Matthew Desmond for The New York Review explicates how America makes it cost so much to be poor.
The irony is that while politicians and pundits fume about long-term welfare addiction among the poor, members of the protected classes have grown increasingly dependent on their welfare programs. If you count all benefits offered, America’s welfare state (as a share of its gross domestic product) is the second biggest in the world, after France’s. But that’s true only if you include things like government-subsidized retirement benefits provided by employers, student loans and 529 college savings plans, child tax credits, and homeowner subsidies: benefits disproportionately flowing to Americans well above the poverty line. If you put aside these tax breaks and judge the United States solely by the share of its GDP allocated to programs directed at low-income citizens, then our investment in poverty reduction is much smaller than that of other rich nations. The American welfare state is lopsided.
Student loans look like they were issued by a bank, but the only reason banks hand out money to eighteen-year-olds with no jobs, no credit, and no collateral is because the federal government guarantees the loans and pays half their interest. Financial advisers can help you sign up for 529 plans, but those plans’ generous tax benefits will cost the federal government an estimated $28.5 billion between 2017 and 2026. In 2020 the federal government spent more than $193 billion on homeowner subsidies, a figure that far exceeded the $53 billion allocated to housing assistance for low-income families. For most Americans under the age of sixty-five, health insurance appears to come from their jobs, but supporting this arrangement is one of the single largest tax breaks issued by the federal government, one that exempts the cost of employer-sponsored health insurance from taxable incomes. It is estimated that in 2022 this benefit cost the government $316 billion.
Today, the biggest beneficiaries of federal aid are affluent families. In total, the United States spent $1.8 trillion on tax breaks in 2021. I can’t tell you how many times someone has informed me that we should reduce military spending and redirect the savings to the poor. I’ve met far fewer people who have suggested we boost aid to the poor by reducing tax breaks that mostly benefit the upper class, even though we spend over twice as much on them as on the military and national defense.
It’s never been clearer than it is today: the haves love the secret socialism that benefits only them.