The Cato Institute’s Ryan Bourne has a great new study (and accompanying video) out about social welfare, government spending, and regulatory reform.
In “Government and the Cost of Living: Income-Based vs. Cost-Based Approaches to Alleviating Poverty,” Bourne highlights the distinction between most current social welfare programs, which provide monetary benefits and unpriced or subsidized services to low income households—the “income-based” approach—and reforms that lower the cost of living and allow a modest household budget to stretch farther—the “cost-based” approach.
Bourne points out that there are many current government programs that raise the price of vital household necessities, increasing the burden on low-income households:
In markets where low-income households spend significant amounts — on housing, childcare, food, transport, clothing, and services regulated through occupational licensing — interventions designed to achieve other objectives restrict supply and in turn raise prices. Since these goods are relative necessities, these interventions impose disproportionate burdens on the poor. They are left with less disposable income, heightening calls for further taxpayer-funded redistribution or government interventions to counteract the effects of the policy.
Simply repealing or reforming those programs with unintended negative impacts would go a long way toward helping the less-well-off, without perverting incentives or increasing deficit spending. The Competitive Enterprise Institute made some similar recommendations a couple of years ago in two studies by my colleagues Iain Murray and Ryan Young, “The Rising Tide” and “People, Not Ratios.” In the first of those papers, Iain and Ryan write:
…many inequality activists have been asking and answering the wrong questions in their quest to help the poor. Instead of analyzing the mathematical ratios between high and low incomes, poor people are better served by higher living standards. This paper proposes a policy agenda to raise living standards for poor people around the world.
Removing obstacles to entrepreneurship is central to achieving certain goals to help the poor. These include affordable energy, access to capital for entrepreneurs, occupational licensing reform, greater government transparency, and institutional-level changes to the regulatory process. Reforms to achieve these goals have the added bonus of helping to reduce opportunities for governmental corruption.
There’s a great deal of debate about whether current government program are really helping the poor or not—before spending more taxpayer money on programs that may or may not be working, surely we can at least get rid of the government programs that are actively making things worse.