Government Welfare vs Private Charities

The government should just take care of people under its care like a mother to their child.

 

We've spent about $15 trillion (your number) to mitigate the effects of poverty while spending virtually nothing and doing virtually nothing to reduce the poverty.

Of course the "ignorant right" fails to understand that the War on Poverty was about providing free higher education and job training to reduce poverty and that had fundamentally nothing to do with the welfare assistance for those living in poverty. Sadly higher education and job training does virtually nothing to reduce poverty overall because roughly 40% of all employment is under-compensated so while one person might succeed based upon higher education and/or job training it doesn't change the statistic that roughly 40% of all American households would still be living below or near poverty levels. Only a "living wage" eliminates poverty for working American households.

Here's the bottom line for those that are ignorant:

Welfare Assistance mitigates the effects of poverty.
A "Living Wage" eliminates the poverty for working Americans.

 

We have spent $15T on poverty relief, and while the poor are no better off, their landlords are $15T richer.

Coincidence?

 

so your are admitting that democrats weren't trying to help the pool but instead padding the pockets of landlords

 

I suspect all but a handful were too naive, ignorant, or stupid to understand what they were doing.

 

With private charities providing the vast majority of safety net assistance the US poverty rate was reduced at a steady rate until the "War on Poverty" federal programs of the mid sixties. Since that time and despite trillions of dollars being spent by the federal gov the poverty rate did not continue to decline but instead has remained constant (+- ~ 3%) since that time. The private charities understand the corruption factor associated with providing assistance. It was easy to get help but very difficult to remain on the dole. The gov programs are completely the opposite. It is difficult to get into the programs but when "enrolled" the programs can easily be manipulated into a dependency on the dole doing net harm to those who were professed to being helped.

It's amazing that the history of these social programs is ignored and more tragically is not used as a basis for learning and reforms to make them better. Bill Clinton did pass the welfare reforms of 1996 which immediately resulted in many leaving the welfare rolls but Obama has chosen to ignore the lessons and gone back on the reforms which reduced dependency.

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Those policies create dependency and result in greater unemployment. The best way to alleviate poverty is to grow the economy. Unfortunately lefties have not realized that.

 

Poverty is not affected by welfare assistance regardless of whether it's provided for by private charity or government assistance. Poverty is a reflection of mandatory expenditures in excess of household income. Welfare (government and private) merely mitigates the effects of the poverty by filling in the gap between the income and the expenditures.

The decline in poverty during the 1950's and 1960's was due to the power of organized labor that effectively created the middle class by securing compensation relative to productivity. Since about 1970's we've seen a significant decline in the power of organized labor, generally attributed to anti-union legislation at the state levels of government, and with that we had a divergence where productivity increased at twice the rate of compensation. When inflation is factored in that has resulted in a vast increase in poverty in the United States. Using IRS statistics the actual poverty rate is can arguably be estimated at 47% of American households today.

At no point in recorded history have private charities ever been capable of mitigating the effects of poverty.

Nonsense. As a long contributor to Northwest Harvest, that largest food bank system in the Pacific Northwest, there's no "eligibility" requirement except to walk in the door and no provisions whatsoever to remove a person from that welfare benefit. We can also note that Northwest Harvest, even though it's the largest private food bank, can't even provide enough food for the person to live on for more than a couple of days a week. The just don't have enough food and donations to be able to do more as much as they would like to.

There's only one way to significantly reduce poverty and the necessity for assistance regardless of whether that assistance is from private charities, government welfare, or a combination of both (which is what we have today). It's not magic or smoke and mirrors. The only way to reduce poverty is to ensure adequate compensation from employment in both wages and benefits. It doesn't eliminate all poverty but it does eliminate poverty for working Americans and working Americans receive the vast majority of welfare assistance in America today.

Sadly the same people that oppose government welfare assistance also oppose a "living wage" (living compensation) which would eliminate most of the government welfare assistance today.

