The U.S. welfare system sure creates some crazy disincentives to working your way up the ladder. Benefits stacked upon benefits can mean it is financially better, at least in the short term, to stay at a lower-paying jobs rather than taking a higher paying job and losing those benefits. This is called the “welfare cliff.”
Let’s take the example of a single mom with two kids, 1 and 4. She has a $29,000 a year job, putting the kids in daycare during the day while she works.
As the above chart – via Gary Alexander, Pennsylvania’s secretary of Public Welfare — shows, the single mom is better off earning gross income of $29,000 with $57,327 in net income and benefits than to earn gross income of $69,000 with net income & benefits of $57,045.
It would sure be tempting for that mom to keep the status quo rather than take the new job, even though the new position might lead to further career advancement and a higher standard of living. I guess this is something the Obama White House forgot to mention in its“Life of Julia” cartoons extolling government assistance.
As you saw from my post of the IMF economists debunking the multiplier effect of stimulus spending that you commented in I believe that the whole concept of priming the pump from the supply or demand side makes us poorer as a society and that an objective examine of past attempts around the world supports that assertion. You can counter that although there were losses gains were made but let's be realistic, the gains tend to be from personal ambition and innovation. If anything the government spending hindered those by crowding out individual innitiative.
I understand the concept of the safety net is important to the left but I don't believe there is ever a real safety net, even nations fail. Remember in the 90s when Nobel ecconomists created a Hedge Fund to prove their theory and reap the rewards called Long-Term Capital Management. They believed if their investments were diverse enough they would be immune to corrections. What they failed to consider was that no matter how diverse their selections were they all had one thing in common, their investment. They ended up being the cancer that dragged down their investments. Right now I see the United States on an unsustainable path based upon debunked failed economic theory and the only solace we are offered is that we were not adequately invested in the theories that failed us or that the rest of the world is just as wreckless and we can't all fail. That is nonsensical, of course we can. That is a major contributing factor to Dictatorships and World Wars. Prior to WWI economists predicted there could never be another major war because the economy became so global that all active participants would lose economically, they were absolutely right but it happened anyway and another followed a couple decades later fueled by the consequences of settlement of the first.
The argument is often made to allow the funding of the government to fall upon those with the means to fund it. The problem with that is two fold. We need to assume that if someone has more than another it is because they aquired their advatage through legitimate means. If their gains are ill gotten that is what should be addressed, not disparity in general. The second is if we take disproportionately from those with disposable income that they will no longer have the means to convert their excess to capital which provides employment, products, services, and multiplies wealth. There are no guarantees that the investments made will succeed, most will fail but the losses are privately held and the investments are being managed by people with a direct vested interest in their success as opposed to government investment.
I don't think Romney could or would elliminate welfare but I don't think he would be looking to make it more comfortable and would want to preserve and improve the temporary nature of it. Teach a man to fish, rather than give a man a fish. I send my child to a Pre-Kindergarten and recently I had to fill out a form for Federal Lunch Assistance. Although we are lower middle class (I hate the term middle class) I made clear that I know we don't qualify for it and was told it is mandatory for all parents to complete the form in full to be put into the aggregate of the population of the school. So let's say I qualified and did not wish the assistance, a requesite of enrollment was allowing the school to request upon the child's behalf.
Why shouldn't people pay off their homes? Remember how I feel about stimulus spending. The manipulating inflates bubbles, crowds out private investment, and makes us all poorer.