Welfare and Poverty: Following the Money

Welfare and Poverty: Following the Money March 6, 2008

One of the central principles of Catholic Social Thought is the preferential option for the poor, that is, the idea that special attention ought to be paid to the condition of the poorest and most vulnerable members of society. For many, the preferential option for the poor justifies the creation and expansion by the government of so-called welfare programs, in which the government spends tax dollars in order to alleviate poverty. Others object to at least some of these programs, arguing that they are ineffective, create perverse incentives, or crowd out alternative solutions provided by private groups and voluntary associations. I don’t propose to try and settle these disputes here. But it is worth noting just how much (or how little) of spending on these welfare programs actually goes to the poorest members of society.

For example, in 2006 the Federal government spent around $740 billion on programs designed to increase income mobility. Yet of that $740 billion, only roughly a quarter was spent on people in the bottom 40% of the income distribution:

And note, just because a dollar is listed as going to the bottom 40% doesn’t mean that it actually ever reaches a poor person. Administrative costs will take a sizable chunk out of even a highly efficient program, and many government programs are not very efficient. (I also would not be surprised if a sizable percentage of the money listed as going to the bottom 40% actually went to college students and others who, while statistically poor, had good long term prospects).

Nor is government spending on income mobility unique in this regard. Farm subsidies tend to go to the rich, even though they are sold as helping small, struggling family farms. The primary recipients of affirmative action are the already relatively well off members of the protected groups. The bulk of World Bank loans go to middle income countries, not the poorest countries of the poor.None of this should be terribly surprising. Unlike private action and voluntary associations, government programs are subject to issues of political economy and public choice, which will tend to skew benefits towards those with political power. This doesn’t mean, of course, that government should never get involved in such programs, but it is something to think about.

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