More Work, Less Welfare

Despite claims that the economy has come roaring back, Gross Domestic Product growth remains anemic. The number of people receiving Supplemental Nutrition Assistance Program (SNAP) benefits, or food stamps, alone has doubled since 2008, to 74.7 million; in troubled cities like Baltimore, more than one-third of the residents receive them.

Called the “welfare cliff” by policy wonks, this growing trend is little more than people responding to incentives. For example, eligibility for food stamps ends when annual income exceeds 130 percent of the poverty line, or a little more than $15,000 a year, for an individual. When the minimum wage increases above this level, as it has recently in many cities and states, employees reduce their hours to keep their benefits. As a result, people forgo opportunity for safety.

There is a solution that fulfills society’s obligation to help the poor without reducing opportunity: the Earned Income Tax Credit (EITC).

– The EITC supplements incomes of the working poor through the tax code.
– As their income increases, their government supplements declines. The decline is never so steep that it results in a decline in total income.
– The IRS recently estimated that nearly 28 million Americans received more than $66 billion in EITC payments in 2013, lifting an estimated 6.5 million people out of poverty, including 3.3 million children.
– While programs that provide food, housing and medical benefits are certainly important, the EITC is more effective in helping people rise out of poverty. These existing programs should be rolled into an expanded EITC

The only way to truly reduce poverty and finally get the economy going again for working-class Americans is to create greater opportunity for the economically disadvantaged.

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