Cognitive Theory and the Delivery of Welfare Benefits

44 Pages Posted: 2 Mar 2009

Date Written: February 2, 2009


The federal government delivers many of the benefits it provides to improve the general welfare of its citizens - poor and non-poor alike - through the tax system rather than traditional direct spending programs. This article examines the political and economic rationales underlying the federal government's use of the tax system as a mechanism to deliver welfare to the poor. It concludes that certain direct spending programs can be more efficient and generate more public support than tax expenditures. From an economic standpoint, even the best type of tax benefits-refundable tax credits - have problems. They create work disincentives during phase-outs, and cannot provide the non-monetary assistance people often need. They also do not address long-term underlying causes of poverty and inequality.

From a political standpoint, tax welfare benefits for the poor encounter problems that tax welfare benefits for the non-poor do not face. Using the tax system to deliver "poor" welfare creates cognitive disadvantages that ultimately present welfare in a negative manner that divides people and narrows public support for welfare. The tax system emphasizes individualistic/hierarchic views and self-interested norms, activates negative attitudes regarding taxation, the poor, and welfare, and creates an uneven playing field by disguising welfare benefits the non-poor receive while leaving those the poor receive visible. In contrast, direct expenditures, especially universal human capital programs, can activate communitarian/egalitarian worldviews and norms of cooperation and altruism; they also can moderate anti-tax attitudes by removing the direct connection between tax and welfare that exists when the tax system is the delivery mechanism. Direct expenditures diminish anti-welfare sentiment by leveling the playing field, making welfare benefits for the poor and non-poor equally visible. Reframed as direct expenditures - especially universal programs to develop human capital-welfare spending can further the norm of equal opportunity, which is supported by most Americans, regardless of their worldviews. This encourages a sense of cohesion and support.

Part I sets the political debate about welfare and inequality within the context of opposing worldviews. It suggests that conventional wisdom underestimates the actual amount of support for direct welfare because it both overstates the dominance of the worldviews that oppose it and understates the strength of worldviews that support redistribution. Indeed, evidence suggests much stronger support for direct welfare than commonly believed. Part II continues the discussion of welfare within the framework of cognitive behavior. The placement of "poor" welfare benefits in the tax system triggers cognitive processes that are inimical to redistribution. Properly devised direct expenditures, in contrast, can suppress these processes and activate more positive ones that would generate more support for welfare than conventional wisdom suggests. Part III briefly examines the economic arguments favoring tax welfare benefits. The first section illustrates some of the economic problems with tax benefits, using the EITC and education credits as examples. The second portion explores the fallacy of the equity-efficiency tradeoff. Part III's final section briefly discusses efficiency issues with direct expenditures. Part IV provides a brief summary of the potential advantages of reframing certain welfare benefits as direct spending. It concludes by describing two hybrid tax/direct expenditure programs that might optimize efficiency and popular support by re-framing welfare Just as financial investment portfolios must be constantly rebalanced to achieve optimum results, so too must investments in human capital. The government should re-balance its mixture of direct and indirect spending on human capital (i.e., welfare).

Keywords: education, earned income tax credit, tax, welfare, cognitive theory, cultural cognition, poverty, tax, tax policy, welfare reform, worldviews.

Suggested Citation

Kornhauser, Marjorie E., Cognitive Theory and the Delivery of Welfare Benefits (February 2, 2009). Loyola University Chicago Law Journal, Vol. 40, No. 2, 2009, Available at SSRN:

Marjorie E. Kornhauser (Contact Author)

Tulane University School of Law ( email )

6329 Freret Street
New Orleans, LA 70118
United States

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