Transcript Who Should Help the Poor?

Who Should Help the Poor?
Blank, Who Should Help the Poor? eReserves
U.S. Catholic Conference, Economic Justice for all,
http://www.osjspm.org/economic_justice_for_all.a
spx
DeParle, Ch. 14: Golf Balls and Corporate Dreams:
Milwaukee, 1997-1999
Wednesday’s Topic:
How Do Our Governments Help Poor People?
Do Government Programs Reduce Poverty?
• Readings:
– Schiller Ch 12, Welfare Programs
– Congressional Budget Office, Economic and
Budget Issue Brief, “Changes in Participation in
Means-Tested Programs,” available at:
http://www.cbo.gov/publications/bysubject.cfm?ca
t=12
– Familiarize yourself with 2000 Green Book Over of
Entitlement Programs, available at
http://aspe.hhs.gov/2000gb/
– DeParle, Ch 15: Caseworker XM128W: Milwaukee,
1998-2000
Today’s Topic
Who Should Help the Poor?
• Why bother with this topic?
• Economic arguments for Government
intervention
• Can private charity replace the role of
government in helping the poor?
– Statistics on charitable giving
Topic, Cont.
• What role for government and
individuals was asserted in Economic
Justice for All? Does it help us answer
the questions: Should we help? Who
should we help? How should we help?
Why bother with this topic?
• Can we justify government intervention
from an economic perspective?
• Can economics help us determine how
much we should give? To whom? In
what form?
Justifying Government Intervention:
The Inefficiency of Poverty
•
•
“The budget [$2.77 billion]
drains money from two-thirds of
federal agencies and continues
a large military buildup.
Pentagon funding would
increase by nearly 7% and, for
the first time in Mr. Bush's
presidency, claim more than half
the government's expenditure
on discretionary programs.”
WSJ on line, quoting from
Guns
http://www.washingtonpost.com/wpdyn/content/article/2006/02/06/AR200602
0600464.html
Butter
Justifying Government Intervention:
The Inefficiency of Poverty
Rebecca Blank, “Who Should Help the Poor?”
Chapter 5 in, It Takes a Nation, Princeton
University Press, 1997
1. Economic arguments based on
individualistic notions of self-interest
2. Ethical notions of community responsibility
3. Economics rights arguments
Economic arguments based on individualistic
notions of self-interest
• Investment/positive externalities argument —
antipoverty programs provide a brighter
future for both the poor and nonpoor by
increasing productivity and lowering the costs
of poverty.
• Risk-sharing
—the government can pool resources to assure
people that they will have protection against
future economic bad luck.
Ethical notions of
community responsibility
• Human dignity argument --Primary responsibility of society is to
respect human value and avoid wasted human lives
• Capacity to respond argument --The moral responsibility of a
society is greater when it possesses economic and
technological capacity to assist the poor.
• Administrative Capacity Argument —The government has better
administrative and programmatic capacity to carry out efficient
redistribution than the private sectors for some types of needs.
• Market failure argument —if a society chooses a market-based
economy, it should assume responsibility for those for whom the
market does not provide adequately or who cannot compete.
Economics rights
(equity) arguments
• Every citizen has a right to access to
education, to food, to medical care, to
housing and to employment.
• Citizens with equivalent needs living
within the same national boundary have
a right to similar programs.
Additonal justifications
• See Singer, “How Much Should a Billionaire
Give--And What Should You?”
– The Nobel Prize-winning economist and social
scientist Herbert Simon estimated that social
capital is responsible for at least 90 percent of
what people earn in wealthy societies like those of
the United States or northwestern Europe.
• social capital: natural resources, technology and
organizational skills in the community, and the presence
of good government.
– Thomas Pogge, a philosopher at Columbia
University, has argued that at least some of our
affluence comes at the expense of the poor.
Can economics help us answer:
• How much should we give?
• To whom?
• In what form?
How much do we spend?
Government Spending
http://www.irs.gov/app/understandingTaxes/artspec/IWT01L01acs301A.jpg
The Federal Budget in 2006
Revenues $2.407 trillion
Expenditures $2.654 trillion
_____________________
Deficit
$ 248 billion
Federal Budget Expenditures
• Pie chart of total federal expenditures
http://www.washingtonpost.com/wpsrv/politics/interactives/budget07/category.html
• Total federal expenditures for Medicaid and
Income Security = $396 Billion
– Includes TANF, unemployment compensation,
Supplemental Security Income, the refundable
portion of the earned income and child tax credits, Food Stamps, family support, child nutrition,
and foster care.
• Medicaid $/GDP = $.1806/12.9 = 1.4%
• Income Security $/GDP = .2158/12.9 = 1.7%
State Government
Expenditures for the Poor, 2004
• Public Assistance
• Medicaid
• Total
$345.2 billion
$299.7 billion
$744.9 billion
(6% of GDP)
• Sources
http://www.acf.hhs.gov/
http://www.census.gov/compendia/statab/state_local
_govt_finances_employment/receipts_expenditure
s_investment/
Private Philanthropic
Expenditures for US Poor, 2004
• See:
http://nonprofit.about.com/od/trendsissu
esstatistics/a/givingusa2005.htm
Private Philanthropic
Expenditures for US Poor, 2004
• Adding gifts for human services, health, and
education categories gives an upper limit of
$75.0 billion in private gifts.
