How to help
Date posted: April 26, 2012
When it comes to households in our country that need assistance, there’s a longstanding debate on how to provide this help. N.C. State University economist Mike Walden summarizes the competing viewpoints.
“Well, first of all … it’s estimated by many that if you look at all of the programs that various governments have — local, state and federal — to provide a safety net, if you will, to folks who need financial assistance, that comes to about $1.5 trillion a year.
“Now there is a big debate … over, well, how — if we’re going to allocate that amount of money — … are we going to do it? How are we going to get the assistance to folks?
“And there are really two competing viewpoints. One viewpoint says, ‘It’s simple: just provide cash to folks who need financial assistance. Just take that $1.5 trillion and cash it out — provide cash to people who have lost their jobs who simply are in a circumstance where they can’t earn enough to meet the bills. Provide them with cash that they can write the checks, et cetera.’
“The advantage of that is it’s very easy to do. You don’t need much of a bureaucracy. In fact, we have a program like that that’s really operated through the IRS called the earned income tax credit. So, that’s one viewpoint.
“Another viewpoint says, ‘No, we want to attach strings to how that money’s going to be used. So, we want to set up specific programs and dedicate that money to those programs and actually tell recipients how they’re going to use the money.’ So, for example, we have food stamps. We have Medicaid. We have housing vouchers. We have temporary aid to needy families, et cetera.
“Now the upside to that, of course, is … you are assured to some degree the money’s going to be spent a certain way. The downside is you need bureaucracy. You need rules. You need people to monitor that. So, it’s a lot, lot more costly to implement.
“But this is a big debate between how simply do you help.”
Category: Economic Perspective