Nathan Newman wrote:
>But out of a $2 trillion federal
>budget, and about another trillion dollars at the state and local level,
the
>money goes overwhelmingly to poor and working class folks.
-Overwhelmingly? Could you be a bit more specific? The U.S. welfare -state, such as it is, does very little to reduce poverty - i.e., -compared to other countries, it barely adjusts market income -distributions.
Income support is pretty marginal in the US; at best it moves people from starvation to marginal poverty. There is no question that inequality is higher in the US than European countries, but that is a separate issue from where the smaller government spending actually goes in the US. A large amount of government spending on education and medical care, which does not effect poverty and income inequality much in the short-term, can have long-term effects and does matter for poor people in the US. A poor family with two kids in public schools and on Medicaid receives well over $10,000 in benefits in addition to any income support received. The links to studies you made in your other post is all about cash benefits; it specifically notes that most welfare spending in the US is in the form of "noncash benefits." In assessing inequality and income-based poverty, ignoring noncash benefits is reasonable, since you can't eat education or health care in the short-term, but if we are discussing what the federal budget is spent on, you have to pay attention to non-cash benefits, since that's most of what the budget goes to in the United States outside of Social Security.
>Thanks to the mortgage interest tax deduction, the
>bulk of federal housing subsidies go to upper income households -
>over 75% of benefits go to the top two income quintiles
><http://www.nlihc.org/pubs/cpgraph5.htm>.
Again, examining tax expenditures and deductions is important in discussing the fairness of the tax code and who pays for the welfare state, but it again says little about the allocation of revenue actually collected. There is no question that housing deductions make the tax code less progressive, but the fact remains that the rich getting the housing deduction still in the end pay more of their income for taxes than the poor receiving meager housing subsidies. That is still a net transfer of income to housing for the poor, even if it is less than without the housing deduction. (The real problem is that the housing deduction is a transfer of income from middle class renters, who have to pay more taxes, to make up for the lower taxes of middle class home owners).
One area where I disagree with Max is that I think the degree of tax progressivity is crucial to evaluation the overall value of government spending, since the goal is to have taxes of the wealthy paying for the benefits for those with less income. Most spending in Europe is high taxes on the middle class paying for benefits for that same middle class, with little income transfer. Because of that high tax system, it is easier to jstify a bit more spending on the poor, but I have not seen good studies on whether than increased spending comes more from the middle class or from the rich. Most studies like the ones you cite completely ignore the issue of who is paying for the spending, which seems like the crucial issue in assessing the welfare state balance sheets.
-- Nathan Newman