By Rebekah Rast — A hypothetical single mother of two lives in Virginia and brings home $20,000 a year after the government takes out Social Security and other state and federal deductions. However, because of her low income she is able to collect Earned Income Tax Credit (EITC), food stamps, Medicaid/SCHIP and Section 8 housing.
In another scenario a recent college graduate is fortunate enough to find a job and makes a starting salary of $39,900.
Who makes more money — the single mother or the recent college graduate?
If you guessed the single mom, you’re right. With her income less taxes plus subsidies, she brings home just about $40,000, according to economist Clifford Thies.
When applying Thies research that the relationship of earned income and after-tax income plus subsidies is basically flat from $0 to $40,000, it paints a grim picture for today’s working class. During the fourth quarter of 2011 median weekly earnings for full time wage and salary workers in the U.S. was $764 — a yearly salary equal to $39,728. This means those who make this median amount or less essentially have less spending power than those who make a much lower salary and live off the government’s myriad welfare programs.
How can this be?
It’s simple really, when you consider that there are about 70 means-tested welfare spending programs overlapping in the U.S. today. These means-tested programs have nothing to do with Social Security, or other entitlement programs. Though they phase out as income increases, they keep people dependent on the government — even when they don’t want to be. They also discourage workers from moving up the ranks or from finding a job at all.
You see, someone making less than $40,000 a year might be penalized for accepting a raise or agreeing to work more hours because it might result in a much smaller personal budget. When low-income Americans move up in the tax code, they don’t just face a higher tax bracket, they also see their government benefits begin to disappear. Unfortunately for many, it economically makes more sense to stay at their current level and turn down that raise or extra hours of work.
This government trap ensures that the poor in America stay poor.
“It is no surprise that these overlapping programs only perpetuate the growing welfare state in America,” says Bill Wilson, president of Americans for Limited Government (ALG). “This affects all low-income Americans and essentially keeps them in a government-run benefits prison.”
A policy brief by the Republican Study Committee states, since 1964, “Americans have spent $16 trillion on means-tested welfare. All levels of government may spend another $10 trillion over the next decade based on recent projections.”
The brief also highlights the fact that no agency has the responsibility to figure out how all these welfare programs interact with each other and how, despite their original purpose, they often deter people from working altogether.
Since $40,000 has been labeled as the breakaway point for many of these government welfare programs, what exactly does $40,000 a year look like? Breaking it down to an hourly rate, it’s a little less than $20 an hour.
That’s a far cry from today’s federal minimum wage requirement of $7.25 an hour. Of course this number also varies by state, but no state comes close to a $20-an-hour requirement. So what does this mean to America’s youth?
Year after year Democrats petition for the minimum wage requirement to go up. This hurts young workers as businesses decide paying the minimum wage requirement is too burdensome and so they don’t hire young, inexperienced workers anymore. This is where the government steps in and young people begin falling into the government’s welfare trap — often times they have no other choice.
The cries from the Left asserting America needs to do more for its youth and low-income citizens by strengthening current welfare programs, establishing new ones and even raising minimum wage laws, is only abetting the problem.
What would be beneficial for all Americans is the reduction and repeal of many of these programs. It should never be the case that someone could potentially be made financially worse off for earning more money.
And when you have a system where people have to ask themselves if working more hours or accepting a raise will result in less money in their pocket then you know the system is the problem.
A low-income earner, a recent college graduate or an 18-year-old working his first job should never be better off living off the government than by their own abilities.
Rebekah Rast is a contributing editor to Americans for Limited Government (ALG) and NetRightDaily.com. You can follow her on twitter at @RebekahRast.
