Incentives and Poverty

I've seen two good pieces lately on the impact of government incentives on the poor.  In the first, Abby McCloskey of AEI raises the work of Aspen Gorry and Sita Slavov (also of AEI) on high marginal tax rates as government benefits are phased out:

The tax code should incentivize work, not discourage people from earning a paycheck. Gorry and Slavov recommend transitioning to a proportional tax system to improve transparency and eliminate the variation in marginal and average tax rates within income groups. The system could be made progressive by adding a universal transfer payment or an income exemption.

In the second, Jonah Goldberg highlights the increasing number of Americans receiving disability benefits, with most who go on the disability rolls staying there forever:

That points to the even bigger parts of the story. As the nature of the economy changes, disability programs are sometimes taking the place of welfare for those who feel locked out of the workforce — and state governments are loving it. States pay for welfare, the feds pay for disabilities.

Both pieces are worthwhile.  Liberals are good at coming up with well-intentioned policies.  Conservatives are especially strong on how government policy affects incentives.  We have seen this in the way that lower tax rates on work and investment spurred growth in both areas (to the tremendous benefit of all Americans) between 1983 and 2008.  (We can leave for another blog what wound up derailing that growth.)  Conservatives need to keep focusing on how government policy causes and reinforces poverty.  Staying on welfare or on disability is no way out of poverty, no way to live, and no way to contribute to society, but many will do it if it is provided as the easy path forward for them.