tag:blogger.com,1999:blog-582368152716771238.post7653051880379130810..comments2024-03-29T07:18:14.271-05:00Comments on The Grumpy Economist: Work requirementsJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger23125tag:blogger.com,1999:blog-582368152716771238.post-46825996266460980382023-06-08T11:15:14.409-05:002023-06-08T11:15:14.409-05:00Great points about the disincentive built into the...Great points about the disincentive built into the current system of government benefits. We have been arguing similarly for a couple of decades. See http://www.comingtogether.info/. I am not as pessimistic about the affordability of eliminating means testing. Consider financing the government benefits with a flat tax. Let that be the only disincentive to earning more money. I am thinking a rate around 25% to fund the whole federal government benefit program. That amount of money would provide a pretty good balance between the safety net and incentive. This would eliminate so many of the current programs and expenditures that significant reductions could be made in other taxes, leaving the vast majority of marginal earning increases with the worker. Change the incentives, and the taxed income would skyrocket, providing resources to fund the program. What do you think?Steve Dossinhttp://www.comingtogether.infonoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-57634937447730429772023-06-07T15:08:22.465-05:002023-06-07T15:08:22.465-05:00What if any do you think risk aversion plays into ...What if any do you think risk aversion plays into these incentives? Government subsidy is essentially risk free, while holding and maintaining a job comes with inherent risks such as losing the job, transportation issues, evictions, child care, etc. Does a time limit move the needle at all, possibly creating enough "risk" that makes getting a job less risky than keeping the subsidy and moving people from subsidies to the work force? If not is there a solution out there than can be framed in such a manner?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-32404361227367835082023-06-06T18:07:50.175-05:002023-06-06T18:07:50.175-05:00Impose a national sales tax and give people the op...Impose a national sales tax and give people the option to pay income taxes and get a "sales tax exempt card", in the amount of the taxes they paid. Add to that an optional, simplified negative income tax with flat rate plan that can be selected in lieu of all current benefits and income and payroll taxes. I'm an economist who likes choices.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-47443532011956537982023-06-02T14:58:19.111-05:002023-06-02T14:58:19.111-05:00Mr. Chochrane said "One answer is, remove the...Mr. Chochrane said "One answer is, remove the income phaseouts. Give food stamps, medicaid, housing subsidies, earned income tax credits, and so forth, to everyone, and don't reduce them with income. Then the disincentive to work is much reduced. (There is still the "income effect," but in my judgement that's a lot smaller for most people in this category.)" <br /><br />Absolute genius! The only thing I would add is that the Federal tax code should consider these subsidies as part and parcel of the standard deduction. By this I mean: people who are not participating in any of the federal assistance programs could take a $45,000 standard deduction on Federal income taxes. The amount of the standard deduction would be reduced by they amount of assistance someone received. Income above the "adjusted" standard deduction would be taxed at the current marginal rates for adjusted gross income. <br /><br />The only thing "impractical" about this is that the standard deduction increases from today's $17,000 (on average) to $45,000 and this means that total standard deductions would be something like $4.4 trillion. Total deductions today (standard and itemized) are about $3.1 trillion. This $1.3 trillion increase in the amount of deductions would represent a 13% decrease in the total taxable income which today is $9.8 trillion. To me 13% loss of taxable income to the IRS does not seem to be an insurmountable gap to fill with other policy adjustments.<br /><br />Another thing I love about the idea of proposing $45,000 standard deduction (with no phase out of assistance programs) is that it would open discussions about the purpose of the standard deduction. Once upon a time the standard deduction was supposed to be large enough that money spent on essential living expenses of food clothing and shelter were not taxed. Clearly this is no longer the case if average subsidies to the bottom 20% amount to $45,000 annually. I would also think that if we did in fact move to a consumption tax system, an exemption on the order of $45k would be needed to preserve a similar degree of progressiveness to the tax code that we have today.