I just read an interesting report about disposable income in America. The claim is that the head of a household of four making minimum wage has more disposable income than a family making $60,000 a year. How is this conclusion reached? Well, supposedly after all government benefits, including food stamps and medicaid, the individual making less money can receive significantly more benefits than the person making $60,000.
Although there are some flaws in the report (one example being a failure to include employer healthcare benefits) the report does illustrate some severe flaws in our tax code and welfare system. If it turns out that individuals can work less, while doing financially better than people who make more money, why work? While some argue the Keynesian multiplier will boost the economy, at some point common sense has to come into play.
The best way to boost the economy is to have all citizens working productive jobs. Adding an unnecessary moral hazard by paying people not to work, while punishing people who do, will invariably result in a worse economy. Sadly, anyone who advocates against the status quo is often accused of hurting the poor.