WHAT'S FAIR?
I've been thinking about how our President continually describes people in the US as though they are treated unfairly and they don't receive everything they deserve. Mr. Obama often suggests that "those people should pay their fair share", and I guess the assumption by folks that listen and believe his comments must believe that the "fair share" will somehow be spent on funding services for others, perhaps even themselves.
As readers know, I am absolutely fine with wealthy people paying taxes, I just want someone to tell me where the limits of "fair share" are and then make a constitutional amendment to mandate that taxation cannot ever exceed "fair share". What I'm getting at is that Obama's "fair share" today may be 50% of earned income or 60%, but we all know that the amount will go up in time as entitlement programs and benefit services skyrocket and the need for revenue increases dramatically in the future. In other words, without some cap, there will always be someone that thinks those rich folks don't contribute enough to the poor people.
WHAT'S IT LIKE?
I often wonder about the lives of the needy in our country as I tend to pay attention to the amount of services that are available to low income earners because my health insurance business often allows me to speak with desperate people that have no income that need medical care. In my practice I am able to guide them to services and programs in our state that are available at low or no cost to provide medical care. As I educate myself on these topics, I often find other services that are made available to our poor and down on their luck citizens.
WHAT CAN YOU GET FOR BEING POOR?
A recent article I found summarizes one program that I've known about for some time called the Lifeline program where people below the poverty level can obtain cell phones or phone lines. The "grant" provided in this plan will cover about 250 cell phone minutes per month for free to the qualified user. I found this program because I saw a commercial on television that was advertising to seniors and suggested that they could qualify for a free cell phone!
WASHINGTON FOOTS THE CELL PHONE BILL FOR OUR POOR
Obviously a program like this was started with great intentions, but as you read the article, you will find that there is some segment of the recipients of the program that have the services, but don't qualify, or have obtained cell phones at multiple carriers, therefore abusing the free system. Ultimately those in either camp are stealing from the US taxpayer and our government oversight is clearly lacking. As a cell phone or land line user, you pay significant taxes each month to fund this program, you should know about it and should be pissed off that the government assumes there is about $200 million in theft or mismanagement going on in this $1.6 billion program.
Ok, cell phones are paid for and we know that food stamps are available through the SNAP Program that I report on monthly. (See the most recent post where I outline that 46 million of our fellow citizens are receiving benefits -
WHAT'S UP WITH THE PO' FOLK?). We know that states offer Medicaid services for health insurance for low income earners. We also have heard about housing benefits for those that live in low-income housing (section 8 housing). Essentially, I'm painting the picture here that many of the basic and not-so basic needs of a person are being met for individuals and families that are below the poverty line in the USA.
Let's dig a bit deeper then and examine the life style of our poor. I recently found a book that reveals several key statistics about our poorest and highlights while they are "relatively poor" they do live quite comfortable lives. The life-style of many of these people is not quite like the poverty-stricken, dirty, and hunger-ridden life we might expect. Scott Rasmussen's book, "The People's Money: How Voters Will Balance The Budget and Eliminate the Federal Debt", highlights some facts that illuminate just how well off our poor really are. -
WHAT IS POVERTY IN THE US?
FOOD PROGRAMS -
- Parent report they have kids that go hungry - (only .25% of US homes)
- 1% of households report that they miss a meal in the day
CAR OWNERSHIP -
- 70% report they own a car
- 30% report they own two or more cars!
CABLE TV
- 63% state that they have cable tv or some other tv service
Rasmussen highlights other items like the fact that 23% use TIVO, 50% have a computer, and 53% have a gaming system. I guess where he is going here is that these are absolutely not necessary and they are considered luxury items....if you are really poor. I don't really get to worked up about these, but I do get fired up about cable tv subscriptions. Both car ownership and cable tv come along with monthly costs. Clearly car insurance is expensive, but you can use a car to work and pull yourself out of poverty. Unfortunately, cable tv expenses for our least fortunate is not defensible and is really the thing that makes me the most angry. Cable bills can range from $50 to $200 a month and this service has become a "right" for our poor. I've met and counseled many struggling families that need assistance with budgeting and debt management. One of the first items I challenge them to cut is cable and you can't believe the resistance that I receive. Perhaps I am nuts, but people that are poor don't "deserve" cable television, it is a luxury and that income could be spent wisely on anything else!
WANT THE BOOK?
Buy the book by Scott Rasmussen from our Amazon Link -
The People's Money
(Oh yes, and if you buy anything from Amazon, please go through our search box at the upper right hand of our page!)