<br />Cap. J Parkernoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-323742224308914372023-06-01T14:57:25.677-05:002023-06-01T14:57:25.677-05:00thank you for presenting facts and ideas. I have ...thank you for presenting facts and ideas. I have to think about your ideas more. I've always disliked the consumption tax, because I don't like the government coercing me and taxing everything I do. If it replaced the income tax, I might be for it but it will still control behavior. I know of folks who have pride and want to work hard and receive the promotion offered, but it reduces their total income with the benefits reduction. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-87926703171312133222023-06-01T12:54:48.081-05:002023-06-01T12:54:48.081-05:00Not what I was asking for, but interesting nonethe...Not what I was asking for, but interesting nonetheless. I think there are many other aspects to this outcome than only being born in poverty, although those likely are related to being within that cohort.Bloefeldhttps://www.blogger.com/profile/08155640635840881753noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-27046475679050530182023-05-31T21:25:55.969-05:002023-05-31T21:25:55.969-05:00see: https://inequality.stanford.edu/sites/defaul...see: https://inequality.stanford.edu/sites/default/files/SOTU_2015_economic-mobility.pdf <br /><br />Very roughly, the odds of a child born in the lowest quintile moving to the highest are somewhat less than half that of random chance. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-23993141917326576792023-05-31T12:06:27.901-05:002023-05-31T12:06:27.901-05:00Most people pay into social security. If these fu...Most people pay into social security. If these funds (employee and employer contributions) had been invested in the private markets, people would have far more in some in retirement than what social security pays today. Social security gives government a huge incentive to extract large amounts of cash from the ecomony and direct them to lower productive government programs and projects.<br /><br />Tax consumption, give everyone a basic refund to cover "issues". Social. Welfare programs can address inequities but use time and performance to constrain dependency.<br /><br />We don't need a lottery solution to inequalities. If people think give ngn$1 millions to compensate for past racism, we will just find ourselves in 20 years wondering why we still have inequities because the funds would be use unproductively. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-42591640075084552702023-05-31T00:35:39.510-05:002023-05-31T00:35:39.510-05:00How long do most people stay in the lowest quintil...How long do most people stay in the lowest quintile? Bloefeldhttps://www.blogger.com/profile/08155640635840881753noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-34128109380851840442023-05-29T13:16:34.118-05:002023-05-29T13:16:34.118-05:00High marginal tax rates of government transfer pay...High marginal tax rates of government transfer payments and benefits are an incentive to the recipients to trade labor for unreported monetary income, services, and tangible goods that can be used, bartered, or sold. The ratio of leisure to work of government benefit recipients is probably lower than the public perceives when undisclosed work is included. As Abhijit Banerjee and Esther Duflo have noted, the world's poor have too much idle time. The recipient's reserve wage price is likely closer to the value of benefits and undisclosed income and initially unobtainable by the benefit recipient due to a lack of skills, experience, and physical or mental ability. Milton Rechthttps://www.blogger.com/profile/02488660316957122768noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-74726484660101883282023-05-29T05:43:34.267-05:002023-05-29T05:43:34.267-05:00I was born in 1960. My folks divorced w/5 children...I was born in 1960. My folks divorced w/5 children. My fathers support was not enough in 1966. I am not sure what extra my mom recieved. I have been around the working poor most of my life. There were a lot of people trying to game the system just to get ahead of where they were at the time = poor. Working under the table and at jobs that had cash tips. When Clinton put a sunset on welfare and housing subsidies for some, it forced my brother and his family OFF. They did it - because they were forced to and it worked sort-of. They were still poor and lazy.<br />Something like this could work. Lower the amount given by a lot. Just above or at the poverty line. If you chose to live on welfare and other benefits you will be "really" poor. At the same time give people 3 years to get off the dole, and let them keep all they earn at a job and recieve the welfare etc.. No penalties for a man in the house with income. No payment of rent for public housing. Code the EBT cards (which would be easy) so you can not buy booze soda etc.. Like it used to be with food stamps. Maybe bring back paper food stamps to increase the shame factor. I remember having to put items back on the shelf from my mom's cart at check-out.