that many students are not very serious about education.
Just as housing subsidies incentivized people to purchase homes that they otherwise shouldn’t have, higher education subsidies have incentivized people to go to college who weren’t ready or suited for it. In both cases, the cost to taxpayers has been substantial while the alleged benefits have proven illusory.
Unfair Subsidies for Buses
Cato essays on the Department of Transportation contain a common theme: federal subsidies for various modes of transportation have stifled privately funded and operated alternatives. One emerging bright spot is private intercity bus companies.
From a Cato essay on Amtrak subsidies:
If Amtrak is privatized, passenger rail will be in a much better position to compete with resurgent intercity bus services. The rapid growth in bus services in recent years illustrates how private markets can solve our mobility needs if left reasonably unregulated and unsubsidized. A Washington Post reporter detailed her experiences with today’s low-cost intercity buses: “This new species offers curbside pickup and drop-offs, cheap fares, clean restrooms, express service, online reservations, free WiFi and loyalty programs . . . The bus fares undercut Amtrak and, depending on the number of passengers, personal vehicles.”
That’s why a story out of Minnesota is disturbing. According to the Duluth News Tribune, Jefferson Lines, which operates a bus line between Duluth and the Twin Cities, received $2.65 million in federal stimulus money to purchase five of the eight buses it has in service. One of Jefferson Lines’ competitors isn’t happy:
That angers Dave Clark, owner of Skyline Shuttle, which provides transportation from Duluth to the Twin Cities. Clark claims it’s unfair for Jefferson Lines to use government money to compete with his business and cut into his revenue.
“When there’s a market and they are competitors, it should be left to the market without government interference,” Clark said. “They could have taken the risk themselves, but they relied on the taxpayer to take the risk.”
The first problem is that federal taxpayers across the country are being forced to subsidize a private bus line in Minnesota. The second problem is that the government is effectively picking winners and losers in the market for intercity bus services. Instead of spreading transportation subsidies across every form of transportation, the federal government should cease with the seemingly endless interventions and allow free individuals to figure out what makes the most sense.
Amtrak’s New Rail Cars
Amtrak has announced that it will spend $300 million on 130 new rail cars, including sleeper and dining cars, for its long-distance trains. The government company’s announcement came with the obligatory statement that the purchase will create 575 jobs. That’s more than $500,000 per job.
As a Cato essay on Amtrak discusses, all of Amtrak’s long-distance routes are money-losers. For example, the Sunset Limited, which runs from New Orleans to Los Angeles, lost $462 per passenger in 2008. According to the Government Accountability Office, long-distance routes account for 15 percent of riders but 80 percent of financial losses.
Amenities like sleeping and dining services contribute to the red ink:
The demographic being served by these long-term routes does not demonstrate a strong need for taxpayer subsidies. Eighty percent of long-distance train riders use it for recreational and leisure trips, and riders tend to be retirees. Premium services like sleeper and dining cars contribute to operating losses for long-distance trains. These amenities are heavily subsidized, which means taxpayers—and not the pleasure-seeking retirees—are incurring the burden.
To maintain its unprofitable routes, Amtrak is dependent on federal subsidies, which are usually about $1.5 billion a year (Amtrak also recently received $1.3 billion in stimulus money). Amtrak has asked for $2.5 for the upcoming fiscal year, and the Senate Appropriations Committee has proposed a 25 percent increase.
Amtrak’s press release brags: “Last fiscal year (FY 2009), the railroad carried 27.2 million passengers, making it the second-best year in the company’s history.” That sounds good until you realize that Amtrak accounts for only 0.1 percent of the nation’s passenger travel. Moreover, Amtrak projected in 1976 that its ridership would grow from 17.3 million in 1975 to 32.9 million by 1980.
With the nation’s debt spiraling out of control, taxpayers can no longer afford to subsidize Congress’s toy train. If intercity passenger rail makes economic sense, it could be profitably supported by its ridership and run as a private company. If not, then it makes no more sense for taxpayers to keep Amtrak operating than it would be for the federal government to subsidize stagecoaches.
To Kill ACORN, Kill the Programs
Last year, when the issue of defunding ACORN was a hot-button issue, I told countless radio talk show audiences that the focus should be on eliminating the underlying fuel that created the organization—the flow of federal subsidies.
Chris Edwards pointed this out in September. If Congress simply stops subsidizing ACORN, its activists will reincorporate under new names and again become eligible for funds. Alas, that’s precisely what ACORN is currently doing.
From FoxNews.com:
One of the latest groups to adopt a new name is ACORN Housing, long one of the best-funded affiliates. Now, the group is calling itself the Affordable Housing Centers of America.
