29 June 2011

Welfare for the Well-Off, or What About the Undeserving Rich?

There is an ample amount of hypocrisy at large in our current budget politics. In this recent essay at The Washington Monthly, political scientist Suzanne Mettler lays out some of the worst - huge tax expenditures directed at welfare recipients in the upper reaches of the U.S. income/wealth distribution defended by Republicans who vigorously decry virtually any government relief aimed at the poor or working classes.
"The clarion call of the conservative approach to governance that has dominated American politics for much of the past thirty years has been the demand to rein in the welfare state. Although few provisions have suffered outright termination, average benefit rates for several traditional and longstanding policies—such as welfare, unemployment insurance, Pell grants, and food stamps—have deteriorated in real terms, and in some cases the scope of coverage has atrophied. As deficit hawks continually remind us, costs have grown for the “entitlement” programs—Social Security, Medicare, and Medicaid— owing to inflation-protected benefits, soaring health care costs, and the sheer numbers of Americans aging into eligibility. Generally ignored, however, have been the rapidly escalating costs of tax expenditures for social welfare purposes—the sine qua non of our submerged state.
Known in informal parlance as “tax breaks” or “tax loopholes,” these policies permit households to pay less in taxes if they are involved in some kind of activity or belong to a class that policymakers deem worthy of public support. From the time Ronald Reagan took office in 1981 until 2010, the number of such tax subsidies had increased by 86 percent, from 81 to 151. As of 2011, the federal government annually doles out more than $1 trillion in these tax expenditures.
Understandably, to many people tax breaks may seem substantively different from traditional social benefits. The latter are funded by tax revenues collected from the public and delivered through checks or services to particular citizens, whereas tax breaks function by allowing recipients themselves simply to keep more money, reducing the amount that they would otherwise owe. Traditional social programs also require the development of a bureaucracy to determine eligibility and deliver benefits, whereas the tax expenditures do not. For these reasons, many libertarians and conservatives object to the term “tax expenditures.” While conceding that tax loopholes constitute government intervention in the market, such thinkers equate closing them with raising taxes, unless the changes are offset by lower rates.
As a matter of budgeting, however, there is no difference between a tax break and a social program: both have to be paid for, either by raising tax rates or by adding to the deficit. Eugene Steuerle, a tax economist and political appointee in the Reagan administration, said of the distinction between tax expenditures and direct social spending, “One looks like smaller government; one looks like bigger government. In fact, they both do exactly the same thing.”
As the chart above (lifted from Mettler's paper) makes clear, the foregone taxes dwarf expenditures on programs for the poor. Where is the right wing outrage at this sort of redistribution to the undeserving rich?

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Blogger Public Squalor said...

I think those Republicans would argue that any tax break is a good tax break since that money belongs to those people with money and not the government.

It's all BS of course but its a narrative that fits nicely within their bizarro, black & white world-view. And since it serves the interests of their wealthy patrons, it also makes perfect political sense.

The aspect of all of this that drives me nuts is that quite a few people without money who directly suffer from government policies that drive wealth polarization - hold the same attitudes toward taxation as the wealthy. Why do the poor fight the rich man's class war?

How do we change that? How do we cultivate a civic sense of public entitlement?

~ peace

02 July, 2011 09:43  

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