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Government fails the poor and taxpayers (watch the video)


If you wish to help people: you donate to a charity, you don't give extra money to the government. Last year president Obama gave more money to private charities than he paid in federal income tax. Even the head of our government felt it was better to give his money to charities than to  the government he manages.

Official US Census poverty figures show about 46 million people have been living in poverty the last couple of years, the most ever. The 15% poverty rate is tied for the highest it has been since 1965.  The problem isn't lack of funding.

  $195 billion would have been needed last year to simply give everyone enough money to bring their income above the poverty level.
$1030 billion at least was spent on federal anti-poverty programs (including state funding put into those programs).

If all that money had been simply given as cash to the poor it would have brought them above the poverty level and given an extra $18,051 to every poor man, woman, and child. That is $62,971 extra per family, Alternatively it could have brought them above the poverty level and given them all a housekeeper and a nanny for each family. They spent almost 6 times as much money as it would have taken to simply give people cash to bring them above the poverty line. To put the numbers in perspective, an economist estimated that to end extreme poverty around the world (i.e. not to bring them up to our standards, but to at least tackle the worst of it) would cost $175 billion.

Nobel prize winning economist Milton Friedman suggested that rather than having myriad wasteful government programs, if the government was going to help the poor it would be more efficient to simply given them cash. He proposed  a "negative income tax" to raise the income of the poor to a minimal level. Others think such a system too easily   inspires dependence on government.

Competition Works

There is another alternative. If charity were a tax credit (100% of the amount taken out of your taxes) rather than a tax deduction (taken out of your income) you could essentially give your money directly to a charity that works instead of giving it to the government to waste. The government would be forced to compete to show it will use your money wisely.  

In the former Soviet Union people felt important things like food, toilet paper, cars, and electronics  should be produced by  a government monopoly in a one size fits all fashion. They eventually gave up when they discovered   our approach works better to produce consumer goods. Many different people try to find better ways to solve problems and compete to prove whose solution is best. It is wishful thinking to  merely tell a government manager "solve this  problem" and pretend they are guaranteed to be better than anyone else in the country at it.

 Instead of enlisting   competition to help the poor, they are stuck with an obsolete Soviet central planning approach.  Unfortunately those in need have less influence on politics than others in this country and can't counteract the natural impulse of politicians to seek power.  Most politicians run for office because they think they know the best way to solve problems. Without competition there is no reason to be sure they are right.  People care enough about consumer products that they insist on allowing competition to produce them. Its time for the public to show they care as much about the less fortunate.

Freedom of charity

People make moral choices when they consider what cause to donate to, such as: "Is it better to help keep one person from starving,  or fund the search for the cure to a disease which kills many people?".  Should you  have a politician you may not have voted for making such a decision? Or would you prefer to either make it yourself, or entrust it to a secular charitable fund or church you approve of who decides which causes to fund with the money you give them? In the financial world "mutual funds" arose to allow you to delegate investment choices to experts. There are   websites that compare charities to help you decide where to put your money. Competition will lead to new innovations  to better solve the problem of steering money to   charities that work the best.

You have the freedom to choose what toothpaste to buy. Isn't it just as important to   have the freedom to choose what charity (private or government), to give your money to? Should government be legislating 1 size fits all moral choices? Should you use government to force people to pay for programs you think are important rather than letting others be free to give to causes they think are important?  If a problem isn't being solved, the media will be full of stories about those in need until people steer their contributions to solve the problem.

People   contribute over $300 billion to charities in this country now, even though many think "why bother, I'm already paying tax money for the government to solve   problems". Many would give far more if they could choose to give their money to charity rather than government. Unfortunately   politicians fight against this approach. For four years in a row nonprofit groups had to fight Obama's attempt to lower the tax deduction for charity and a current "fiscal cliff" debate has led many to suggest limiting charitable deductions.

Poverty was falling in this country for many years before the federal government began its "War on Poverty":

The former Soviet Union thought it was better to avoid "wasteful" competition when producing important things like food. It turns out  the benefits of competition more than make up for any added overhead on things like marketing. The same would be true for social programs. Competition helps the poor. As economist Goodman reports:

Nobel laureate Gary Becker gave the opening speech. I found what he said quite remarkable:

'The greatest beneficiaries of capitalism are those at the bottom of the income ladder. That’s why I favor capitalism. Were that not the case, I would not be in favor of capitalism. Milton Friedman feels the same way.'

..years back the council of Economic Advisers (CEA) calculated a 'predicted poverty rate'  based on economic growth alone. In other words, economic growth by itself lifts people out of poverty, even if nothing else is happening. The CEA results suggest that if there had never been a welfare state... the poverty rate would actually be lower today than it actually is!"

A study of economic freedom around the world shows that in the freest countries   the poor are better off: "In the top quartile, the average income of the poorest 10% was $11,382 compared to $1,209 in the bottom". Government spending on poverty can slow economic growth due to government inefficiency wasting resources that are not left in the private sector. For example, any extra money wasted on an unnecessary
government worker  wasn't left in the private sector for a private company to
have hired that same worker to help grow the company and  create new jobs for the poor.