Others changing their names include what were among the largest affiliates: California ACORN is now Alliance of Californians for Community Empowerment, and New York ACORN has become New York Communities for Change. More are expected to follow suit.
A comment from Frederick Hill, a spokesman for Republicans on the U.S. House oversight and government reform committee, doesn’t indicate that the GOP has quite received the message:
To credibly claim a clean break, argued Hill, the new groups should at least have hired directors from outside ACORN.
It appears that for many Republicans, attacking ACORN represented political opportunism, not a statement about the proper role of the federal government.
Further rendering the GOP’s ACORN agenda moot was last week’s ruling by a U.S. District judge that singling out ACORN for defunding is unconstitutional. It truly boggles the mind what passes for constitutional and unconstitutional in this country.
Tuesday was the birthday of James Madison, the “Father of the Constitution.” Reflecting upon Madison’s wise words, it’s hard to understand how the federal “community development” programs that have funded ACORN could pass constitutional muster:
“The government of the United States is a definite government, confined to specified objects. It is not like state governments, whose powers are more general. Charity is no part of the legislative duty of the government.”
“[T]he powers of the federal government are enumerated; it can only operate in certain cases; it has legislative powers on defined and limited objects, beyond which it cannot extend its jurisdiction.”
“With respect to the two words “general welfare,” I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators.”
“If Congress can do whatever in their discretion can be done by money, and will promote the general welfare, the government is no longer a limited one possessing enumerated powers, but an indefinite one subject to particular exceptions.”
See this essay for reasons why these HUD community development programs should be abolished.
Federal Aid to States Is Too Popular
The Economist’s Free Exchange blog asks: “[W]hy isn’t federal aid to states more popular, and popular enough to get through Congress, given that nearly every American lives in one?”
I would ask the blog’s author: How much more popular would he like it to be? As the following charts show, federal aid to state and local governments has catapulted to record levels.
As I’ve discussed elsewhere, Medicaid has been driving the growth in federal subsidies to state and local governments. But other areas, such as education, income security, and transportation, have also seen substantial increases.
Subsidizing state and local government is quite popular with federal, state, and local policymakers and associated special interests. It’s doubtful the average citizen is aware that so much of their state’s spending is derived from their federal tax dollars. However, I suspect that most folks (who aren’t on the take) would frown upon the concept of sending money to Washington only to have politicians send it back to the states via the federal bureaucracy. While there may be popular support for many of the state programs funded with federal dollars, citizens need to understand that federal subsidization of state and local government has fueled unhealthy government growth at all levels.
State and Local Subsidies
Earlier this week I criticized the U.S. Conference of Mayors for going to Washington and groveling for more federal handouts. Let me provide some more background for my criticisms with a look at federal budget data. The first chart shows that since 1960, total federal subsidies to state and local government have increased an astounding 1,173%.
Several readers have asked me what particular programs account for this large increase in state aid. The federal budget breaks down the total figures into categories. Not surprisingly, health subsidies — mainly Medicaid — account for almost half of the current total and are the driving force behind the massive overall increase:
“Keep Your Subsidies off My Ovaries”
In my recent Cato paper, “All the President’s Mandates: Compulsory Health Insurance Is a Government Takeover,” I explain that if Congress compels Americans to purchase health insurance, it would “inevitably and unnecessarily open a new front in the abortion debate, one where either side—and possibly both sides—could lose.”
Slate‘s William Saletan explains how the pro-choice side could lose:
This week, the Senate finance committee is considering amendments that would bar coverage of abortions under federally subsidized health insurance. Pro-choice groups are up in arms. After all, says NARAL Pro-Choice America, “In the current insurance marketplace, private plans can choose whether to cover abortion care—and most do.” If Congress enacts subsidies that exclude abortion, “women could lose coverage for abortion care, even if their private health-insurance plan already covers it!“…
The argument these groups make is perfectly logical: If you standardize health insurance through federal subsidies and coverage requirements, people might lose benefits they used to enjoy in the private sector. But that’s more than an argument against excluding abortion. It’s an argument against health care reform altogether.
Saletan also explains why pro-life and pro-choice positions on Obama’s health plan are irreconcilable:
To get what they consider neutrality, pro-choicers have to make pro-lifers pay indirectly for abortions. And to keep what they consider clean hands, pro-lifers have to make abortion coverage federally unsupportable and therefore, in a subsidy-dependent system, commercially nonviable.
Rather than an argument against all health care reform, I’d say this is an argument against reforms that expand government subsidies or otherwise give government the power to choose what kind of insurance you purchase. Fortunately, there are better ways to reform health care.
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