<br />After 3 years individuals can keep all the money they can earn and save in that time frame - THEN YOU ARE DONE! i THOUGHT THIS IN THE 90'S WHEN IT HAPPENED TO MY OLDER BROTHER.<br />Give people the incentive to work by making being on the dole worse than having a job. It "should" be punishing to be on welfare. And no welfare for single working age people with no kids, addicted or not.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-24120748800799978362023-05-28T20:21:41.186-05:002023-05-28T20:21:41.186-05:00"earned income tax credit, social security di..."earned income tax credit, social security disability "? They must have some kind of job to get EITC. Or alimony.wild chickenhttps://www.blogger.com/profile/17956296475651720602noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-13024272281363059362023-05-28T14:36:33.474-05:002023-05-28T14:36:33.474-05:00I think something like this could work:
A genero...I think something like this could work: <br /><br />A generous but refundable standard deduction. Let's say $20,000 per person (it is almost $14,000 today). But, if your income is less than $20,000 a year, then you have to "earn" the refundable part. For instance, the government could give you $20 for every hour worked, up to a maximum of 1000 hours a year. So for instance, if you earned $5,000 but worked 500 hours, then you would get a tax refund of 500*$20 = $10,000, and so your post-tax income would be $15,000. Gideon Magnushttps://www.blogger.com/profile/16663743757455222076noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-14949423287268349652023-05-28T13:59:58.517-05:002023-05-28T13:59:58.517-05:00One disincentive to encourage users to limit use o...One disincentive to encourage users to limit use of programs is to limit their choices. Why should SNAP pay for junk food, for example? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-71641426598376443442023-05-26T21:31:10.046-05:002023-05-26T21:31:10.046-05:00What is the support for a 100% marginal tax rate c...What is the support for a 100% marginal tax rate claim? Yes, there are some cliffs, but I do a lot of taxes for low-income people and don’t see that. E.g., EITC phases in and out gradually based on earned income and number of children. Ditto Child Tax Credit. Becoming ineligible for Medicaid makes you eligible for ACA Premium Tax Credit, another phased credit.<br />Gramm et al break out the “big four” programs that make up the $45,389 average transfer payment for the bottom quintile in their book: $18,944 (42%) Soc Sec OASI and Medicare; $9,634 (21%) Medicaid; $2,575 (6%) SSDI; $1,504 (3%) SNAP; the rest a mix of tax credits such as those above and other federal and state programs. <br />What are the incentives? I assume we can rule out work requirements for Soc Sec and Medicare. Medicaid? You can’t buy groceries with it and you only use it if you’re sick. I’ve never met anyone who didn’t work because they had Medicaid. And again, those who earn too much for Medicaid are eligible for the Premium Tax Credit. SSDI (and SSI) may be abused by some, but are we expecting a work requirement to trigger a wave of honesty? <br />That leaves SNAP. Gramm et al report that 36% of prime age adults in bottom quintile worked, compared with 85% and more in higher quintiles, which results in 17.2 avg hours worked per week vs 32 hours in the next quintile. The 15 hr difference would imply an avg SNAP subsidy of less than $2 per hour not worked, hardly enough to stay home and eat bonbons.<br />What to do?<br />People’s ability to subsist without working, or working full-time, as a result of safety net programs should also be weighed against the downward pressure on wages that work requirements create. While the budget constraint is presumably real (although one might be forgiven some doubt in light of the last two years), the policy debate is about redistribution. And that is indeed the moral cloud that even 'value-free' economics won’t clear up for us.<br /><br />Peter H<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-33713108036831108182023-05-26T17:07:21.858-05:002023-05-26T17:07:21.858-05:00Yes, it’s unfortunate that there are abusers takin...Yes, it’s unfortunate that there are abusers taking advantage of the systems.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-8775672028249753382023-05-26T13:27:17.534-05:002023-05-26T13:27:17.534-05:00"Since you have established yourselves as a p..."Since you have established yourselves as a people, have you not yet discovered the secret of forcing all the rich to make all the poor work? Are you still ignorant of the first principles of the police?"