• Total spending for the Poor = $1.216 trillion
– Federal spending
– State and Local spending
– Private philanthropy
= $396 billion
= $745 billion
= $75 billion
• The amount of foreign development aid given
by the U.S. government is 22 cents for every
$100 the nation earns (0.2% GDP)
Could Private Spending Replace
Government Spending?
• Private spending is at most 6% of total
government expenditures of $1.140
trillion, or 7% of all expenditures.
– Blank’s estimate was 5% and she had
better information about the percentage of
spending in the three categories that went
to the poor.
Disadvantages of Reliance
on Private Philanthropy
• “Much as we may applaud what Gates
and Buffett are doing, we can also be
troubled by a system that leaves the
fate of hundreds of millions of people
hanging on the decisions of two or three
private citizens.” (Singer)
• Others?
Advantages of private
philanthropic giving
• Private philanthropists are free to venture
where governments fear to tread
• Private donors can more easily avoid dealing
with corrupt or wasteful governments
• They can go directly into the field, working
with local villages and grass-roots
organizations.
• Private philanthropists are not beholden to
lobbyists. (Source: Singer)
• Others?
Who gives to Charity?
• "Charitable Giving: How Much, By
Whom, To What, and Why." Paul G.
Schervish, John J. Havens and
Mary A. O’Herlihy. The Nonprofit
Sector: A Research Handbook,
Second Edition. Woodrow Powell
and Richard Steinberg (eds.) Yale
University Press. 2002.
How much should we give?
• “Everyone who earns above the tax-free
threshold contributes something, with
more collected from those with greater
ability to pay” (Singer, “How much
should a Billionaire . . .”)
Average Federal Tax Rates
by Income Ranking, 2004
Average
Tax Rate
All Taxpayers
Top 1%
12.10%
23.49%
Average Taxes
for poor support
(tax rate x 0.26)
3.15%
6.11%
Top 2-5%
Top 6-10%
Top 11-25%
16.95%
12.28%
9.26%
4.41%
3.19%
2.41%
Top 26-50%
Bottom 50%
7.01%
2.97%
1.82%
0.77%
Source: http://www.taxfoundation.org/news/show/250.htm
Singer’s Suggested
Contributions
Percentage of Income
Top 0.01%
33%
Top 0.02-0.1%
25%
Top 0.2-0.5%
20%
Top 0.6-1.0%
15%
Top 2.0-10%
10%
How much should we give?
• Use your economic knowledge to evaluate
Singer’s argument. How would you defend
his target percentages? Challenge?
To whom ?
• Does economic theory help us
determine the identity of those who
should receive assistance?
– Consider how eligibility for government
transfers and other assistance is now
determined.
In what form?
• What is this best form of economic
assistance?
• Is consumer theory, especially the
theory of optimal consumption bundles,
useful in this discussion?
Economic Justice for All
Economic Justice for All: Catholic Social
Teaching in the U.S. Economy, (United
States Catholic Conference, 1986)
1. What is society’s obligation to the poor
according to Economic Justice for All?
2. In what respects do Economic Justice for All
and Blank’s ”Who Should Help the Poor?”
agree? Are there significant points of
disagreement? If so what are they?
Economic Justice for All, cont.
3. The Bishops write that their letter, “ . . . does not
embrace any particular theory of how the economy
works, nor does it attempt to resolve the disputes
between different schools of economic thought” (p.
2). Nonetheless, does the letter, in your opinion,
seem to lean more toward one theory than another?
Are the six moral principles of the Bishops’ letter and
their recommendations consistent with the principles
of free-market economics?
4. To what extent does PRWORA incorporate the
Bishops’ recommendations regarding the poor?
Bishops’ Recommendations
regarding the poor
1. The first line of attack against poverty must be to
build and sustain a healthy economy that provides
employment opportunities at just wages for all adults
who are able work. (196a)
2. Vigorous action should be undertaken to remove
barriers to full and equal employment for women and
minorities. (199b)
3. Self-help efforts among the poor should be fostered
by programs and policies in both the private and
public sectors. (200a)
4. The tax system should be continually evaluated in
terms of its impact on the poor. (202d)
Bishops’ Recommendations
regarding the poor, cont.
5. All of society should make a much stronger
commitment to education for the poor.
(203e)
6. Policies and programs at all levels should
support the strength and stability of families,
especially those adversely affected by the
economy. (206f)
7. A thorough reform of the nations’ welfare
and income-support programs should be
undertaken. (210g)
Bishops’ Recommendations
regarding the poor, cont.
8.
Public assistance programs should be designed to
assist recipients, whenever possible, to become
self-sufficient through gainful employment. (211-1)
9. Welfare programs should provide recipients with
adequate levels of support. (212-2)
10. National eligibility standards and a national
minimum benefit level for public assistance
programs should be established. (213-3)
11. Welfare programs should be available to twoparent as well as single-parent families. (214-4)