“Welfare Is What’s Eating the Budget”

“Welfare Is What’s Eating the Budget,” by Phil Gramm and Jodey Arrington, Wall Street Journal (WSJ has a pay wall but I believe this link goes to a free version of the article on the AEI website)

“Since funding for the War on Poverty ramped up in 1967, welfare payments received by the average work-age household in the bottom quintile of income recipients has risen from $7,352 in inflation-adjusted 2022 dollars to $64,700 in 2022, the last year with available household income data. This 780% increase was 9.2 times the rise in income earned by the average American household. … After counting all transfer payments as income to the recipients and taxes as income lost by taxpayers, and adjusting for household size, the average households in the bottom, second and middle quintiles all have roughly the same incomes—despite dramatic differences in work effort. With the explosion of means-tested transfer payments, the portion of prime work-age persons in the bottom quintile who actually work has fallen to 36% from 68%. In the second quintile, households with a work-age adult who actually works have declined to 85% from 90%. While work effort fell in the bottom two quintiles, the percentage of middle-income households with a prime work-age person who works has risen to 92% from 86%. … Demand for reform would be even stronger if the public understood how generous social-welfare benefits are. In reporting household income, the Census Bureau doesn’t count 88% of transfer payments made to households that are defined as being poor. The census doesn’t count refundable tax credits (for which the beneficiary receives a check from the Treasury), food-stamp debit cards, free medical care through Medicaid, or benefits from about 100 other federal transfer payments as income to welfare recipients. When those benefits are counted as income, 80% of those who are today counted as being poor are no longer poor, and almost half have incomes equivalent to American middle-income earners.” (Emphasis added)

LTC Comment, Stephen A. Moses, President, Center for Long-Term Care Reform:

Don’t miss this extraordinary article. When the bottom three income quintiles have the same income after counting welfare benefits, but the middle quintile works and pays taxes while the bottom quintile mostly receives welfare, is it any wonder the two bottom quintiles’ work ethic is disappearing?