Under compensation is the primary reason for a dependency on welfare assistance. A person/household that's already working full time and still can't meet their mandatory expenditures requires welfare assistance and as long as there is a shortfall between income and their mandatory expenditures they will be welfare dependent. Once again the vast majority of households collecting welfare assistance are working households.

 

Underemployment is the main reason for poverty. The best way to reduce poverty is to grow the economy and implement policies that ensure a quality education for all (a vouchers system for every K - 12 child in the US would be a great solution). Forcing higher labor prices on an economy only acts to reduce the growth rate of that economy. That's Econ 101.

Labor unions actually reduce employment and actually act to increase the poverty rate. Right to work states show that auto workers take home the same pay but cost the manufacturing corporations less per hour. Therefore more cars can be sold due to lower prices and more workers can be employed.

I was speaking to the charitable giving in the US before the war on poverty federalized the efforts resulting in dependency on the welfare system. Again helping people is noble but also potentially harmful to those helped. Instead of focusing on the welfare system the focus should be on growing the economy which would actually provide additional tax revenues to help people with real needs. It's mystery why the left does not realize that basic fact.

 

So what is the necessary 'compensation to survive'? $35K? $50K? Let's see your number?

Then explain how all US businesses can arbitrarily increase ALL of their wages to pay the minimum wage of $35K or $50K or whatever number you provide?

Explain how ALL businesses can deal with the increased cost of materials and supplies and facilities and energy, etc. which will be increased because ALL businesses are forced to increase their wages?

Explain how ALL businesses who operate in the global economy will be able to remain competitive once ALL of their cost of doing business is increased?

Can you even begin to quantify the cost impact on ALL businesses if you force ALL businesses to your 'survival compensation'? You're of course going to say if consumers have more money they will consume more...so what when the end result is consuming the identical stuff they consume today? And you must factor in the loss of business attributed to greatly increased prices on ALL US goods and products...

 

But they will consume less overall if prices (labor rates) are arbitrarily forced higher as you point out in the last sentence.

 

Is less consumption of things produced in the U.S. by American citizens something we should strive for?

I recently replaced all my home lighting with LED lights, which were 'designed' in the U.S. but produced in China.

Would U.S. consumption diminish if labour rates in the U.S. were forced higher, or would lower priced imports become a greater source of our consumption?

And at the same time, would the increased cost of what cannot be replaced by imports require greater government subsidization to keep them functioning and employing people?

Our increasing trade deficits should be an indication that we are becoming less competitive in trade with developing nations and increasing wages does not appear to be a proper solution.

 

We benefit from lower prices. The source of the products is irrelevant. If China can produce and sell a product designed in the US (at a lower price than the US can do it) then US consumers enjoy a net benefit. If China violates patent laws that is a different matter and should be addressed in a trade agreement. But to penalize US consumers with higher prices does net harm.

If higher labor rates were forced on US employers less of their products would be purchased because of the consequent price increase. If this opens the door for a foreign import which was of higher price before the higher labor rate action then the import would take market share. In both cases however the US consumer suffers net harm.

Why should the gov subisidise a product whose price was increased by the gov ?? That makes no economic sense but it does make short term political sense.

When our economy is strong our trade imbalance is typically high. But labelling that entire concept as a problem makes no sense. We have their products and they have our dollar bills. Each participant in the transaction benefits. If US consumers can buy widgets from China at half the cost of US widgets they benefit. If China choose to devalue their currency then US consumers again benefit from the price reduction and the increase in discretionary income. If the US puts import tariffs on Chinese goods the US consumer is harmed by the higher prices and the reduction in discretionary income.

 

Let's use the $35K number...so if we force the wages of all US workers who earn less than $35K up to $35K this obviously will cause interesting inflation. But what happens to all the US workers earning $35K to $45K who according to many won't get the same percentage wage increase...their buying power is reduced which means less consumption.

