Vitter reform bill helpful to reduce poverty, increase growth

Last month, Sen. David Vitter, along with several other senators, joined House colleagues in introducing their version of the Welfare Reform Act of 2011 that promises to right-size and make appropriate taxpayer efforts to assist those truly down on their luck and in need of social welfare  assistance.

Despite the wailing and gnashing of teeth by the uninformed who 15 years ago claimed work and time requirements placed on recipients of Temporary Assistance to Needy Families would cause widespread poverty and misery, the opposite happened as rolls of those using the program declined, in some cases dramatically. Further, states with more restrictive requirements saw the biggest decline, while economic fluctuations played a minor role. In other words, making this cash benefit program available only to the truly needy, structured in a way that would encourage self-sufficiency rather than dependency, worked.

But the problem is, that was just one of over six dozen federal programs that provide some type of anti-poverty assistance and thereby solved only a small part of the difficulty in ensuring only the deserving poor receive such benefits as today the typical recipient of anti-poverty funds receives an average of $19,000 per year costing taxpayers $871 billion in 2010.

This is the equivalent of a working person making about two dollars an hour more than the minimum wage (and these benefits are tax free), with no requirement to work or, in many cases, to show any desert except for a small net household worth.

Many of these individuals can’t work due to disability or are children or are responsible for them. But some (I know of them personally but will use more general and theoretical data here) willingly trade leisure for work, bolstered by these assistance programs. For example, in Louisiana, all a single individual has to do to qualify as a single individual for the Supplemental Nutrition Assistance Program (once known as “food stamps” that involved actual coupons, but run through debit cards now) at $200 a month is make less than $1,180 monthly gross income – the equivalent of working 38 hours a week at minimum wage. And this is just one program, with all them getting leveraged by having more household members.

Thus, the situation has been perpetuated where taxpayers subsidize lifestyle choices of some, hence the legislation that would make less attractive the willingness to trade off. As of now, taking just SNAP as an example, one could live quite decently off the amount of money provided and the kinds of food allowed as part of it. The bill would restrict those choices to perhaps less appetizing but healthy (if not healthier; the poor in America tend to have the worst eating habits and higher obesity rates, despite lower incomes) fare and also institute work requirements (training, employment seeking, or actual employment) that currently do not exist.

There’s nothing radical about this; indeed, it is timid compared to some places. In Britain, the government has proposed legislation that would limit welfare handouts to no more than the average weekly wages for working households. Canada drastically slashed these kind of expenditures even before the initial U.S. effort, as this bill on a small scale wishes to do, with no real ill effects. Both of the countries have much more generous histories of provision of these kinds of benefits. In all cases, the able-bodied are encouraged to be producers rather than consumers.

Naturally, Vitter and his colleagues will catch plenty of heat from the left on this proposal, but understand that such complaints are meritless on both theoretical and data-driven bases but instead are based on political considerations. Like in Canada in the early 1990s, only a major overhaul of spending practices will ensure continued economic health and vitality for the public, and a great place to start is found with Vitter’s legislation.