Upward Immobility

The question that really needs answering is, how much do government entitlement programs actually aid upward mobility? Concurrently, the Democrats have a favorite talking point about “income inequality” that they revived after the president proposed increasing the minimum wage. Nancy Pelosi said that “the disparity of income in our country … is not a healthy thing for a family or an economy. Raising the minimum wage is the right thing to do.” But is it?

Those who argue for the need to ensure income equality for the sake of income equality alone are, in essence, arguing for socialism. When confronted about the rise in income inequality over her tenure as prime minister, Margaret Thatcher pushed back strongly, noting that while that was true, all incomes — including those of the poor — had risen. She took to mocking the liberal questioner, saying, “What a policy! [The left] would rather have the poor poorer, provided the rich were less rich … So long as the [income] gap is smaller, they would rather have the poor poorer.” Indeed, Winston Churchill once pointed out that “the inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries.”

Upward mobility, however, is something everyone, Republicans and Democrats alike, agree is a worthy endeavor. But when it comes to policy, the truth is that the so-called “anti-poverty” programs do little more than lock people into a life of dependency on government. It seems that every new program the Democrats come up with, ostensibly to aid those with low incomes, only further cements their standing in this class. As Ronald Reagan said, “The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’”

President Obama marketed the Affordable Care Act, otherwise known as Obamacare, as a program that would help people who couldn’t afford medical insurance obtain necessary coverage by keeping prices down. He promised that premiums would go down an average of $2,500 annually and famously declared, “If you like your … health-care plan, you can keep it. If you don’t have insurance, you’ll finally be able to afford insurance.” A recent study by the Society of Actuaries found that that isn’t the case. Due to the ACA, premiums will rise an average of 32% going forward, on top of the average increase of $3,000 that already took place.

This is a perfect example of a government program creating a situation which leads to upward immobility. For example, the IRS, in a report released late January, estimated that the average cost for an approved plan for a family of 5 would be $20,000. In New Jersey, to qualify for government-sponsored insurance, such a family would have to gross under $36,689 in total household income. A family earning more than that is required to purchase a government-approved plan, or pay a fine to the IRS. Being that the number required is gross income, money spent on insurance premiums is not deducted from that number. So as it would turn out, when the government came to help, they created a situation where a family earning $36,689 is better off financially than one earning up to $56,688! This doesn’t even take into account other government programs that the lower-income family would receive, which the “higher-income” family would not.

Not many people can jump over $20,000 a year in earnings. So once someone qualifies for programs ostensibly there to help the poor when they are below that income line, the government effectively penalizes them for being successful, and makes it near impossible for the poor to be upwardly mobile. The entitlements thus incentivize poverty.

That is not to say that the left in this country isn’t well-meaning in their effort to assist the poor. As economist Milton Friedman wrote in Capitalism and Freedom, government programs as they are currently structured generally don’t have a positive impact on the people they are designed to help. He concluded that there exists “…the internal threat coming from men of good intentions and good will who wish to reform us … Yet if they gained the power, they would fail to achieve their immediate aims and, in addition, would produce a collective state from which they would recoil in horror and of which they would be among the first victims. Concentrated power is not rendered harmless by the good intentions of those who create it.”

And so it becomes that, as Reagan said “…governments’ programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth.”

The right thing to do, which some on the right, Rick Santorum and Marco Rubio to name two, have championed, is overhaul this “assistance” in a way that it actually helps poor people. Ideas ranging from radical restructuring of the entitlement, to a simple addition of a scaled benefit ensuring that there is no incentive to remain in the lower-income group, have been floated. But if the GOP wants to shed its image as the party of the rich, they will have to do a better job of explaining that the policies of the Democrats are what keep their voter base very poor.

This article appeared in print on page D28 of the April 4th, 2013 edition of Hamodia.