4 Welfare Policies That Hurt The People They Claim To Help

President Biden’s economic philosophy calls for a much larger federal government, with the Biden administration intending to implement an “updated social contract that treats American workers and working families as essential at all times, not just times of crisis.” This intention has manifested itself in Biden’s massive proposed spending programs, including the American Rescue Plan, the American Jobs Plan, the American Families Plan, and a $6 trillion federal budget.

Past Democratic administrations — namely, those of Franklin Delano Roosevelt and Lyndon Johnson — likewise believed that the federal government ought to occupy itself with tackling poverty through massive increases in government spending. 

History rejects the premise that federal social programs can meaningfully disrupt generational poverty over time. In fact, they often do the opposite.

Here are four welfare policies that destroyed American families.

Social Security

The Social Security Act of 1935 enacted the distribution of retirement benefits to older Americans. However, it is funded by hefty taxes on employers and employees — a reality that tightens labor markets. 

Presently, workers and their employers each pay 6.2% of wages in order to fund Social Security. As a 2010 Congressional Budget Office report described, a cut in payroll taxes would lead to a boost in employment.

“Some firms would hire more people because hiring would be less expensive; others would lower prices to increase sales, thus spurring production and increasing the demand for labor; still others would increase compensation for employees, which would encourage more spending,” noted the report.

The effects of payroll taxes are highly regressive. In other words, they tend to disproportionately harm lower-income workers.

In an essay claiming that Social Security impoverishes working people, Berkshire Hathaway CEO Warren Buffett famously noted that his secretaries pay more federal payroll taxes than he does: “Our leaders have asked for ‘shared sacrifice.’ But when they did the asking, they spared me… what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office.”

Minimum Wage

The Fair Labor Standards Act of 1938 implemented the first federal minimum wage — another policy that has distorted labor markets for generations.

As Ben Shapiro describes, the federal minimum wage “does not accomplish what it seeks to accomplish.” Currently, the market price for labor is above the minimum wage for most workers. However, younger employees — especially teenagers — rely upon minimum wage jobs as a means to enter the job market and gain entry-level experience.

Economist and philosopher Thomas Sowell notes that federal minimum wages are especially harmful toward African-Americans: “If you go back to say 1950… you find that at that time, the unemployment rate among black teenagers was a fraction of what it is today. And there certainly wasn’t any less racism than there is today. What was different was that at that time the minimum wage law was a decade old. It was a decade of inflation, and the law hadn’t been changed. So for all practical purposes, it didn’t exist.

In a paper for Cato Institute, Joseph Sabia — an economist at San Diego State University — concurs that “minimum wage increases almost always fail to meet proponents’ policy objectives and often hurt precisely the vulnerable populations that advocates wish to help.” He concluded that “it is more likely to result in making many low-skilled workers worse off,” as it “fails to reduce net poverty because of its adverse effects on employment and poor ability to target workers living in households below the poverty threshold.”

Food Stamps

The Food Stamp Act of 1964 — which ballooned from 2 million participants in 1965 to 40 million in 2020 — is meant to provide “nutrition benefits to supplement the food budget of needy families so they can purchase healthy food and move towards self-sufficiency.”

One year after the legislation’s passage, Daniel Patrick Moynihan — a Labor Department sociologist — released an influential report concluding that urban poverty leads to the breakdown of African-American families. President Johnson cited his report in a speech delivered at Howard University, claiming that government spending was the ultimate solution to the crisis. At the time, 25% of black children were born to parents who were not married.

As former White House Office of Public Liaison deputy director Timothy Goeglein explains, the Johnson administration instead subsidized “single mothers who did not marry the fathers of their children.”

“By expanding the panoply of welfare state programs to Americans who were already experiencing serious stress and hardship, a series of significant problems became an unstoppable conflagration often referred to as a tangle of pathologies,” wrote Goeglein. “Millions of Americans were soon engulfed in permanent chaos and dysfunction. Major metropolitan areas were comprised of block upon block of victimized children, broken families, and shattered lives.”

Medicaid

The Social Security Amendments of 1965 instituted Medicaid — a federal and state program by which disadvantaged Americans can acquire healthcare. As with food stamps, enrollment rocketed in the decades after its introduction: from 4 million in 1966 to 75 million in 2019.

However, an analysis from the Buckeye Institute — a free-market think tank in Ohio — revealed that “free” Medicaid programs effectively cost a recipient hundreds of thousands of dollars in lost wages due to nonexistent work requirements. Men lose $323,000 over their lifetimes, while women lose $212,000. 

“More hours on the job translates to more wages,” remarked Heritage Foundation senior fellow Doug Badger. “Over the course of a lifetime, the differences in income accumulate to levels that significantly improve living standards.”

Indeed, the Buckeye Institute found that “most people who remain in the work force will work their way off Medicaid and experience earnings gains more similar to those who were never eligible for benefits.” Nevertheless, “people who receive income-related benefits have powerful disincentives to work.”

“A job provides income. Too much income results in loss of benefits. These perverse incentives discourage people from pursuing the surest way to escape poverty: a job.”

The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.

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