If you invest in  a new start-up company which creates jobs , those jobs may help many more people out of poverty than  if you'd given the money to charity. Although some people advocate running charities more like profitable businesses, not every business would be considered a charity. A tax credit for charity wouldn't let you steer  your tax money to help people in ways the government doesn't consider an official charity. The answer in the long run may be to get the government entirely out of the charity business and simply lower taxes and let you use the money however you see fit. Currently many people wouldn't trust that approach to ensure the poor would be taken care of. The initial approach of a tax credit would force a certain amount of money to be spent on social causes. Since the private sector should solve problems in a more cost effective way, the government could experiment with gradually lowering the amount it requires to  be spent on charity (government or private) to allow people to see it still works better than the current approach.

Many people experience an emotional reaction to the idea of change: "ick, its new and different, I prefer the status quo I'm used to".
In reality this would simply be modernizing government by applying concepts  used throughout  most of our society.   Often people have an in-built conservative aspect to their worldview which opposes change even if it might lead to radical progress towards improving society. People need to consider whether they care more about helping the poor or protecting bureaucrats and politicians from change. I'm sure many will invent objections to  the notion of forcing government to compete, but no solution is perfect. The question is whether its better than the existing failing approach. 

Government competition is better than no competition

Many people are   used to having the government solve problems and aren't ready to trust more of them to be taken care of privately.  Even if you wish *some* government to perform a task, it is useful to consider *which* level of government should perform it. An improvement on the current approach would be to at least have state or local governments handle problems rather than the federal government. We don't know the best way to solve many social problems, so there is no reason to force 1 approach on the whole country as if we knew it were   best. Lower level governments should be free to try different approaches to discover what works. They can  collect data to compare and learn from each other.

In the private sector some larger companies are more efficient due to "economies of scale", but that efficiency is partly motivated by competition. Even private companies that get too large become wasteful due to "diseconomies of scale". A lack of competition means its even easier for  a federal department to become wasteful. Programs   become bloated slow moving dinosaurs that are so big they fail.   In the private sector we have some idea what things should cost because if a company charges too much, another company will compete with a lower cost item. If we only have 1 federal government performing a task instead of myriad lower level governments, it is difficult to know what a reasonable amount is to spend on a task since they are the only one doing it.

Politicians   look for ways to justify taking on new tasks. They often use the poor as an excuse to do things the private sector can do. If  someone would like to play at running a health club, and no one in the business world will trust them with the money to start one, they may just go into politics. They will claim a health club needs to be built "for the poor" and will call it a "recreation center" to pretend that somehow makes it not the same thing as a private club providing the same services. [Note: there may be other reasons you wish the government  to run a rec center, this page is only addressing the 1 issue that poverty shouldn't be a justification].

  One way to assist most of the poor is to solve the problem that defines them: help  them have enough money so they aren't poor. Let them choose how to spend the money.  
 Instead of having money spent for them to have access to a health club, they might prefer to use that money to buy a bicycle for exercise as well as transportation. Simply providing poor people with cash directly lets them make their own choices. 

If  you feel the poor specifically need to have access to some item, it is best to use the food stamp model and simply give them a voucher to buy the item privately. We don't have the government grow food just because poor people need to eat. If you wish to provide the poor  access to health clubs, it is better to provide them with vouchers for use at a private club than to build a government club. An even better solution would be to start a private charity to provide such vouchers. Then the public can decide whether they think it is e.g. more important to give money to feed a starving child in Africa, or to provide an American with access to a health club.

If you don't trust the poor to make their own choices directly (even with financial counseling), there might be  a "case worker service" to hand out vouchers for different goods&services to a poor person.  One  option to introduce competition into the process    would be to allow private entities to compete to handle individual cases. A poor person could choose among "private case worker" services instead of using a government case worker. If charity were a tax credit, they could  find a private case worker charity that had the funds to take on a new "client". If the government were getting all funds meant for the poor, alternatively a  voucher to handle that case would go to the private entity. This essay is meant to suggest the possibility of introducing competition into the system, not to explore all the options in detail.

Some people think: "If you don't want the government to do more for the poor you must be evil and not care about people".  That is a myth. In reality many people wish the government to do less *because* they care about people and simply think other approaches are better.

Watch the video:

Cartoon and Obama clips explaining this


Appendix A. Please spread the word!


Information the major media doesn't cover can only be spread by "word of mouth" virally so please use email and every other way you can to spread the word. Please pass around the "posters" below, you may even upload them to your own albums to be noticed. Advertising repeats since people may not notice it the first time so come back  again for more posters.

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Appendix B. Source Information

Historical Poverty Rate:

Estimates of poverty aren't exact, they are estimates based on statistics so their is an uncertainty/error range. The Census bureau says the   15% poverty rate has a confidence interval of + or - 0.2 percent (and the prior year's uncertainty was higher at 0.3 percent), so it is statistically a tie with 1983's rate of 15.2%. The last time the rate was statistically significantly higher was 1965 at 17.3%.

