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Government Keeps People Poor
by
Sheldon Richman,
June 28, 2006
Washington reruns are boring. A Democrat beholden to Big Labor proposes an
increase in the mandated minimum wage.
Republicans beholden to Big (and small) Business defeat the bill. End of
episode. Each side has thus reestablished its bona fides with its respective
constituency and thus can return to what it really cares about
spending the peoples money on war against this, that, or the other.
Both sides will claim to care about the poor, but caring means
they can be counted on to utter the right words on cue.
Thats Washington for you nothing more.
As the great movie Wag the Dog illustrated, politics is show
biz and pageantry. What counts is perceptions. Results or the lack
thereof dont matter because in short order the public will be
distracted by something else anyway.
We can be certain of this because if the politicians
really wanted to help poor people, they long ago would
have done what it is in their direct power to do
namely, eliminate all the ways that government
blocks people from climbing out of poverty. (We should
remember that poverty is a relative term.
Most poor people in America are well off when judged by
historical and even contemporary world standards.)
How does government keep people poor? A brief article
cannot count all the ways, but we can cover the
highlights. First, low-income people pay various taxes,
even if the personal income tax isnt one of them.
They labor under the payroll tax to support bankrupt
Social Security and Medicare. They pay sales taxes,
property taxes (through their rent), and gasoline taxes.
Many taxes are built into the prices of products. The
governments fiscal burden is heavy, and its a
burden that low-income people are less able to cope with
than wealthier people.
Second, the government does many things that make the
cost of living higher than it would otherwise be. Tariffs
and quotas on imports raise the price of necessities:
shoes, clothing, food, and more. Does it make sense to
bemoan the fate of the poor while artificially holding
prices high as a favor to wealthy producers?
Third, government occupational licensing is a devastating
one-two punch against low-income people: Licensing makes
the number of practitioners of many occupations
artificially low, raising the price of needed services.
Obviously that harms low-income people more than others.
Moreover, licensing raises the cost, and often makes it
impossible, for low-income people to enter certain
occupations. Someone who is talented at cutting and
styling hair may have to pay thousands of dollars to
achieve the paper qualifications necessary to become
eligible for a license. That barrier can be prohibitive
for many low-income people. In the early 20th century a
poor person in New York could become a taxi driver by
obtaining a cheap used car. Today that is impossible.
Taxi licenses, the number of which is limited by
government, cost a fortune.
Fourth, government has steadily eroded the value of the
dollar through control of the monetary system. Because of
inflation, money buys less today that it would if the
monetary system had it not been in the hands of the
state. What required a dime to buy in 1947 requires a
dollar today. Who is hurt most by inflation? Poorer
people.
Fifth, the minimum-wage prices low-skilled workers out of
the labor market. Some lose their jobs; others never get
hired; still others are required to do more work to
justify the increased pay. Organized labor knows that
some workers are locked out, which is why it wants an
increase it cuts down on the competition.
Government is and has long been the enemy of low-income
people. The next time you hear Republicans and Democrats
shed tears for the downtrodden, remember that they refuse
to give up the power that keeps those folks poor
and dependent on them.
Sheldon Richman is senior fellow at The Future of Freedom Foundation, author of Tethered Citizens: Time to Repeal the Welfare State, and editor of The Freeman magazine. Visit his blog Free Association at www.sheldonrichman.com. Send him email.
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