Welfare Policy Should be Smarter than a Country Western Song

The irony of Federal spending is that it often saves US money

“Well, God, if you’re 5-foot-3 and you’re 300 pounds,

Taxes ought not to pay for your bags of Fudge Rounds.”

Oliver Anthony – “Rich Men North of Richmond”

Oliver Anthony has it wrong. His 2023 hit song exploited the national mythology of the lazy welfare recipient. But he missed the real money. Those tired of how their tax dollars are spent should look to people with the connections to escape punishment, by well-off taxpayers who can afford the lawyers and accountants to duck their full tax bill and by the tax and spending programs that subsidize the wealthy for the same activities for which low- and-moderate income Americans are demonized.

Consider a few examples:

President Trump says he will cut spending on Medicare and Medicaid by eliminating waste, fraud and abuse. His track record is not encouraging. In 2020, Philip Esformes was four years into a 20 year prison sentence for bilking Medicare and Medicaid out of $1.3 billion. The Department of Justice called the case “the largest health care fraud scheme ever charged” by DoJ. Even so, in the last weeks of his first term in office, President Trump commuted the sentence of Esformes. Proving old ways are hard to give up, Esformes last year pleaded guilty to another health fraud crime.

The Biden Administration’s Inflation Reduction Act appropriated $80 billion for the IRS to update its systems and strengthen enforcement. Former IRS Commissioner Danny Wertel told NPR, “if you’re middle or low-income, you will see better service. If you’re high wealth with a tax issue, you will see more scrutiny.” Sounds good, right? Especially that last point. A National Bureau of Economic Research study found that 36% of federal income taxes unpaid in 2021 were owed by the top 1% – an outstanding debt of as much as $175 billion.

As it turns out, it doesn’t sound so good to the Trump Administration and congressional Republicans. The GOP already clawed back some of the IRS’s new money and Republicans are proposing deep cuts in the budget now under consideration. They claim the spending cuts as “savings” and ignore the deficit impact of the lost tax revenue. Fuzzy math.

Less noticed is the amount of subsidies that long have favored the well-to-do. The 2017 Republican tax bill sought to put a dent in one tax subsidy, capping the amount of mortgage interest that can be deducted on federal taxes. Studies have shown that as much as two-thirds of the benefits go to those with incomes over $200,000. Now, with mortgage interest rates at least twice what they were in 2017 and home prices continuing to go higher, Trump is proposing to lift the ceiling on the deduction when Congress reauthorizes the 2017 tax bill this year. If Trump has his way, changes to the deduction could hike the cost to nearly $90 billion. Meanwhile, the federal government spends about $67 billion annually (2023) on housing assistance for the non-wealthy, according to the Peter G. Peterson Foundation.

Program reforms in these and other spending and tax policy could significantly reduce the deficit. But, of course, Trump and Musk, won’t go there. Instead, they hope to reduce the federal deficit by tricks, gimmicks and lies. Where they do make cuts, many will be to programs designed to help the poor. It’s an easy lift to exploit the stereotypes that welfare is rife with fraud and promotes laziness and dependency.

Of course, there is waste, fraud and abuse in government. From Minnesota’s Feeding Our Future scandal to Trump’s disaster-plagued Covid-era Paycheck Protection Program and Economic Injury Disaster Loan Program, billions of dollars have been siphoned from taxpayers.

But before looking for fraud and waste in bags of Fudge Rounds, Trump and the GOP would do well to read President Lyndon Baines Johnson’s 1964 State of the Union Address.

Johnson proposed an “unconditional war on poverty in America…The richest nation on earth can afford to win it. We cannot afford to lose it.” More than three dozen programs were created to address poverty during LBJ’s presidency. Some failed, some fell short and some are spectacularly successful.

Fighting poverty is not cheap. The Federal Safety Net website estimates the total cost of the 13 federal programs most often associated with fighting poverty was $1.01 trillion, with Medicaid the largest at $616 billion (not counting state spending of $274 billion for their share of Medicaid) followed by the Supplemental Nutrition Assistance Program (food stamps) at $135 billion.

But look what the programs have achieved. In 1964, about one-in-five Americans lived in poverty; today, it is about one-in-nine. Reducing the rate of poverty by nearly half is not a bad record.

Or, look at it another way: the subsidies and tax benefits that mainly benefit the well-off also are expensive, yet there is little evidence that they produce value to anyone other than the recipients. Studies have shown that the mortgage interest deduction, for example, does not reduce the cost of housing and may actually increase prices.

None of this is to suggest that Congress should tax the rich to support the poor. Linking one to the other too often leads to policies that are more punitive than effective and to divisions in society that are harmful. Rather, tax rates should be progressive and applied fairly because that is good public policy. How the revenue is spent is a separate matter.

The spending that is devoted to welfare should be accompanied by reforms. Programs need to be streamlined, consolidated and sometimes eliminated. According to the CATO Institute, “there are 34 housing programs run by seven different cabinet departments, including even the Department of Energy…Altogether, 13 cabinet departments and four independent agencies administer at least one explicitly anti-poverty program.”

Congress should approach welfare spending with a recognition of the good it has achieved. The proof is as recent as four years ago when President Biden and Congress significantly expanded tax credits supporting low- and moderate-income Americans and their families. The number of children living in poverty was cut by half almost overnight. More than that, the cash benefits people received from the tax credits went right back into the economy through the purchase of basic goods and services, sustaining the U.S. economy during Covid.

Six decades ago, President Johnson drew from his own background to tell Congress that poverty often isn’t a result of laziness or buying Fudge Rounds. “Very often a lack of jobs and money is not the cause of poverty, but the symptom,” he told Congress. “The cause may lie deeper in our failure to give our fellow citizens a fair chance to develop their own capacities, in a lack of education and training, in a lack of medical care and housing, in a lack of decent communities in which to live and bring up their children.”

Minnesota Republicans were among those who responded to Johnson’s call to action. They created some of the nation’s first policies to assure equal opportunities in housing, education and other areas essential to giving people an avenue to escape poverty. Minnesota Republicans knew that the conservative goals of small, effective and efficient government were well-paired with a commitment to government that supported people at times of their lives when they are most vulnerable.

That traditional Minnesota conservative philosophy should be heard in Washington today.