More On: poor
We're already doing all of these things, to be honest.
If I wanted to keep poor people poor, there are several government policies I would favor. Let's count them down.
1: An Expanding Welfare State
To begin, I would support a vigorous and ever-expanding welfare state—programs such as Medicaid, food stamps, unemployment insurance, and so on.
I realize that one efficient way to keep poor people poor is to establish incentives that encourage them to make decisions that keep them in poverty.
Case in point: A 2012 study by Pennsylvania’s Secretary of Public Welfare analyzed the decisions confronting individuals and families enrolled in various government welfare programs. In the example of a single mother with two children ages 1 and 4, the analysis found that she would be eligible for government benefits (such as Medicaid, housing vouchers, and subsidized daycare) worth an additional $28,000.
This situation puts this woman in a difficult position. She risks losing a significant amount of benefits if she gets a better paying job or works more hours. Despite the fact that her compensation would be higher, she would cause financial hardship for her family. To break even after taxes, she would need to find work paying around $69,000 per year to compensate for the lost assistance benefits. Many low-skilled workers are incapable of making such a leap.
The welfare cliff is a term used to describe this situation. When faced with this situation, many people sensibly choose to continue receiving government assistance. Rather than assisting individuals, the "social safety net's" skewed economic incentives imprison welfare beneficiaries. And the longer they are out of the workforce or working at lesser levels, the less employable they become. It's a self-fulfilling loop that keeps people poor and reliant on the government.
There's also the effect of the welfare state on the family unit. By substituting a father's wage with a government check and perks, welfare programs break up families. The rate of unmarried births has tripled since LBJ's Great Society increased government social programs in the mid-1960s.
When there is no father in the family in my native state of North Carolina, families are five times more likely to be poor.
2: Progressive Taxation Policy
If I intended to keep poor people poor, I'd fund the welfare state's poverty trap with punitive taxes on society's wealth and job producers.
Productivity improvements enabled by capital investment are the main element to economic growth and thus a greater quality of living for society's poor. Profitable enterprises and small businesses alike are discouraged from investing in capital. Job possibilities dry up as enterprises choose to either not expand or relocate to more investment-friendly countries.
3: Increase the Minimum Wage
I would push for higher government-enforced minimum salaries if I wanted to keep impoverished people poor. The law of supply and demand states that when the price of a commodity or service rises, so does the demand for it (other things held equal, of course). Low-skilled labor is in high demand as well. More low-skilled workers will be priced out of the labor market as minimum wages rise.
Meanwhile, greater wages will attract more job searchers who are willing to work for a higher rate. Employers will be able to be more selective in their hiring, resulting in lower-skilled job seekers being pushed out in favor of higher-skilled, less-needy candidates. Minimum wage rules are an effective tool for removing people who are most in need of job experience from the bottom rung of the career ladder.
4: Support Restrictive “Green Energy” Policies
If I wanted to keep poor people poor, I would support government “green energy” initiatives that make energy more expensive. State and federal initiatives that mandate more expensive “renewable” energy mean that—in the words of President Obama—utility bills “necessarily skyrocket.” Poor people trying to scrape by just to stay even can scarcely afford higher electricity bills.
5: Increase the Business Regulatory Burden
If I intended to keep impoverished people poor, I'd make sure the government imposed numerous expensive rules on businesses. Such restrictive measures deter firms from establishing or expanding, resulting in fewer job openings for people most in need. Furthermore, piles of red tape encourage firms to spend scarce resources on compliance fees rather than investing in their operations and creating jobs. Payroll that may have gone toward possibilities for lower-skilled job seekers will be diverted to higher-skilled compliance officer positions.
6: Inflate the Money Supply
I would favor "quantitative easing" programs if I intended to keep poor people poor. The Federal Reserve manufactures money out of thin air under such initiatives. The value of the dollars in your pocket or bank account is eroded as a result of the bloated money supply. The poor are the hardest hurt by inflation since their low skill set makes it far more difficult for their earnings to keep up with rising living costs.
7: Impose High Tariffs
I would place high taxes on foreign items to limit imports if I wanted to keep impoverished people poor. Sure, home industries that are sheltered from competition by tariffs would benefit, but at what cost? Tariffs on foreign steel, for example, may benefit the steel industry's 170,000 American jobs, but higher steel prices will hurt the 6.5 million Americans employed by companies that use steel as an input. More jobs are likely to be lost than saved in the end.
Furthermore, low-income households are disproportionately harmed by price increases passed on to them. The combination of fewer career prospects and increasing living costs makes it more difficult for the poor to escape poverty.
Finally, I would not support a competitive, free market economy if I wished to keep impoverished people poor. Phil Donahue was famously trained by Milton Friedman:
So that the record of history is absolutely crystal clear that there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.