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On Helping the Poor

Readers of this blog know that I have had nothing positive to say about Obamacare. In fact, I regard this law to be one of the truly dreadful laws that I have seen passed in my professional lifetime. As I said in an earlier post, this law should be instructive about the folly of central planning (see that post here) but there is another aspect of the law that reveals a larger truth. Laws designed to help the poor often damage the very people the laws are designed to help. The minimum wage is the classic example of a law which harms people at the low end of the income distribution even though it is designed to raise their incomes.

There is a large body of evidence showing that minimum wages create unemployment. Yes there are some people who have their incomes raised by the minimum wage but others lose their jobs (or have their hours cut) when the minimum wage is increased. Any student of introductory economics sees this illustrated in a simple labor market diagram. Why is it good policy to pass a law which creates two classes of people: the winners and the losers?

Obamacare is designed to provide medical insurance to individuals at the low end of the income distribution and some will certainly gain coverage under the law. But others may lose their jobs because of the employer mandate, or have their hours cut (there is growing evidence of more part-time workers in the economy), and still others may lose their medical coverage. Was it really necessary to create winners and losers once again? How about using insurance vouchers to give coverage to the poor. We already do things much like this with the food stamp program so the government knows how to administer such a program. And yet we would not need to damage others with new taxes, mandates, and transaction costs.

As it is sometimes said, the road to hell is paved with good intentions. Obamacare is yet another example of what liberals regularly do because of their economic illiteracy. Their good intentions damage the very people that they want to help.

 

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  1. John Seater
    July 10, 2013 at 1:13 PM

    It’s not obvious to me that the intention of Obamacare is merely to help the poor. President Obama’s political and economic philosophy is either fascist (state control working through private corporations) or outright communist (the state actually running things, such as public schools and General Motors). Fascists and communists favor government control for one of two reasons. First, some of them really believe the government can run things better than the private sector. Second, others want to control things so they have the power to redirect income to themselves and their friends. In my experience, the latter group is the one that really calls the shots on the political left, though they hide behind the rhetoric of helping the poor.

    Obamacare institutes a huge increase in direct government control of a large sector of the economy, just what the fascists and communists want. Helping the poor is more of an excuse than an objective. The main objective is to increase government control. Self-interest by those in power can explain the left’s persistent support of policies such as the minimum wage and the public schools as exercises in control (typically for the benefit of those in power) much better than altruism. The latter would be susceptible to evidence (many decades’ worth in the case of the minimum wage) that the policies do not achieve their stated objectives. The former is not susceptible to such evidence because that evidence is irrelevant to the true objective.

    It is said that Eintsein defined idiocy (or maybe it was stupidity) as doing the same thing repeatedly and expecting different results. Isn’t it then idiotic to keep trying to explain the left’s infatuation with direct government control as an exercise in altruism when, from that perspective, the policies repeatedly are shown by the facts to be abject failures? Why not accept the much more factually consistent explanation of the infatuation with direct control as an exercise in political power for the benefit of those in charge?

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A blog by John B. Taylor

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