If US business cannot compete globally this reduces their demand which terminates US jobs. Even moving to more automation and robotics due to higher wages will terminate US jobs. And of course there is the impact to those businesses who simply cannot make $35K minimum wages work and they close the doors...

 

A simple answer is the fact that nothing is free. If government forces higher costs on business in various forms and fashions these higher costs must be offset by reducing expenses elsewhere or increasing prices or some of both. From business to business it might be impossible to reduce costs and/or increase prices and these companies, and employees, will suffer the most as they are forced to make hard decisions. Other businesses will struggle in varying degrees but someone or something somewhere must make up for the higher cost of doing business...nothing is free! The stupidity of this from a macro perspective is most Americans are demanding more jobs and higher paid jobs with zero regard to the downside risk of doing this...

 

Americans only whine about what they feel is being taken away from them while they seldom celebrate all that is afforded to them in the USA. There never is a discussion about the true NET result. Therefore it's all diatribe and political non-solutions...

 

As always I appreciate your question so let's begin with this one.

While there are variables due to family composition (working adults, children, and location) if we want to establish a "living wage" for the "average" household then it would be about $45,000 in combined wages and benefits that could be rounded off to $22/hr for a standard 2080 work-year or about $24/hr if payroll taxes are included in the "cost of compensation" for the employee. Let's simply call it $50,000/yr (rounding up again) which would equal about $4.5 trillion spread equally between all of the workers in the United States.

My estimate is higher than the general consensus of economists that peg the figure at about $3 trillion but I attributed this to the fact that I include the payroll tax as well as including compensation required for the retirement of the person after they become too old to work. So basically I'm more inclusive of all of the "costs" that need to be covered under the heading of "employee compensation" in the business plan.

In any case with gross personal income in the United States of about $15.5 trillion a year that leaves $11 trillion in income that can be used for incentive compensation (i.e. compensation in excess of what's required by the household) and profit for the owners of enterprise. While that additional $11 trillion can be divided anyway that the owners of enterprise choose there's certainly more than enough left over after every worker receives the minimum wage/benefit compensation required so that they don't require external financial assistance from government and/or private charities.

First of all the increase isn't arbitrary but instead is quantitative based upon the analysis of the "cost of living" for the household. While I've provided an all inclusive estimated "cost of living" of about $50,000/yr I'm not the foremost expert on the subject. I used the quantitative analysis done by MIT and the average household size as the foundation for my estimate but there are certainly experts that could be more accurate. In any case it's not based upon an arbitrary decision but instead is based upon a quantitative analysis.

Next is the fact that "all" businesses might not be able to revise their business based upon increased costs but all competent business owners that understand and use a business plan can accommodate increased costs of any kind so long as the increases occur over time. If we used the cost per square foot of perhaps $0.10/sqft from the 1960's and increased that to $1.00/sqft overnight it would have driven a lot of companies out of business but because it occurred over time that increased cost was absorbed by the business plan.

So an instantaneous increase to a "living wage" is unrealistic but a phased implementation from today's minimum wage to a living wage over a decade or more can easily be accomplished because it occurs over time allowing the business plan to adjust to the increased costs.

The impact of a phased increase in compensation over time are highly exaggerated. We can also note that the increased compensation is partially offset by reduced taxation.

For example in 2015 Wal-Mart, the largest retail company in America. had $456 billion in gross revenue, paid out a 16% dividend to stockholders (including the Walton family that's the wealthiest family in American and doesn't require even one dime of income for generations to come) while the US government paid out $8 billion in welfare benefits just to Wal-Mart employees that couldn't afford to live on the compensation they received. The cost for Wal-Mart to provide adequate compensation to Wal-Mart employees to eliminate the $8 billion in government welfare benefits equals less than 2%. So if Wal-Mart increased prices by just 2%, that none of the customers would have even noticed, it still could have paid out the 16% in dividends to the stockholders and wouldn't have lost a dime.

