US Policy Ignores Adam Smith Caveat

Lind’s “America Pays a High Price for Low Wages” argues US policy has used wage subsidies to support its lowest-paid workers aka it’s “a welfare system” keeping the poor down, mostly benefits the rich & undermines initiative…

In short, Lind writes in the WSJ, “policy makers of both parties in the US have successfully refuted Adam Smith, who warned any capitalist society that wants to survive MUST provide “somewhat more” for its workers than mere “covering the living costs of themselves & dependents.” Rather he says: “It turns out that it is indeed possible to pay wages to workers that are too low for their own maintenance, much less that of their families.” Among other things, Lind points to Uncle Sam’s use of “means-tested welfare programs like the earned-income tax credit (EITC), food stamps & housing vouchers, all of which compensate for wages that are too low for workers to live on.” Ironically, it was way back in 1975 during my law school days that the EITC was created to supposedly help workers & their kids AND has been “expanded repeatedly under Democratic & Republican presidents alike.” Meanwhile, the various states have jumped into the mess with tax subsidy versions of their own.

As Lind says, “liberals like the EITC because it reduces absolute poverty & conservatives like it because it attaches a work requirement to welfare.” So, what’s not to like? Explains Lind: “But it is a myth that wage subsidies like the EITC ‘make work pay.’ On the contrary, they make taxpayers pay to rescue workers whose work does not pay enough. Nor are such wage subsidies an alternative to welfare … [but] … are welfare in the form of cash rather than in-kind benefits like food stamps or housing vouchers.” Hence, the term “refundable tax credit” is just a euphemism for redistributing income.” And the merry-go-round for poor folks keeps spinning around for generation after generation …

Davd Soul