<br /><br />- Madness and Civilization, page 46 (Michel Foucault)<br /><br />Europe had tried forced work as a means to purge laziness, which was largely Biblically inspired to cure vagabonds, the poor, and the insane from their spiritual affliction that made them economically and socially useless: sloth. Guess what? It didn't work. In fact, it caused economic disruptions due to cheap labor some guilds had that others did not.<br /><br />While there is the myth of rugged individualism, the reality is that no one does it on their own, for if they were, they'd be a diety with no concern of death and scarcity. <br /><br />So, where are the real points of failure? Social capital, specifically linking capital, which are the people who have access to resources to help them move forward in life. Right now, the social safety net and social workers are the providers of social capital of last resort when people are destitute and desperate. This costs money, however. <br /><br />Incentives only make sense to rational economic agents. Everyone is an economist in the end: what's the better deal. Economists are largely ignorant about the nature of addiction on a social and neurological level. So we can talk about incentives, sure, but if we don't understand where people are at, discussing incentives or promoting them is like trying to smell a flower with your ear.Mykel G. Larsonhttps://www.blogger.com/profile/17128735421035292909noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-56838856202868787442023-05-26T10:57:08.074-05:002023-05-26T10:57:08.074-05:00Maybe Germany doesn’t qualify as a “Nordic Europea...Maybe Germany doesn’t qualify as a “Nordic European country”. But certainly, you don’t want to consider copy/paste from their current system: https://miwi-institut.de/archives/2565Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-47116632229007258172023-05-26T08:50:56.914-05:002023-05-26T08:50:56.914-05:00You should study the quantity of work done by thos...You should study the quantity of work done by those on welfare in the under-ground economy, I believe that most work now for unreported cash or other goods. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-53891384926547146922023-05-26T06:15:06.682-05:002023-05-26T06:15:06.682-05:00Thanks for the comprehensive analysis of the topic...Thanks for the comprehensive analysis of the topic. Bottom line is no matter how you change it, there is an incentive to not work. Since you can't eliminate this effect, the only answer is to reduce the value of benefits the shift the curve toward self reliance. This is a great time to do that. Cut by half, don't adjust for inflation, and reduce the integrate the benefits so you one program reduces the other for each beneficiary. That will work in reducing incentive to not workGarynoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-61335263157024486062023-05-25T22:30:53.948-05:002023-05-25T22:30:53.948-05:00I'll have to look that one up. Great story. In...I'll have to look that one up. Great story. Instead we consign the poor to incredibly expensive but slow public transportation. John Cochranenoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-46730268769460247892023-05-25T20:30:17.089-05:002023-05-25T20:30:17.089-05:00Whatever happened to the War on Poverty? Most of o...Whatever happened to the War on Poverty? Most of our social welfare programs aim to enable people to remain poor. Few of them aim to get people out of poverty. The same is true for homelessness: we have a homeless-industrial complex that spends billions helping people to remain homeless and nothing to help them rejoin mainstream society. <br /><br />I can think of at least one program that has helped people out of poverty: low-interest loans for buying or repairing a car, thus giving people the mobility they need to get and hold a job, find better housing, and access to lower-cost food and other consumer goods. The Federal Highway Administration gave a number of non-profit groups seed money to start such loan program in the late 2000s and all reported high rates of success: the people got jobs, got off of welfare programs, got better housing, etc. Maybe it wouldn't work for everyone, but programs that get people out of poverty make more sense than ones that allow them to remain poor.Antiplannerhttps://ti.org/antiplannernoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-23623010578381871192023-05-25T17:01:38.443-05:002023-05-25T17:01:38.443-05:00This was so well thought out I can’t find anything...This was so well thought out I can’t find anything to disagree with. There were a number of details I was ignorant about. Thanks John. 👍🏿Anonymousnoreply@blogger.com