Monday, September 13, 2010

There is No Safety Net

Public dialogue in the US has a serious flaw: the myth that a safety net exists for people who have had unfortunate circumstances, such as losing a good job and running through all their savings. There is none if you have no young children. Almost all "welfare" benefits are available only to people with children.

Income levels for single people being eligible for Medicaid (health care) are very, very low. For NY for 2010, the limit is $8,479. If you earn more, you aren't eligible.

The Right often spouts that the poor pay no taxes due to the "Earned Income Credit". I guess they don't check the tax forms. For a single person, the earned income credit is only 7.65% of earned income below $5,970 for 2009. That's the employee share of Social Security and Medicare taxes, but not the employer share. Yet the Right always says the worker effectively pays that part, too. That's called "double talk". For incomes over $5,970, the credit is capped at $457, then phases out from phases out from $7,470 to $13,440. The phase out rate is the same 7.65%, hence the working poor in that income level is paying a double Social Security + Medicare, hence has a very, very high marginal tax rate (higher than private equity fund billionares thanks to their 'carried interest' tax at only 15%).

Emergency rooms ? That works for "emergencies" for now, until the hospitals go broke and close [that is happening in some communities]. Simple procedures like a potentially dangerous cyst are not "emergencies". Many very important health care needs are not emergencies.
Housing support: you get nothing unless you have children.
WIC program: children and recent mothers only.

In Massachusetts, the federal poverty limit for a single person is $10,836. Above that and food stamps go away.

How much money is $10,836 per year ?

A work year is about 50 weeks at 40 hours per week, hence 2,000 hours. That poverty line then equates to $5.42 per hour. The Federal minimum wage is $7.25/hour. Uh ... does this make sense ? A single person working the minimum wage for a year is NOT poor ?

Notice that such a person is right in the middle of the Earned Income Credit phase out, hence that person's marginal tax rate is very high. How can person work & climb out of such a hole ? The system's barriers to exit poverty are very, very high.

Worse: the banking system. A person who has lost all their savings and gone bankrupt has likely had his/her bank account closed. Banks do that when one defaults on a credit card from the same bank. Now that unfortunate person has no bank account to cash pay checks and must use check cashing services and pay those huge fees.

Worse again: a home. One loses the home in foreclosure, then must rent. Renting in a safe place often requires security deposits and credit checks. Bingo, the working poor gets the door slammed in their face again.

More worse: credit checks. Did you know that many employers now do credit checks ? Hence a person suffering from unfortunate circumstances has another barrier to return to normalcy.

Look at the entirety of this : a person working hard for years, not bad, not evil, not a criminal, but a good person who has had unfortunate circumstances is (metaphorically) tossed into a deep pit to suffer, and that pit has high walls. It's very difficult to escape.

There is no safety net for many, many good people with unfortunate circumstances. It's quite wrong. We, the taxpayers who pay a LOT of taxes are being lied to by the Left and Right.

The Left says it's working for the poor, but it is not. 40+ years of huge taxes and government payments and those who are certainly very, very deserving get no help. All these programs of the Left are incredibly complex, requiring many, many well paid state and local employees (unionized) with fine benefits to administer.

The Right says there is a safety net, but as you can see, there is none for the taxpayer who has some bad luck. Good people - like the voters whom the Right panders to - get tossed into the pit and ground up by the system, effectively enserfed.

What else do we see ? Benefits for the poor are massively concentrated on people with children. What is a relevant law of economics and behavior ? IF one subsidizes something, one gets more of it. Thus the US gets MORE children from the poor. That's the very thing the right loves to gripe about, yet they do nothing.

This downturn has exposed the lies of the past four decades on both the left and right, and the corrupt system of government that feeds off our taxes yet does NOTHING for those very people who deserve some help. It's just wrong and must be reformed.

All these programs need reformed and made simple. As does the US tax system. We need honest people in government. Not deal makers, not negotiators, not good speakers, not people who can work the system. Honest people who will implement real reform - simple reform.

We need a Square Deal: fair and simple.


I am still riding that Brontosaurus to the next water hole. Futures look good this AM. I'll contemplate taking some sugar at the 1150 area on the S&P 500. [sugar = profits]

Word of the Day

"Festoon" - verb, transitive [$10] and "Festoon" - noun [$10]
Festoon means (verb) to hang or form festoons, to shape into festoons; (noun) 1. a decorative chain or strip hanging between two points; 2. a carved, molded or painted ornament representing a decorative chain.
Sentence: The Left piles program upon program to make themselves look good to voters, to cause voters to think the Left is helping them, but it's all phony festoons to hide the core reality: the Left cares primarily about having more and more well-paid, unionized government workers for their power base.


Spin-em said...

bunk firing on all cylinders today...well done sir

(vote for "honest" people is fantasy but....lool)

Bunkerman said...

lol, I also chastized our local newspaper editor for favoring expediency over honesty in a lette rthis weekend.

"look into a mirror - you're part of the problem ..."

I suppose my letter will get the spike now.

Frosty said...

Sal...your al-quada unit have a nononono ask nononono tell policy sir?

mfl59 said...

Iowa State football-feel the thunder!

Spin-em said...

bro and I had to go to this grocery store saturday(in general we buy our strawberries on friday night like Sal) all these able bodied jerkies with Supplemental Security Income (SSI)cards..sickening for 2 hard working Irishmen to see so many gaming the system....makes ya think.. who are the real idiots??

Frosty said...

"who are the real idiots??"..."the girls" will soon all the clubs at very good prices.

Frosty said...

will soon "own" that is.

Bunkerman said...

very true, spin.