So let me ask a question. Should Wal-Mart raise prices by 2% so it can pay out a 16% dividend to the stockholders or should Wal-Mart keep the prices the same so that the taxpayers have to pay out $8 billion in welfare benefits to Wal-Mart employees so that Wal-Mart can pay a 16% dividend to it's stockholders?

First and foremost not all business operate in a global economy and, in fact, few do today. The predominate source of employment today in the United States is the service sector and service sector jobs are confined to within the United States and are generally to specific geographic locations. We can't outsource the burger-flipper, the bank teller, or the convenience store jobs to other countries and they are NOT based upon the global economy.

Few enterprises actually deal in the global economy most notably of which is manufacturing but manufacturing of durable and non-durable goods addresses less than 4% of all employment in the United States. You might ask how do we compete in manufacturing within the global economy if labor costs increase and it's the same way we've been competing because the competition is based upon automation and there are no labor costs for the "robot" that is responsible for production. Manufacturing jobs in the United States have declined by about 40% per capita since 1970 while US production of durable and non-durable goods has soared because of automation but we're not alone. The identical situation if happening world wide as the number of manufacturing jobs declines and the production soars because of automation. It has absolutely nothing to do with "out-sourcing" of the jobs because of cheaper labor. It has everything to do with the fact that a robot doesn't receive any wages at all.

In point of fact a "living wage" doesn't directly result in increase spending by consumers because it's just replacing government welfare assistance where the consumer is still spending the same amount of money. What it does do is dramatically reduce government welfare assistance and that tax burden so arguably there could be significant tax cuts for middle income households that actually use their income for consumption (as opposed to wealthy households that don't use more income on consumption) so the economy grows significantly. Imagine a $400 billion savings in government welfare expenditures being translated into a tax cut for those earning $50,000-$100,000 per year? Or how about it ending $400 billion in deficit spending so that we don't impose a higher tax burden on our children? Imagine people actually being able to pay their electric bill so that the rest of us don't have to subsidize their need for electricity with higher electric rates?

You don't like taxes and government welfare assistance and neither to I. What irks me no end is that the owner of a company can drive a Mercedes while I have to pay taxes so that their employees can afford the mandatory expenditures that they must pay everyday that they work for that employer or thousands of them that are identical to that employer. Instead of me subsidizing that owner's Mercedes let them pay their employees enough so that I don't have to fund welfare benefits to their employee.

 

Defending the industries and their employees which cannot compete globally wins votes. But implementing tariffs to save jobs of a few results in the loss of jobs for many more. This lesson should be very obvious from the Smoot-Hawley legislation of the Great Depression era and more recently the steel tariff of the early 00's. But since real world economics is not taught in the high schools and colleges we have a nation of economic illiterates and politicians which exploit them. A discussion of the true net result of protectionism does not fit on a bumper sticker.

 

That action by itself would not result in inflation (which is only a function of the fed printing too much money) but would result in price increases which would adversely affect economic growth. The number of jobs at the new $35K annual wages would be reduced and unemployment would increase. This action would also adversely affect US business competitiveness internationally. The net result would be economic harm and not economic gain.

 

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$22/hour is simply two workers in the household each earning $11/hour...this should be no issue today? We'll use your $50K number.

The increase will be arbitrary because everyone has a different opinion and who knows what the politicians will dream up.

This issue of forcing higher and higher costs to business in not about competency. It's about math and the risks of business and how much energy owners have to invest time and money sometimes for nothing. You cannot separate the emotion from the math.

Since you are using 'household' income we can't discuss hourly wages but using your numbers we'll assume two workers per household each eventually earning $12/hour for $50K gross income. Over ten years this will require ~50% increase in minimum wage. During the same period there will also be ~20% inflation. So the business owner will be forced to deal with 5% wage increases per year and 3-4% inflation caused by higher expenses, and IMO even amortizing this over ten years on some/many businesses will be an untenable situation. Forcing the minimum wage higher will also force all other wages higher...this is lots of new expense that cannot simply be dealt with by competency.

