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MAKING AMERICA WORK: ALFRED P. MURRAH PROFESSORSHIP INAUGURAL LECTURE* - page 17 / 20

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2006]

MAKING AMERICA WORK

69

Americans.

Like most welfare programs, the Food Stamp Program is

extraordinarily complicated. It administrative procedures. The

has arcane eligibility criteria and baffling Food Stamp Program is also inefficient. In

2003,

for

example,

only

54%

of

those

eligible

for

food

stamps

actually

received them. costs—currently

The Food Stamp Program also has high administrative about 8% of total expenditures, compared with just 1% of

total expenditures for the Social Security system. Food stamps expensive to distribute than cash benefits or tax credits.

are

just

more

Tinkering with the Food Stamp Program will not solve these problems. Instead, we should repeal the program and use its $31 billion-a-year appropriation to help pay for refundable personal tax credits, worker credits, child care credits, and health care credits.

Next, we should cash out housing assistance. Instead of providing a fraction of low-income families with rental subsidies or mortgage interest subsidies, we should give all low-income families $2,000-per-person tax credits and let them choose their own housing.

The bottom line is that we are unlikely to achieve any meaningful reform of the welfare system by simply, in Edgar K. Browning’s words, “trying to patch up each one of the innumerable and uncountable programs.”18 Instead, we should replace the current system with an integrated tax and transfer system—with large personal tax credits, large per-worker earned-income credits, and low tax rates on earned income.

C. Modestly Raise the Minimum Wage and Index It for Inflation

Third, we should increase the minimum wage and index it for inflation. Figure 12 shows how the value of the minimum wage has fallen in recent years relative to poverty levels.

Most economists believe that increasing the minimum wage would reduce employment opportunities for low-skilled workers. On the other hand, earnings subsidies like the earned-income credit can actually increase the demand for low-skilled workers by making it relatively cheaper for employers to hire them. The earned-income credit is also better targeted to help low- income families.

Still, it would make sense to modestly increase the minimum wage and index it for inflation. Combining a modest increase in the minimum wage with an expanded earned-income credit would help ensure that virtually every low-income worker would make enough to bring his or her family out of poverty.

18. Edgar K. Browning, Commentary, in INCOME REDISTRIBUTION 207 (Colin D. Campbell ed., 1977).

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