Poverty Spending:


"we can estimate that total federal, state, and local government spending on means-tested programs was probably more than $1 trillion in 2011. "

Based on data from the Congressional Research Service and other sources, staff from the Senate Budget Committee calculated gave a rough figure for spending on federal welfare programs (including   money the states kick in):

"The total amount spent on these 80-plus federal welfare programs amounts to roughly $1.03 trillion. Importantly, these figures solely refer to means-tested welfare benefits. They exclude entitlement programs to which people contribute (e.g., Social Security and Medicare)… Spending on federal welfare programs is up 32 percent since 2008, and now comprises 21 percent of federal outlays."

More may have been spent for state&local-only programs that don't have a federal component, so that may be  a low estimate of government aid for the poor.

You will see some other sources quoting larger figures such as

If the $1.45 trillion in direct anti-poverty spending in 2007 had been simply divided up among the poorest 20% of the population, it would have provided an annual guaranteed income that year of more than $62,000 per household

That includes some aspects of other programs which transfer wealth to those who aren't rich, but which aren't "means tested"  to be only for the poor. Since some might dispute the use of the term "anti-poverty" programs for them, the   $1.03 trillion number is used for this page since it illustrates the point well enough without including those other programs.

In reality these figures only include programs with a federal component, various state&local programs with no federal connection wouldn't be counted which could likely bump that figure up by a few %.

Poverty Gap:

In its detailed data the Census Bureau has a spreadsheet data file titled: "POV28. Income Deficit or Surplus of Families and Unrelated Individuals by Poverty Status" which tells how the gap between the income of various groups and the poverty level. The data is broken out into three separate categories: families, unrelated subfamilies and unrelated individuals. 
There are 9,497,000 families who are on average $9,576 below the poverty level, for a total   of $90.9 billion required to bring them up to   the poverty threshold. 
There are 272,000 unrelated subfamilies on average $11,458 below the poverty level, for a total of $3.1 billion to bring them up to the poverty threshold.
There are 12,416,000 unrelated individuals on average  $6,401 below the poverty level for a total gap of $79.5 billion   to bring them to the poverty threshold.
That is a total of $173.5 billion cash to bring everyone above the poverty level. (obviously this is a rough estimate leaving off the small fractional of that required to distribute the cash). Note: The figures are a little off since  census poverty figures "does not include capital gains or noncash benefits (such as public housing, Medicaid, and food stamps)", which means someone who sells property and has a $100k capital gain but little other income would be below the poverty level.

Update note:
it turns out there  is some means tested cash assistance included in the "income" figures used to assess poverty (but not non-cash income like food stamps).The US Census bureau has spreadsheets of the "POV27. Source of Income By Ratio of Poverty Threshold For Families And Unrelated Individuals" for families and individuals. For those under the poverty threshold the amounts for means tested cash assistance spent are $10.645 billion for families, and $10.96 bllion for unrelated individuals. $21.605 billion total. Adding that yields $195 billion in cash to bring people above the poverty line. It may be that some of that cash assistance comes from state&local programs not counted in the total government spending figure.

They show the "means tested" cash assistance goes largely to those *over* the poverty line, $37.9 billion. Those at 1.75 times the poverty level and over received almost half that, $18.5 billion. Those at 1.75 times the poverty level and up received  more per family and per individual (their families are smaller) than those below.

Extra Per Capita and Family:


Total spending of $1.03 trillion minus the $195 billion  needed to bring them above the poverty level leaves $835 billion left over. Dividing that between 46.25 million people would provide $18,051 each. There are an average of about 3.49 people per family in poverty (this is based on the family number only, not individuals), which makes that $62,971 extra per family in poverty. (note: the 3.49 figure is likely in other Census data, but it can be derived from the POV28 table mentioned above. Use the average  deficit per family * number of families to get the total deficit. Dividing the total deficit by the per capita deficit gives the number of people in those families. Divide that by the number of families and you get the average number of people per family in poverty).

Nanny and Housekeeper cost:

 This is just a rough estimate to illustrate the order of magnitude of how much the government is spending.  Some of the unrelated individuals likely share housing, which lowers the housekeeper cost. Also many would only use nannies and housekeepers part time, so although I used fulltime salaries  I lowered them a little in essence by not  adding in the employer side tax contribution. The Census data referenced above was used for the numbers of people in poverty.

As of this writing a nanny site reports the average fulltime live out nanny salary is $705 a week. That means each  9,769,000 families and subfamilies could get a fulltime nanny for $358 billion.
Adding together the number of families, unrelated subfamilies, and separate unrelated individuals yields 22,037,000 fulltime housekeepers needed. At a yearly average salary as of this writing of $22,037 that would cost $489 billion. Adding together those costs, plus the cost to bring everyone to the poverty threshold yields $1.04 trillion. Assuming   its likely state&local governments mean there is at least  1% more anti-poverty spending than already counted, that would cover it .