Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

AI Summary. Because government benefits aren't counted as income, a single parent with two children earning $11,000 is officially in poverty yet can receive $53,128 in benefits—tax credits, food stamps, housing and utility aid, Medicaid, school meals, and cash assistance—for a total of $64,128, or 254% of the poverty level.

Phil Gramm and John Early Wall Street Journal
Date Posted:
Is Database:
Database

Counting non-cash benefits as income would reduce the 19.8mm US households defined as poor by 90%. If the $1.4T in annual Federal poverty spending, including non-cash benefits, were distributed in cash to those households, each would receive $70,000.

Does excluding government benefits from income overstate poverty?

Core argument: A single parent with two school-age children earning $11,000 from part-time work is counted as in poverty because household income falls below $25,273, yet would qualify for $53,128 in benefits, bringing total income to $64,128, or 254% of the poverty level.

The government’s failure to count its largess as recipients’ income allows welfare households to blow past the income level above which a working family no longer qualifies for government help. Take a single parent with two school-age children who earns $11,000 annually from part-time work. The government considers this household in poverty because its income is below $25,273. But this family would qualify for benefits worth $53,128. It would receive Treasury checks of $3,400 in refundable child tax credits and $4,400 in refundable earned-income tax credits. The family would also receive Food Stamp debit cards worth $9,216 a year, $9,476 in housing subsidies, $877 of government payments for utility bills, $16,033 to fund Medicaid, $3,102 in free meals at school and $6,624 in Temporary Assistance for Needy Families. All this puts the family’s income at $64,128, or 254% of the poverty level. A hardworking family earning anything like $64,128 in salary wouldn’t be eligible for any of these welfare benefits in four-fifths of the states. Meanwhile, the welfare family would be eligible for another 90 small federal benefits and sundry state and local welfare programs.

Takeaways by Macro Roundup® AI

  1. A single parent with two school-age children earning $11,000 from part-time work is counted as in poverty because household income falls below $25,273, yet would qualify for $53,128 in benefits, bringing total income to $64,128, or 254% of the poverty level.
  2. The $53,128 benefit package includes $16,033 for Medicaid, $9,476 in housing subsidies, $9,216 in Food Stamps, $6,624 in Temporary Assistance for Needy Families, $4,400 in refundable earned-income tax credits, $3,400 in refundable child tax credits, $3,102 in school meals and $877 for utilities.
  3. A family earning about $64,128 in salary would be ineligible for any of these welfare benefits in four-fifths of the states, while the welfare household would remain eligible for another 90 small federal benefits plus state and local programs.

Related Articles:

  • Stranded by the Safety Net: How to Fix the Benefit Cliff Problem — A simulation of safety-net benefits for a single mother with two children in North Carolina shows net income rising faster than earnings below $30,000 a year, then dropping abruptly as benefits phase out. She would need to earn $70,000 to exceed the net income available at $30,000.
  • Mitigating Benefits Cliffs for Low-Income Families: District of Columbia Career Mobility Action Plan as a Case Study — The authors estimate that a hypothetical low-income family with children receives $68,686 in government support at an income of $11,000 but only $22,709 at $65,000, while its tax liability rises from $842 to $12,835. The lost assistance plus higher taxes fully offsets the $54,000 income gain.
  • Welfare Is What’s Eating the Budget — The U.S. redistributes 29.4% of its gross domestic product through transfers and taxes, a larger share than any developed country except France at 30.1%. Counting transfers as income and taxes as income lost and adjusting for household size, average households in the bottom, second, and middle income fifths have roughly equal incomes despite large differences in work effort.
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