US POVERTY RATES BY RACIAL MAKEUP -
http://ardd.sph.umich.edu/about_diabetes_disparities.html
- 25.9 percent for American Indians
- 25.8 percent for African-Americans
- 25.3 percent for Hispanics
- 9.4 percent for non-Hispanic whites.
CORPORATE PROFIT MAXIMIZATION
Unfortunately, we are a nation of entrepreneurs. (I don't really mean unfortunately in that sense, I mean that we are so good at it we tend to over do it). Because we have a system where the great big generous government will meet our poor's needs, we have created an incentive for corporations and organizations to try to maximize sales to the beneficiaries of these governmental services, that often could care less if there is waste or fraud involved. We've seen this example with the Scooter Store, a Texas wheel chair company that misled senior citizens and filed many false Medicare claims.
http://www.justice.gov/opa/pr/2007/May/07_civ_344.html Ultimately the Scooter Store paid millions to the federal government and the cause of the problem comes back to the fact that the users of the services didn't pay for them! When you are spending your own money, you actually care how much things cost.
By creating programs that are paid for and "monitored" by the federal government, cell phone companies advertise heavily and attempt to maximize the number of folks using the "free" system. This is why the Lifeline program is full of waste, companies are marketing to the user, not the payer, and in this case the payer has no limit on how much they will spend. While I expect more from businesses and owners, you can't help but to admire a firm that recognizes there is an untapped opportunity to harvest gains in the business landscape by exploiting the demands of users who will not pay for the services.
MEETING ALL NEEDS WILL MAKE KEEP SOME PORTION OF PEOPLE.....POOR FOR EVERMORE
Is the welfare life a good life? I don't think so, but maybe it is compared to working hard and receiving little or no incremental benefit for your labor. In other words, if I find a job paying $8 an hour and I have to pay for my own cell phone, food, rent, and other basics by myself with no assistance, I may have a bit more money, but I'm worn out and haven't made any real growth. I can imagine that this is the logical exercise that many participants go through when evaluating their decision to find a job or two or three. If you are killing yourself and you are worse off compared to receiving benefits and not working, you'd probably make the rational choice to make less or give less effort. I think this is the problem with making benefits so generous, it clouds the decision making process and makes the decision less clear cut.
The killer here is that if you provide just enough subsistence benefit to placate some people you will create generations of poor that learn to "work the system" and never get out. I think the best example of this was New Orleans before Hurricane Katrina. There were many families with three and four generations receiving benefits from governmental agencies providing for all of their needs. This corruption of the system ultimately hurt an entire city of people that were stuck in a system of poverty for years and years. Rather than changing the system and educating the public there, we created a legion of benefit experts that could exploit all of the provisions of social security benefits, welfare benefits and all other types of assistance. Ultimately, the creation of an entire class of people in the USA that receive subsistence help forever was not the design of the safety net system.
BEING POOR....SHOULD SUCK
Finally, I know that this post may be perceived as a "rich goat" not wanting to share his money with the poor guy, and frankly it isn't. What this post is about is that we as a nation need to determine what level of life-style we will support for our poorest men, women, and children. If we decide that at x-income level we will provide food, shelter, healthcare, cellphone, cable television, and a car, we are going to actually attract a whole lot of people that decide that level of "minimum life-style" seems quite fine. Bad incentives often result in poor outcomes. For example, if we pay women more section 8 housing allowances, SNAP dollars, and other benefits based on the number of children they have, we'll probably end up with more poor children!
I'm attacking the notion that poverty should be comfortable. Being poor sucks,.....and it should stink enough to prod the marginally poor to improve, work hard, and strive to become productive. The problem with an ever-increasing demand for the rich to provide their "fair-share" through taxation is that government mechanism for that payment process is inefficient and sucks away a large amount of resources in waste (federal government cost, fraud, and time). Federal programs have a tendency to get larger and larger and the
aim of the programs should be to be so successful that their use declines.
Unfortunately we don't see declining participation in these programs as free money usually only attracts more and more free money takers. I'd have less of a problem with many of these programs if they were tied to technical and vocational job training certification programs. We hear from our large manufacturing employers that the skills they need are not met here in the USA and therefore they go to emerging countries to set up plants to find that skilled labor force. Why not make technical job training programs mandatory to receive housing, SNAP, cellphone, or medicare benefits? Why not make the poor life-style with paid housing, healthcare benefits, two cars, cable, a DVD player, game system, VCR, and monthly food payments a temporary program that lifts people up into the next group of earners and make a life long stay in an impoverished state a little less attractive?
GOATMUG
Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/
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