In a recent thread I argued that worldwide, small governments and economic freedom correlate with low rates of poverty. Several people agreed that overbearing government harms the poor in the third world, but that in first world countries it’s possible to have a government that does positive things for the poor. The purpose of this thread is to debate that idea, as it applies only in the USA and other wealthy countries.
In the first post of that thread, I linked to graphs and studies showing that government spending (as a share of GDP) and regulation have grown quite a bit in the past few decades. At the same time, economic inequality in the USA has widened. Correlation does not imply causation, of course, but if we can find many examples of government programs that either harm the poor directly, or assist the upper income tiers without doing much for the poor, that would strongly suggest that the government itself is a cause of widening inequality. As I see it, the great majority of government programs meet that description exactly. Here’s what I see happening in many areas.
Health Care. By far the largest organization providing health care to the poor is Medicaid, which insures about 50 million people. After the PPACA goes into full effect, it will insure even more. But what good does Medicaid do for the poor? In this post I linked to a couple studies—real studies from serious sources—showing that at least in some instances, results for those on Medicaid are not only worse than results for those with private insurance, but also worse than the uninsured.
In 2007 a boy named Deamonte Driver in Maryland died from a tooth infection that could have easily been prevented if he’d gotten treatment. The Washington Post leaped on the case as an example of why we should provide government health insurance for the poor. But the Post was wrong: Driver’s mother had insurance through Medicaid, but Medicaid didn’t provide enough money to pay for the necessary dental work. While plenty of people with good intentions want the government to provide health insurance for the poor, I hear remarkably little about actually providing good health insurance for the poor. The available evidence suggests that the government is not doing so.
Retirement. Taxes associated with Social security are regressive. The poor pay a higher rate than the rich. Meanwhile, wealthier people on average live longer than poor people, so they can collect Social Security for much longer. The same is true for the lavish pensions that many government employees get.
K-12 Education. The fact that the public education system is hurting poor children is so widely known and accepted on all parts of the political spectrum that stating it again seems superfluous. We can look at any statistic: dropout rates, college attendance rates, test scores, and so forth. The results always show that poor, inner-city schools trail far behind others. Yet the same people who claim to be supporting the poor will always resist any effort to reform public schools, as they did during the recent strike by Chicago teachers.
Higher education. Another area where we routinely hear demands for more government spending is higher education. More money for federal grants and loans to students, for spending on state university systems, and for various other programs that provide money to colleges and universities.
Two groups of people benefit from this money: college students, and college professors along with the ever-growing bureaucracy on campus. Both groups skew heavily towards the upper income brackets. Rich kids are much more likely to attend college than poor kids, and professors as a group are upper-middle class.
A targeted program of financial assistance available to poor students only might actually help the poor. As it is, by picking up a large part of the tab for almost everyone, the government encourages colleges and universities to raise tuition and fees, thereby pushing some schools out of reach for poor students.
Labor law. It is often claimed that labor laws are much more generous to workers in other first-world countries than in the United States. For instance, there’s the famous 35-hour workweek in France. I’ve rarely heard anyone ask whether there’s any evidence that a shorter work week is good for the poor. Back when I washed dishes and waited tables for a living, my coworkers and I were much more liable to complain about getting too little work than too much. In my experience, poor people want to work a lot. That’s how they become less poor. Laws that restrict the hours worked per week prevent them from earning as much as they could.
Worker protections are another issue where I’ve often heard that Europe outdoes the USA. In the USA, employers can fire an employee at almost any time for almost any reason. In many European countries, the government makes it almost impossible to fire an employee or even impose any punishment on one. The end result, as even liberal publications can tell, is that employers are very reluctant to hire an employee, since hiring a person might mean getting stuck with him or her for decades. This is very bad for the poor, needless to say, and countries such as Italy have dreadful labor markets as a result.
Miscellaneous Other. Generally speaking, whenever government regulation increases the cost of something or imposes a new cost where there wasn’t one before, it’s hardest for the poor to pay it and easiest for the rich. When the government requires corn ethanol is gasoline and thereby drives up gas prices, the poor suffer more than the rich. Demands for costly safety requirements in cars hurt the poor more than the rich. Further, many government programs and interventions target things that the poor are more likely to use, such as cigarettes and soft drinks. State lotteries exploit the poor. The list goes on and on.
Other posters have told me in the past that many of these things were not done with the intention of targeting the poor. That may be true, but nonetheless if all of these government programs and actions cause financial harm to the poor, it’s useless to go on insisting that government should be automatically associated with helping the poor and that anyone who wants a smaller government must hate the poor.