# [LINK] How rational is the US federal state

-21 30 October 2012 08:56AM

http://www.weeklystandard.com/blogs/over-60000-welfare-spentper-household-poverty_657889.html

60000 dollars per year per poor family, if the article is correct.

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Comment author: 30 October 2012 11:23:07AM *  22 points [-]

When you encounter something that is surprising, you should actually be surprised. Surprise means that either your model of the world is wrong or you're getting lied to. I think Fake Explanations has a relevant parable.

A common tactic in 'unbelievable statistics' is that they attempt to substitute one number for another number in a comparison and hope nobody notices. To delve further into defending against the dark arts, they use this particular statement to gloss over the slight of hand they perform...

To be clear, not all households living below the poverty line receive \$61,194 worth of assistance per year. After all, many above the poverty line also receive benefits from social welfare programs (e.g. pell grants).

When you read it, your mental radar should go off like a banshee. They're trying to get your mind to accept that it'll "be doing a little rounding" and turn off hard checks on the numbers. A useful 5-second level skill to counteract this is to ask yourself exactly how many people are receiving these "pell grants and stuff" that takes up a (seemingly) negligible proportion of people[*]. A quick googling says over 100 million, aka more than twice the number of Americans living in poverty.

This pushes our numbers to 150 million recipients rather than 17 million. That's an order of magnitude of difference and brings us to a roughly expected ~\$6900 spent per recipient. It strikes me as a little high, but not really shocking. It turns out that my model was, in fact, basically correct and it was just the article doing creative things with words and statistics.

[*]Alternatively, you can try to calculate the money spent on "pell grants and stuff" which comes to ~\$700 billion. Apparently the US gives out over 126 million scholarships each year. Who'd have thunk it?

Edit: That's not to say I agree or disagree with moving to direct cash payments. I just felt a need to point out how the article was being such a tricksy little hobbitses.

Comment author: 30 October 2012 03:00:58PM 4 points [-]

Apparently the US gives out over 126 million scholarships each year. Who'd have thunk it?

I know nothing about the US so all this disscussion is way over my head, but isn't the US population only about 300 million? I don't know what kind of scholarships you're talking about, but 126 million is about half the population, which seems implausible.

Comment author: 30 October 2012 10:21:38PM *  3 points [-]

That's the joke. The article implies Pell Grants "and stuff" are making up 70% of our wellfare spending . Pell Grants are a scholarship with a maximum reward of \$5,550. Hence if we were actually spending the way that they're implying, then 40% of our total population is in college in any given year.

I'm was trying to point out the absurdity of the their 'rounding'

Comment author: 31 October 2012 08:15:59AM 0 points [-]

Ah okay, I've clearly just missed your sarcasm then.

Comment author: 30 October 2012 06:14:07PM *  1 point [-]

From the article:

divide total federal and state spending by the number of households with incomes below the poverty line

This number is meaningless for measuring the amount spend on poverty reduction, however broadly that is defined. No one thinks money spent on (1) fraud prevention, (2) food safety, (3) basic research, (4) judicial salaries for civil dispute resolution, or similar programs alleviate poverty.

Edit: When I say "alleviate poverty," I mean charity. Or, as the linked article calls it: "welfare"

Comment author: 30 October 2012 06:50:24PM 4 points [-]

No one thinks money spent on (1) fraud prevention, (2) food safety, (3) basic research, (4) judicial salaries for civil dispute resolution, or similar programs alleviate poverty.

I think you just shocked the countless thousands of economists who believe that functioning institutions are key to growing economies and alleviating poverty.

Comment author: 30 October 2012 08:38:49PM *  2 points [-]

My point was that it isn't charity. Many of those programs (particularly functioning judiciary and basic research) easily produce more value than they cost. But they aren't welfare - despite the contrary assertion from the link.

Thus, dividing this type of spending by the number of people below the poverty line is confused and misleading.

Comment author: 30 October 2012 08:47:01PM 1 point [-]

My point was that it isn't charity.

Has no charity ever used the institution argument/strategy in its investments?

Comment author: 30 October 2012 09:28:02PM *  1 point [-]

I'm not trying to draw the line between institution building and charity. I'm only saying that US government (federal and state) discretionary spending(1) per person below the poverty line is a funky and worthless statistic.

Taking it seriously seems to imply that the value of institutions is realized only by those below the poverty line, with no benefit to the middle class or the wealth. And the statistic obfuscates the fact that the direct purpose of many of the programs is not poverty alleviation or reduction. We may hope for indirect benefits - the rising tide lifts all boats. But the programs I mentioned would be worthwhile even if they did nothing to reduce poverty.

In short, the article is a mindkilled talking point, and deserves criticism for that reason alone.

