Nevada’s ‘social safety net’ increasingly resembles a hammock
The Entitlement State: Part I
- Thursday, October 31, 2013
Food, housing, utilities, health care and spending cash.
Increasingly, Americans can receive all of these items whether they choose to work for them or not. Those who don’t work can receive these goodies by enrolling in the various government welfare programs that distribute them: SNAP, WIC, TEFAP, LIHEAP, TANF, Medicaid, and Section 8.
Traditionally, several of these programs were targeted primarily for children living in poverty but, through laws such as the Affordable Care Act, eligibility for these programs has been expanded to single, able-bodied adults with no dependents.
That means more and more individuals can have many of their basic needs met without having to incur the toil and stress of working for a living. In fact, Nevada is among the best states in which to live without working because it boasts one of the highest levels of available government benefits.
A new state-by-state comparison of benefits from Michael Tanner and Charles Hughes of the Cato Institute shows that the total value of welfare benefits in Nevada exceeds $31,400 for a family of three if that family enrolls in all welfare programs. That’s a pre-tax wage equivalent of $29,820, due to the federal Earned Income Tax Credit. Nevada’s total welfare package ranks 14th highest among the states and substantially higher than neighboring states like Arizona ($21,364), Idaho ($17,766) and Utah ($19,612).
At a 40-hour work week, the value of Nevada’s welfare package is equivalent to an hourly wage of $14.34. Very few entry-level jobs offer a comparable wage, even though it’s often necessary to gain work experience with such a position before one can move up to a higher earning level.
Many people may see the downside of working 40 hours per week as more significant than any incremental income boost they could realize through working. All things being equal, most people won’t increase their workload by 40 hours only to increase their earnings by a few percentage points.
The result is that more and more people are becoming dependent on government assistance, rather than building a life of financial independence through hard work and entrepreneurship. Figures from the U.S. Census Bureau indicate that roughly half of American households now receive some form of government assistance — up from 30 percent in 1983.
That rising trend requires that more and more tax dollars be spent on assistance programs. It also means an ever-greater burden on taxpayers — while, over time, shrinking even further the difference in after-tax earnings among those who work and those who don’t.
Facing this reality, individuals who make the choice to seek government assistance in lieu of employment can’t be merely categorized as lazy, indolent or greedy. They are — it must be acknowledged — rational. Given the financial incentives placed before them, individuals who choose welfare over work see clearly that the incremental return from working may be insufficient to justify such a commitment of time and energy — especially in a welfare-generous state like Nevada.
So, if you find the narrowing of earnings between workers and welfare recipients frustrating, don’t take it out on the welfare recipients themselves. Instead, direct your ire at those who created this perverse incentive structure: state and federal policymakers.
Politicians frequently trumpet enthusiastically the mid-1990s reform of federal welfare rules that imposed work requirements on many welfare recipients. However, official statistics from the U.S. Department of Health and Human Services show that fewer than half of the Nevadans required to participate in work activities as a condition of receiving benefits actually do so. Among those who do participate, fewer than half actually work in a traditional job. Others satisfy the work requirement through more nebulous “work activities,” including “work preparation” or “job search.”
Entitlement programs have become the fastest-growing budget items in most states and will soon begin to crowd out spending on other items such as public safety or education. Nevada Medicaid spending, for instance, increased 10 fold between 1990 and 2010 and, following eligibility expansion, is projected to rise another five fold over just the next decade. By 2023, some 802,000 Nevadans are projected to participate in the program, requiring state taxpayer contributions to rise from about $500 million to about $2.3 billion annually.
Realities such as this mean that if state and federal governments are ever to become solvent long-term and preserve their ability to provide services like education, they will need to dramatically restructure the way entitlements work.
At the least, they must be changed into a true social safety net — rather than tickets to a perpetually subsidized lifestyle.
Geoffrey Lawrence is deputy policy director at the Nevada Policy Research Institute. For more visit http://npri.org.