Dean Baker: Welfare as We Know It Now

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Published on Tuesday, August 14, 2007 by CommonDreams.org
Welfare as We Know It Now
by Dean Baker


In the days before welfare reform, single mothers could collect five or six hundred dollars a month without working. That was what welfare looked like before 1996. In the Internet Age, welfare is about having the government do everything it can to make the rich absolutely as rich as possible. As F. Scott Fitzgerald said many years ago, the rich are not like you or me: They need the government’s assistance to get by. There are all sorts of ways in which the government helps those who have the most.

For example, Bill Gates might have to work for a living if the government didn’t grant Microsoft a copyright monopoly on its software. Sure, we all know copyrights provide an incentive to innovate, but there are much more efficient ways for the government to provide incentives. But, the more efficient mechanisms may not make Bill Gates and his ilk quite so rich, so politicians who hope to get elected and reelected don’t talk about them.

Patent monopolies for prescription drugs are also a great way to put more money into the pockets of the extremely rich. The CEOs of drug companies like Pfizer and Merck are able to earn tens of millions of dollars each year only because the government grants them patent monopolies on their drugs. As a result of their government granted monopolies, drugs that would sell for $4 a prescription in a competitive market can instead be sold for hundreds of dollars per prescription, and sometimes even more.

This is enormously inefficient from an economic standpoint. It also leads to unnecessary suffering on the part of millions of people who must struggle to pay for their drugs out of pocket, or deal with crazy bureaucratic rules to get insurers to pick up the tab. But, when it comes to helping the most affluent, efficiency is a secondary consideration.

In the same vein, the fund managers’ tax break, which applies a special low tax rate on the earnings of managers of hedge and private equity funds, puts as much as $6 billion a year into the pockets of some of the richest people in the country. This tax break costs about a third as much as the annual TANF appropriation, the main federal welfare program for families with children. While the money for TANF is divided by millions of families, the fund managers’ tax break goes to just a few thousand individuals. For the highest paid fund managers, the tax break can mean hundreds of millions of dollars to pay for vacation homes, private jets and other necessities for the extremely rich. ........(more)

The complete piece is at: http://www.commondreams.org/archive/2007/08/14/3163/