The Cato Institute’s Welfare Cadillac

We’re back! And pretty soon there will be another welfare reform debate extravaganza at the State House — this time it will be the House of Representatives’ turn. So let’s get ready.

In case you were on vacation last month and missed the latest conservative homily on why government should not help poor people, here’s what the Cato Institute had to say.

People who receive government assistance are not lazy, Cato assures us. They are behaving as rational economic actors in response to a smorgasbord of government assistance programs that in its total largesse is more lucrative than a minimum wage job. In this deplorable state of affairs, work fails to “offset the value of leisure,” so those receiving government assistance are not inclined to look for jobs.

Especially if you consider the recent increases in the poverty rate (the 2010 rate was the highest in 17 years), this thesis may strike you as deeply implausible, so let’s inquire further. In its state-by-state comparison, Cato takes into account the seven forms of government assistance comprising, in their view, the “full package” of benefits. (Doesn’t the term “full package” evoke a menu of luxury options one might consider when buying a new car? Cato’s welfare Cadillac comes with a power sunroof and heated steering wheel.) For those interested in the details, the elements of the “full package” of benefits and the value Cato assigns to them in Massachusetts are detailed at the end of this post. Cato assumes that a family receiving any form of assistance is in fact receiving all seven forms of assistance simultaneously. And lo, in most states, including Massachusetts, the value of all that assistance ($42,515) exceeds the value of a minimum wage job ($42,510).

Here is how Cato defends its dubious presumption that families receiving any government help are receiving $42,515 worth of it: “we believe it is proper to include the full package of benefits because at least some recipients in every state do receive them.” No, that’s not really true. Just for starters, the value Cato assigns to the cash assistance program, $7,416, is available only to those families who do not receive the housing assistance that Cato values at $17,203: families who do receive housing assistance receive less cash assistance. It is curious that the publishers of a report otherwise so chock full of evidence and statistics are entirely uninterested in determining the number of “full package” families who are being deterred from work by the lure of leisure. Let’s see if we can help get them started. Last month, 99,994 people in Massachusetts (one and one-half percent of the population) were receiving cash assistance, one of the “full package” elements, and only some of that number were also receiving housing assistance. I am sure that if the Cato folks wanted to apply themselves and continue this reductive analysis, they could come up with a number — in all likelihood a very small number they would not like.

Here’s are a couple other numbers Cato might want to consider. How many employers in Massachusetts had 50 or more employees who got their health insurance through Medicaid (one of Cato’s “full package” elements), because the employers did not offer it or because the employees could not afford it? Answer: 1,548. And how many Massachusetts residents received this health insurance subsidy as a result of the policies of these 1,548 employers? Answer: 361,725.

Maybe the problem is not that government benefits are so generous as to encourage leisure over work, but that people are working — really hard — but just not making enough money?


The “full package” of benefits in Massachusetts, which totals $42,515:

Cash Assistance: $7,416
SNAP: $6,247
Housing Assistance: $17,203
Medicaid: $9,920
WIC (Women, Infants and Children Program): $979
Utilities Assistance: $450
Emergency Food Assistance Program: $300

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