A ~50% increase in labor costs over ten years plus higher expenses due to inflation is not exaggerated.

No...Walmart or any other business should not be controlled by government! You are using Walmart as an example but Walmart is also an anomaly so whatever rules you wish to force on Walmart you must also force on ALL other businesses. And, profits of business belong to that business and no one else...how they or any business distributes their profits is their choice. Lastly, ~75 million US workers earn at or below $35K, which means ALL of these workers are eligible for some forms of government welfare. Since Walmart only hires 1.5 million workers, this means the other 73.5 million workers who work for anyone other than Walmart are also a burden on government. Government welfare is not a problem rooted in Walmart!

Name some mainstream businesses that do not operate in the global economy?

The USA is deeply embedded in the global economy, from government to private enterprise. What percentage of products at Target are produced in the USA...I'll guess 5%...therefore without the global economy Target will not exist...or any other major retailer in the USA. Most major manufacturers are certainly selling and buying the the global economy.

Increasing the minimum wage, and all other wages, by ~5% per year will not remove a single worker from government welfare!

There can never be tax cuts for the middle-income people as long as we continue to have deficit spending.

You are wrong about taxes...I like our progressive and corporate tax system but I wish it applied to everyone since today we have 'few' people and businesses paying the lion's share of taxes. I do not agree with government forcing nonsense into the private sector because IMO the private sector is a finely tuned machine controlled by supply and demand and sustained with profits...I call it a natural process. Forcing stuff is IMO unnatural which means it will cause unnecessary problems and fallout...

 

Humans are ignorant across the broad spectrum and this is further exacerbated by our greed and self-serving behavior. I always thought our government leaders would be above this dismal reality but they are not. So we struggle and struggle spinning our wheels spending all of government's time doing Bandaid solutions and pandering for votes and scrapping to save their jobs while the nation and it's people are failing. There is a science and math in economics but science and math fails most Americans so we're only interested in 'what's in it for me' this moment. I used to be astounded by government deficit spending and debt until I realized most Americans don't give a rip. Lastly, people who are wrapped up in their own little worlds, for myriad reasons barely surviving, have no interest in the math and science of economics, or any topic unless it positively impacts their world...and...they are easily persuaded by snake-oil politicians promising things that will never be delivered and never solve any problems...

 

Inflation refers to a broad increase in prices across many goods and services in an economy over a sustained period of time.

If those higher wages, higher business expenses, increases the prices of goods and services, this is inflation...

 

OK - that's price inflation and can be a temporary result of insufficient supply or a longer lasting result of a gov imposed tariff or minimum wage policy. The most dangerous form of inflation results from the treasury of a nation printing too much money (devaluing the currency) which sends false economic signals through the price system resulting in over production and a painful correction. What starts out as a false economic "boom" ends in a spike in the misery index (inflation plus unemployment). And the only way to correct that type of inflation is with tight money policy (as John Volcker did in the early 80"s) which creates even more misery.

 

The problem exists as to whether the prices are based upon "money" (gold and silver coins produced by the US Mint) or "promissory notes" (Federal reserve notes created by a private central bank) because promissory notes are discounted in a free market economy. If we check the purchasing power of the "money" there's been very little inflation in the last century while there has been inflation of the currency that has lost value due to discounting (i.e. Federal Reserve notes have lost over 97% of their purchasing power since being introduced relative to the money).

 

Definitely private charity.

 

Right or wrong...the Fed's central control of the monetary system is critical regarding employment, stabilizing prices, and moderating interest rates. And the Fed cannot make everyone happy all the time so it's a thankless job...but IMO a critical job.

The Fed and the government cannot solve all of our money and inflation problems...PEOPLE are required to take full responsibility...