Welfare Without Dignity Doesn’t Work

by Corey Burres | Sep 22, 2020

Welfare Without Dignity Doesn’t Work

By Corey Burres

I drove through my neighborhood and saw dozens of tents lining the wooded area near my home. I realized there were families and single mothers living in these tents. My heart broke. How did we get here? When did we start to accept this for those in our communities?

I know from our work at Georgia Center for Opportunity (GCO) there are local and governmental services available. I know there are many community groups and philanthropic organizations working to address the basic needs of shelter, food, and health. But I question if these systems address the issue of dignity.

Dignity is a word we throw around a lot at GCO. It’s a core value for our team, but it is also a core component of how we choose to view others. It is a driver, yes, but more importantly, it is a goal. We can address needs and make some headway, but until we restore dignity to individuals we will continue to fight an endless battle. Government safety-net programs are not designed to restore dignity. That is a problem.

Without finding self-worth and dignity in what we do, we continue to seek “just enough.” If we truly want those around us to thrive, we must create systems that seek to do more than simply appease a need. We must create systems that see the value of peoples’ humanity and desire for them to move into a vibrant and thriving future.

The fact of the matter is that systems like Medicaid, food stamps, and other programs are not designed to move people into a better life. Instead, they are a stop-gap that simply meets an immediate or temporary need.

If we truly want those around us to thrive, we must create systems that seek to do more than simply appease a need. We must create systems that see the value of peoples’ humanity and desire for them to move into a vibrant and thriving future.

In the case of temporary unemployment or hard times, this is sufficient and works as intended. It’s why many people tout the effectiveness of these programs. They do work—for some.

However, in the case of intergenerational or long-term poverty, the result is marginalized groups systemically stuck—trapped in dependency and without hope.

And that is what I see when I pass these tent cities. These are our neighbors who have surrendered to a way of life, one that we desperately hope our own loved ones will never experience. The tragedy is that our political leaders have done just enough to appease them.

True compassion says we should hope for them to move off government assistance programs and feel the sense of dignity and belonging we want for everyone.

Over the next month, we are going to highlight changes to assistance programs that will remove the traps in our safety-net systems. We will highlight local support networks that view the individual through the lens of the dignity that they deserve. And we will bring together the business and community leaders leading the charge at Breakthrough.

Will you join us?

Welfare Cliffs Exist—Concludes Team of Economists

by Erik Randolph | Sep 17, 2020

Welfare Cliffs Exist—Concludes Team of Economists

By Erik Randolph

Since 2016, the Georgia Center for Opportunity (GCO) has demonstrated the existence of welfare cliffs. Now a team of five economists has come to the same conclusion.

Welfare cliffs are an unfortunate feature of the American welfare system. They occur when a family’s breadwinner, or an individual, discovers that his or her family will become worse off economically by earning more money. It sounds paradoxical, but it happens whenever the loss in welfare benefits exceeds the additional take-home pay.

Exactly when the cliffs occur, and how bad they are, depends on many factors, including the characteristics of the family, how much they earn, and where they live. And because of the haphazard way the welfare system is constructed, it turns out that there isn’t a single cliff but multiple cliffs that a family can encounter over the range of potential earnings.

For more information on GCO’s work on the cliffs, check out this website that shows cliffs in eight states by common family types.

New Study

Authored by economists at the Federal Reserve Bank of Atlanta, Boston University, and the University of California, Berkeley, a newly published study takes a sophisticated approach to identify disincentives in the U.S. tax and welfare structure. Published as a working paper by the National Bureau of Economic Research (NBER), the authors fed the results of the most recent Survey of Consumer Finances through a fiscal analyzer.

The Economic Team

David Altig, Federal Reserve Bank of Atlanta

Alan J. Auerbach, University of California, Berkeley and NBER

Laurence J. Kotlikoff, Boston University and NBER

Elias Ilin, Federal Reserve Bank of Atlanta and Boston University

Victor Ye, Boston University

The Survey of Consumer Finances is a project of the Board of Governors of the Federal Reserve System. It is the most comprehensive survey examining the personal finances of American individuals and families. Thus, the input data for their study represent a statistical picture of how families are faring economically.

In other words, the financial situations of a representative cross-section of families in America was fed through a fiscal analyzer. This particular fiscal analyzer was based on a personal financial planning tool developed by the software company of Laurence Kotlikoff, one of the study’s authors.

The fiscal analyzer estimates the likely future financial path that individuals or families will take over their remaining lifetime, along with the future taxes and benefits they will pay or receive. The study uses standard mortality rates to predict lifespans and gives a unique calculation on the degree and magnitude that incentives or disincentives exist over that likely path.

The study defined the future fiscal burdens, consisting as taxes and benefits, as marginal tax rates. If a person’s remaining marginal tax rate increases, then so does the tax burden. The greater the magnitude of the marginal tax rate, the greater the disincentive.

Study Results

Given our own work, the conclusion of the authors was not surprising. To quote from their study:

“Our findings are striking. One in four low-wage workers face marginal net tax rates above 70 percent, effectively locking them into poverty.”

“… one in four bottom-quintile households, regardless of age, face marginal tax rates above 65 percent. Thus, a major share of poor households are effectively locked into poverty by America’s fiscal system.”

The authors were careful to point out that this study looks at the structure of America’s fiscal system, meaning these disincentives are hardwired into the laws and rules of the system. This corroborates exactly with our research. The very rules themselves are what create the disincentives and the cliffs. The silver lining here is that rules can be changed.

