The Politics of Poverty and the Poverty of Politics
The Journal of Private Enterprise, 2006
26 Pages Posted: 29 Mar 2015
Date Written: 2006
How much does income redistribution help the poor? First, the official data systematically overstates the inequality in incomes, implying that the poor are becoming worse off, when in fact, they are becoming better off. Second, government has done little to reduce poverty by transferring income from the wealthy to the poor, and appears incapable of altering the distribution of income in favor of the poor.
It is also easier for people to see how particular poor individuals benefit from government spending, than to see the widely dispersed future cost of that spending in terms of more unproductive political competition for government transfers, that the poor seldom win, and the diminished economic productivity that disadvantages everyone, particularly the poor. The purpose of this research is to sharpen the focus on what is not seen, by arguing that government transfers have not only done little to reduce income inequality, but have surely harmed the poor whom they are supposed to help.
Government failure to help the poor cannot be remedied by electing better politicians or hiring more informed bureaucrats, but is the inevitable result of perversities built into the political process. Thus, we contend that Friedman’s negative income tax proposal would never be enacted without being part of a broader political package containing even larger transfers to the non-poor. Unfortunately, government transfers are themselves plagued with a host of negative externalities (many, though not all, explained by the ability of organized groups to secure private benefits at public expense), rendering them a highly unlikely way of helping the poor.
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