Mirror, Mirror, on the Wall, Which State Provides the Most Handouts of All?
Back in 2010, I put together a “Moocher Index” based on the percentage of non-poor people in each state getting government handouts.
Based on that back-of-the-envelope calculation, Vermont, Mississippi, and Maine were the biggest moocher states and Nevada, Colorado, and Arizona were the most self-reliant states.
Then, in 2013, I shared some data looking at the value of welfare benefits in each state, compared to both the median wage and to the federal poverty rate.
Sadly, those numbers showed it was more lucrative in many states (especially in the Northeast and Hawaii) to live off the government rather than work.
Today, let’s look at which states are the most generous with handouts. The Committee to Unleash Prosperity shared this table yesterday, which ranks states based on the level of per-capita spending on public welfare.
The folks at CTUP highlighted California and Florida. Since I usually do New York-vs-Florida and California-vs-Texas comparisons, I added a couple more numbers.
P.S. Looking at the above numbers, keep in mind that there is a Laffer Curve-type relationship between redistribution spending and the poverty rate. So states like Florida and Texas presumably are reducing poverty while states such as New York and California are subsidizing it.
P.P.S. Compared to other industrialized nations, the United States has a relatively low level of welfare spending.
The best way to destroy the welfare trap is to put in Milton Friedman’s negative income tax.
A Picture of How Redistribution Programs Trap the Less Fortunate in Lives of Dependency
I wrote last year about the way in which welfare programs lead to very high implicit marginal tax rates on low-income people. More specifically, they lose handouts when they earn income. As such, it is not very advantageous for them to climb the economic ladder because hard work is comparatively unrewarding.
Thanks to the American Enterprise Institute, we now have a much more detailed picture showing the impact of redistribution programs on the incentive to earn more money.
It’s not a perfect analogy since people presumably prefer cash to in-kind handouts, but the vertical bars basically represent living standards for any given level of income that is earned (on the horizontal axis).
Needless to say, there’s not much reason to earn more income when living standards don’t improve. May as well stay home and good off rather than work hard and produce.
This is why income redistribution is so destructive, not just to taxpayers, but also to the people who get trapped into dependency. Which is exactly the point made in this video.
P.S. Most of you know that I’m not a fan of the Organization for Economic Cooperation and Development because the Paris-based bureaucracy has such statist impulses. But even the OECD has written about the negative impact of overly generous welfare programs on incentives for productive behavior.
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