https://gabrielstaples.com/government-welfare/

[utterances-bot]

My thoughts on government welfare programs | GabrielStaples.com home

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https://gabrielstaples.com/government-welfare/

[RMWinslow]

Hello, I'm here from your post about comment-widgets, but I've had some personal experience with this kind of poorly designed welfare program. It was very frustrating when I wanted to do some paid work for someone, and they wanted to pay me for that work, but I had to turn it down because if they paid me, I would actually lose several thousand dollars.

The jargon for the issue at hand is Effective Marginal Tax Rate. It's the amount of additional taxes you pay and benefits you lose when your income increases. If the EMTR is above 100%, then perverse incentives arise, as people may actually lose disposable income when their earnings go up.

Why might the EMTR rise above 100%? There are two main causes:

1. "Welfare cliffs", wherein benefits very rapidly disappear at some threshold.
2. Multiple programs stacked on top of each other.

What frustrates me about the discussion around UBI is that it's so very very close to (yet still not quite) sound economic policy. If you just take UBI, smooth out the rough edges, and stop pretending like you don't need to fund the thing, you get what's called a Negative Income Tax. And the US already has something similar to a NIT in the form of the Earned Income Tax Credit, which has several of the desirable policy features you mention.

The EITC is far from perfect, but it's still one of the most efficient anti-poverty interventions out there. So it's very disheartening whenever the loudest discourse ignores incremental improvements to existing programs in favor of brand new shiny programs filled with welfare cliffs and slapped right on top of the old ones.

Guys, you don't need a fifth wheel; you just need to pump some air into your tires .

[ElectricRCAircraftGuy]

@RMWinslow , thanks for the comment.

[ElectricRCAircraftGuy]

Thinking about this again this morning, I think a good summary of my article might be:

1. People should always be incentivized to work more, not less.
   1. The only incentive to work less should be the natural inclination to find a happier balance in life once sufficient income and productivity has been naturally reached by working a lot.
2. Working more should always equate to making more money, not less.
3. Any welfare, government, community, or other program which violates the above two principles should be fixed.

---

Example:

If unemployment gives you $400/week, but you take a one-off job that gives you $500 one week, and you are still actively looking for a full-time job, your total pay should be much greater than both $400 and $1000.

In other words, unemployment should not drop to $0 instantly. If it does, it will make you think: "I did all this work to make only $100 more than what I could have made had I not worked? Then, why work?" So, a bad unemployment system would cut your unemployment to $0 that week since you made $500. A good, or fixed unemployment system would perhaps drop your unemployment $0.20 on the dollar, meaning: if you make $500, they reduce your unemployment pay by $500 x 0.20 = $100, thereby giving you $400-$100 = $300. Then, your total pay would be $300 unemployment + $500 you made = $800. Of course, the unemployment pay should have a tapered cutoff at the end too, where it ceases entirely, to ensure you don't milk the system forever.