When it comes to proving support for those in poverty, a significant number of economists, politicians, and pundits support direct transfer of money—just giving the poor cash.
There are many moral and practical reasons I think that option is a suboptimal means of aiding the poorest of our neighbors. But it does have one substantial benefit: It’d be much cheaper and efficient than current welfare programs.
As Daniel Halper at The Weekly Standard points out, the Senate Budget Committee finds that the amount of money spent on welfare programs equals, when converted to cash payments, about “$168 per day for every household in poverty.”
According to the Senate Budget Committee:
By comparison, the median household income in 2011 of $50,054 equals $137.13 per day. Additionally, spending on federal welfare benefits, if converted into cash payments, equals enough to provide $30.60 per hour, 40 hours per week, to each household living below poverty. The median household hourly wage is $25.03. After accounting for federal taxes, the median hourly wage drops to between $21.50 and $23.45, depending on a household’s deductions and filing status. State and local taxes further reduce the median household’s hourly earnings. By contrast, welfare benefits are not taxed.
At the current rate, we could give every family on welfare $61,320 a year (and that would be tax free). The federal poverty threshold for a family of four (two parents, two children) is only $23,550. If we just gave them cash we could give every family on welfare twice the amount needed to bring them out of poverty and still have enough left over to give each family a new Ford Fiesta Sedan (MSRP: $13,995) every year.
Obviously, I don’t think direct cash payments are the most effective form of poverty relief since they provide significant disincentives to work (at $47,000 and new car a year, I might be tempted to go on welfare too). But it highlights just how inefficiently our government is at poverty reduction. If we truly care about the poor, we should find a more effective—and efficient—means of compassion.