(1) Just to be clear, discretionary spending (I think this is what the article is referencing) has a technical meaning: it excludes defense and Social Security spending (maybe also Medicaid). Discretionary spending is roughly 30-40% of federal spending.

Comment author: 30 October 2012 10:15:36PM 1 point [-]

Nitpick: I believe that defense is discretionary and medicare is mandatory. The distinction is a bit phony though, since congress can change mandatory spending by statute, and Congress has only limited real maneuvering room to radically alter the Federal workforce (discretionary) from year to year.

Comment author: 30 October 2012 11:55:23PM 0 points [-]

I agree, the distinction is totally phony. The whole purpose is to allow the two sides to talk about cutting spending without talking about politically impossible spending cuts - without admitting that they aren't talking about most of the spending.

Comment author: 30 October 2012 06:59:06PM 1 point [-]

No one thinks money spent on (1) fraud prevention, (2) food safety, (3) basic research, (4) judicial salaries for civil dispute resolution, or similar programs alleviate poverty.

I can't understand what you mean by this. Maybe the confusion is in your use of "no one thinks" or "alleviate poverty"?

Comment author: 30 October 2012 02:27:47PM -1 points [-]

Using your numbers, ~20,000 per poverty-stricken family is still being spent on them, which would apparently nearly double most of their income if transferred directly.

Also, I don't think the article is being disingenuous, but I think the way it is represented here is. If you believe the point of this spending is to help those in genuine poverty, rather than to assist middle class families, the Pell grants and stuff are just as wasteful as whatever else the money is being spent on.

Comment author: 30 October 2012 06:22:06PM 1 point [-]

If you believe the point of this spending is to help those in genuine poverty, rather than to assist middle class families

Fine, but who thinks that?

Comment author: 30 October 2012 09:51:11PM *  0 points [-]

Are you being disingenuous or are you really unaware of the treatment of poverty as an acceptable justification for a social safety net among individuals generally opposed to such governmental spending?

Comment author: 31 October 2012 12:08:29AM 1 point [-]

Pells grants, food safety inspections, basic research, and a functioning judiciary are not part of the "safety net." Benefit for those below the poverty line is not the primary purpose of those types of programs. Because the programs are (putatively) justified even without reference to poverty reduction, no one should rationally think "the point of this spending is to help those in genuine poverty."

Gwern and I had a parallel discussion here.

Comment author: 31 October 2012 03:14:54PM 1 point [-]

Frequently that's exactly how things like Pell Grants are sold, however; as help for the poverty-stricken. A lot of people are considerably less supportive of the idea of their tax dollars paying for other people's children's college educations when those other people aren't any worse off than they are when their children aren't getting those benefits.

The opening description of the Pell Grant from the grant's own web page:

"The Federal Pell Grant Program provides need-based grants to low-income undergraduate and certain postbaccalaureate students to promote access to postsecondary education."

Comment author: 31 October 2012 09:49:31AM *  2 points [-]

This Weekly Standard article is just silly political spin, but it's based on a genuine report by the Congressional Research Service (a rigorous, nonpartisan government research agency) which was requested by the Republicans on the Senate Budget Committee (who had political motivations for requesting this particular report, but limited control over its contents). This press release from the Senate Republicans describes the source of the numbers in more detail, and includes a link to the full report (pdf).

The CRS report counts about \$750 billion in federal government spending on "welfare programs", which they define as spending which is means-tested; that is, programs that "(1) had provisions that base an individualâ€™s eligibility or priority for service on a measure (or proxy) of low or limited income; or (2) target resources in some way (e.g., through allocation formulas, variable matching rates) using a measure (or proxy) of low or limited income." Entitlement programs (Social Security and Medicare) were not included. The Senate Republicans estimated that there was another \$280 billion in state and local government spending on federal welfare programs, bringing the total just over \$1 trillion.

About half of that \$1 trillion in spending is for health programs (primarily Medicaid). Most of that money is spent on people with expensive medical issues rather than being simple redistribution to the poor - about 2/3 of Medicaid spending goes to people who are disabled or elderly.

For the non-health half of the spending, this webpage has a list of the largest programs with brief descriptions of what they do (or see the pdf above for a more detailed breakdown). The top 5 spending areas (accounting for 80% of the non-health federal spending) are Negative Income Tax (primarily EITC), SNAP (food stamps), Housing Assistance (Section 8 housing subsidies and various other programs), SSI (cash for the disabled and elderly), and Pell Grants (financial aid for college students).

Comment author: 31 October 2012 09:29:43AM *  0 points [-]

I'm sympathetic to the basic point that most of the money spent by the government supposedly on the poor doesn't get to them, but their analysis is so poorly presented, or so half assed in the first place, that I can't tell if there is much truth or sense in the main claim. Ugh!