Welfare Reform is Needed, Not Punitive Economic Incentives That Neglect Dysfunction
Perpetual dependence on social welfare programs is a personal hardship and tragedy for those who survive in a modern world on the generosity of taxpayers. Not only does their reliance on government handouts and lack of participation in the economy tax the economy, the public welfare system sustains the poor in a state of near-destitution. Instead of capitalizing on their own potential and reaping the personal freedom that comes with financial security, those who rely on public welfare are imprisoned in a perpetual state of personal stagnation. Whether working or not, any need to make up a prolonged financial deficit with public or private support is unsustainable. The existence of social welfare programs and charities do not, however, create the need for these things. Widespread and prolonged need is a symptom of economic dysfunction.
The Trump Administration has made social welfare reform a top priority. Unfortunately, Donald Trump and his lieutenants, most of whom have never personally experienced anything like the inescapable burden of poverty, have embraced classic Republican theories on poverty. Instead of embracing lessons learned from past reform efforts, including the 1994 reform effort which had the unintended consequence of solidfying the poverty of the poorest and most vulnerable of Americans, retaining effective solutions from the past, such as transportation assistance, and deriving new solutions by actually thinking about the real problem, they have transformed the theme of the 1990’s anti-welfare campaign into a policy. “Get a job” has become the basis for work requirement proposals on a number of social welfare programs. With the unemployment rate at 3.9% and a majority of able-bodied adult recipients of programs like SNAP already working, getting a job is not the problem nor the solution.
What the debates over income inequality and minimum wage reveal is that the problem is a lack of sufficient income and a lack of sufficient pay. Work requirements cannot fix these issues. An improving economy can help, yet there is no guarantee the poor will see a great enough benefit to overcome their dependence on others. Although the Right seems to have made a collective decision to turn a blind eye to the obvious problem that needs solved, their superficial approach to welfare reform has more to do with a collective unwillingness to admit they have no interest in solving poverty. Conservatives may like to promote themselves as the moral Right, but their libertarian-leaning economic theory is purely social Darwinism, complete with the cruelty of survival of the fittest. Those who have pushed oversimplified, punitive social welfare reform do not truly want to solve poverty. Alternatively, they have succumbed to a subsidy and scarcity mentality.
Under the guise of a Trump Administration, Congressional Republican-engineered budget constraint, HUD plans to raise the rent of four million low-income households by an average of twenty percent. That is an increase of six times the average growth of wages. According to Republican theory, the proposal creates an incentive for people to move out of public housing and/or increase their incomes, but it will likely mean homelessness for those who simply cannot afford the increase. At the very least, it will divert a larger share of what little income HUD beneficiaries have to spend on other needs. What it will not do is encourage employers to pay their employees more or hire more workers. For those workers with multiple jobs, which helps deprive others of the opportunity to earn a living, and those who work significantly more than 40 hours a week, their struggle will grow even more hopeless. In other words, it is simply a plan that saves the government a relatively small sum of money while weakening the social welfare program.
The simple true is that generations of families have become prisoners to public housing projects. Not only does concentrated poverty cultivate a culture of degenerative dependency and financial dysfunction, the lack of community wealth and influx of new monies deprives the poor of potential financial opportunities. Communities, after all, have a limited carrying capacity when it comes to supporting an impoverish population and a healthy economy. The problem with the Republican approach is that it relies on a perverse, and thoroughly incorrect, understanding of economic incentives. Personal incentives aimed at the financially disenfranchised will do nothing to change a dysfunctional economic environment. Offering incentives to someone capable of finding a job is logical, but only sound if that person is not dysfunctional. Dysfunctional people do not respond to incentives as a functional person would.
The key to addressing poverty is understanding dysfunction. All people suffer from dysfunctions that prevent them from seizing opportunities. Dysfunctional people can be given opportunities and everything needed to succeed, but their dysfunctions will always stop them from pursuing those opportunities. Where the Middle Class and wealthy have sufficient incomes to either forgo opportunities they want to pursue or avoid the consequences of their dysfunctions, the dysfunctional nature of the poor prevents them from achieving financial success and a sustainable lifestyle. In order to help address poverty, as well as help others pursue their goals in life, these dysfunctions must be identified and addressed. People will tend to make decisions that they perceive are in their best interests. When the poor make decisions, they are not simply selecting a rational course of action.