This study did not attempt to measure how people react to the disincentives. Some might bite the bullet, take the hit, and still advance their earnings anyway. On the other hand, others may take a defeatist tact, backing off from earning more to draw down more government assistance. This is a ripe area for future research, to determine the proportion of people who forge ahead anyway versus those who give up and retreat.

In the meantime, we shouldn’t wait for future research on how many people accept defeat and remain poor. It makes more sense to fix the rules now so the question becomes moot.

Erik Randolph is Director of Research at the Georgia Center for Opportunity. This blog reflects his opinion and not necessarily that of the Georgia Center for Opportunity.

DISINCENTIVES FOR WORK AND MARRIAGE IN GEORGIA’S WELFARE SYSTEM

Based on the most recent 2015 data, this report provides an in-depth look at the welfare cliffs across the state of Georgia. A computer model was created to demonstrate how welfare programs, alone or in combination with other programs, create multiple welfare cliffs for recipients that punish work. In addition to covering a dozen programs – more than any previous model – the tool used to produce the following report allows users to see how the welfare cliff affects individuals and families with very specific characteristics, including the age and sex of the parent, number of children, age of children, income, and other variables. Welfare reform conversations often lack a complete understanding of just how means-tested programs actually inflict harm on some of the neediest within our state’s communities.

DOWNLOAD WHITE PAPER

DOWNLOAD EXECUTIVE SUMMARY

VISIT BENEFITSCLIFFS.org

Congress should end marriage penalties in the tax code and welfare system

by Georgia Center for Opportunity | Jul 11, 2018

By Erik Randolph, GCO Contributing Scholar

Last December, President Trump signed into law changes to the federal income tax. One of the supposed achievements was the elimination of the marriage penalty. This is not entirely correct.

I recently analyzed marriage penalties for the Georgia Center for Opportunity (GCO). Summarized in a policy briefing, my analysis found that Congress only succeeded in eliminating the marriage penalty if a couple does not have children. If they do have children, the marriage penalty is alive and well.

Certainly, it is a positive change that two individuals without children can now marry without having a tax shock when they file their federal income taxes. This is a fairer system ensuring they do not have a higher tax bill just because they got married. Congress can be proud of this achievement.

However, it’s unfortunate that the tax code continues to punish couples with children.

To make matters worse, the poor face an additional marriage penalty if they receive food stamps, and it doesn’t matter if they have kids or not.

The recent analysis I conducted on the food stamp marriage penalty relied on computations of 256 wage combinations of what two individuals might earn. These combinations ranged from earning nothing up to earning the national median wage. For every wage combination considered, the food stamp program discourages marriage.

The good news is that Congress has an opportunity right now to fix the marriage penalty in the food stamp program. The U.S. Senate and House of Representatives have two versions of the Farm Bill to consider. The final version that will come out of the conference committee could eliminate the marriage penalty in the food stamp program.

There are two approaches Congress can take. The first is to get into the details and redesign the food stamp factors that cause the marriage penalty. This approach is lengthier, and given the urgency of passing the Farm Bill, it may be less appealing.

The simpler approach would be to give the states the authority, under the direction of the U.S. Department of Agriculture, to make adjustments to the food stamp program to eliminate the marriage penalty. Although the food stamp program is a federal program, the states administer the program and pay for half of the administrative costs.

Prior research I did for GCO demonstrates that the more welfare programs an individual or family receives, the greater the likelihood for marriage penalties and the greater the severity of those penalties. Therefore, it makes sense to allow states that administer most welfare programs to address the marriage penalties in a coordinated manner.

Once they’ve fixed the marriage penalty in the food stamp program, Congress should revisit the tax code to fix the lingering marriage penalty there. It is unfair for single individuals with children who want to marry to face tax penalties if they do so. Equally unfair is that married couples with children end up paying more in federal income taxes than they would if they were unmarried and living together.

Combined, the penalties provide a strong and perverse disincentive to couples with children to remain unmarried. It is public policy directly opposed to the behaviors we know are most likely to lift people out of poverty and it needs to end. Congress has a chance to start addressing the problem in the Farm Bill, and it’s an opportunity they shouldn’t miss.

For more on GCO’s recent research on the marriage penalty, check out “How the Food Stamp Program and the U.S. Tax Code Continue to Penalize Marriage.”

Randy Hicks Addresses Compassionate, Commonsense Welfare Reform on FoxNews.com

by Georgia Center for Opportunity | May 8, 2018

President Trump recently signed an order aiming to streamline welfare in the U.S., which is leading lawmakers to take a deeper look at the many programs that make up the complex system.

It’s a positive first step, as the current structure reinforces dependency and doesn’t reward hard work, nor does it allow recipients to strive for self-sufficiency. For example, the average welfare recipient is a single mom with two children, but with the current design, she will lose benefits with marriage and/or a pay raise.

Georgia Center for Opportunity has worked over the last couple of years with leading welfare expert, Erik Randolph, Senior Fellow with both the Illinois Policy Institute and Pennsylvania’s Commonwealth Foundation, to dissect Georgia’s failing assistance programs. The data is shocking and disappointing, proving a system that should be lending a helping hand to recipients is actually hurting them instead.

Randy Hicks, President and CEO of Georgia Center for Opportunity, recently wrote on the importance of taking a compassionate and commonsense approach to welfare reform.

“We believe there is a better approach and it entails stabilizing the safety net for those who truly need it, adopting a “work first” approach for those who are able and creating incentives to form marriages and households,” Hicks wrote on FoxNews.com.

Read Randy’s full op-ed here, click here.