They are making decisions within a limited number of choices due to the constraints of their incomes. If they enjoy a consistent, sustainable income capable of paying for all of their basic necessities, choices mean forging necessities for other necessities and wants. When they face disruptions in their incomes or unrealized expenses, such as emergency medical bills, car repairs, or spikes in utility bills, their limited budgets force them to intentionally neglect needs. Face with a persistent shortage of income and other resources, the poor are forced to make decisions that favor low-cost, short-term options. This often means taking on higher long-term costs.
In term of debt, they take on high-interest, long-term debt, which means they pay a lot more than what their purchases are worth. Payday loans and credit cards are two examples where the poor borrow money to make up for their limited incomes, yet create long-term debt they cannot easily pay off. For this reason, they tend to find themselves trapped in cycles of debt.
If they do not embrace debt or do not have access to credit, they find themselves in cycles of neglect. Eating inexpensive, nutrient-deficit junk foods, which leave people feeling full, is a another way in which the poor exchange short-term food costs for long-term health costs. Ignoring a broken sink or leaky roof is also a way to avoid spending money, yet the inconvenience and structural damage is far more costly in the long-term. Although all people tend to make short-term decisions, the limited resources and opportunities of the poor prevent them from addressing the long-term costs they are accruing. Because their incomes rarely grow, and actually tend to shrink in relative terms, even minor short-term costs can become crippling long-term costs. Where the poor are trying balance their constrained budget by forgoing expenses, they are actually taking on higher long-term costs that they cannot afford to repay.
Another way in which the poor avoid expenses in the short-term and cost themselves in the long-term is by risk-taking. It is necessary to take measured risks in order to succeed. It is tempting to conclude the poor are risk averse and avoid risk-taking whenever they do not seize upon an opportunity to improve their situation, i.e. apply for a job, ask for a raise, or open a small business. Considering the poorest of households “invest” nearly 10% of their incomes into the lottery, the poor consume high-cost, deadly tobacco as a cheap luxury, and the poor often go without healthcare, it is clear the poor are actually making high-risk, low-reward choices. They are not risk averse; the value of risk-taking for the poor is just distorted. Investing a hundred dollars into a stock, for example, is far more risky to the poor than the middle class, so they invest one dollar into the lottery, which is less likely to deliver a profit.
Furthermore, people are not just economic creatures. Those who act solely on their economic interest have a mental defect, i.e. they are sociopathic. As such, people will tend to make decisions that they perceive are in their best economic, emotional, and social interests. Like everyone else, the poor do not just make rational economic choices. Their decisions are also governed by their emotional responses and the responses of their social circles. Because the poor have failed to achieve their economic interests, they tend to compensate by pursuing their emotional and social interests. In other words, they learn to be motivated by social and emotional opportunities while, economic opportunities become demotivational.
All people avoid discomfort. Most learn to embrace lesser discomforts to avoid greater discomforts. Because the poor have experienced greater failure when it comes to financial decisions and they are unable to comfortably participate in high-cost activities, the poor learn to experience opportunities, which could help them increase their incomes or network with people who could offer them financial opportunities, as uncomfortable situations to be avoided. Poor, middle class, and wealthy individuals find things like paperwork and job interviews uncomfortable, or even frightening, but the avoidance of these things is particularly problematic for the poor.
Among the numerous dysfunctions that the impoverished share, their demotivated nature is probably the most detrimental. Because the poor work to simply survive, their attempts to improve their lives are generally met with a lack of reward while they tend to face continually worsening situations, thus they become discouraged, instead of encouraged, when opportunities arise. Between a combination of broken aspirations and the avoidance of discomfort, i.e. failure is the most likely prospect, the poor learn to feel discouraged by opportunity. It is, therefore, helpful to build viable financial opportunities that offer strong social and emotional benefits.
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