Comment

Martinez: How helping the poor breaks the bank

March 5, 2013 

The Congressional Budget Office reported last week that 1 out of every 6 dollars the federal government spends, or $588 billion in 2012, is appropriated to 10 major programs designed to help the poor. The biggies are Medicaid ($251 billion), the Supplemental Nutritional Assistance Program (formerly known as food stamps, $79 billion) and the Earned Income Tax Credit ($60 billion).

Now the bad news: The CBO says that unless changes are made, the bill for these 10 programs in 2023 will top $1 trillion per year with Medicaid continuing to be the spending monster.

Although some programs will see some decrease in spending, the savings will be overrun by Medicaid, mainly because of expansion under the Affordable Care Act – Obamacare. The CBO projects federal spending on Medicaid to increase by 86 percent in real terms, from $251 billion in 2012 to $467 billion in 2023. Here’s why:

“First, health care costs in general will probably continue to rise faster than inflation,” the report said. “Second, the Affordable Care Act (ACA) will expand Medicaid eligibility, causing more people to participate in the program, and the federal government will pay a larger share of costs for newly eligible people than it pays for most people who are eligible under the current rules.”

Reason No. 2 was reason enough for the General Assembly and Gov. Pat McCrory to reject the expansion of Medicaid in North Carolina.

The health insurance exchanges won’t be cheap, either, and they’re mandated under the ACA to ensure that the poor can buy coverage. The CBO predicts taxpayers will spend $18 billion to subsidize premiums in 2014, the first year of the exchanges. Not so bad, but just wait until 2023 when CBO projects premium support will explode six times to $109 billion.


If we expect these programs to be sustainable, they must be reformed. Eight of the 10 help poor and disabled people with specific needs, such as health care, housing, food, even higher education through Pell grants. The Earned Income Tax Credit and Child Tax Credit, however, have devolved into programs that do nothing more than pay people for being poor and having kids. For that reason, these two should be abolished.

The first EITC check was sent out in 1976. Spending on the program remained relatively modest through the 1980s. In 1991, EITC checks totaled $8 billion. Ah, the good old days.

In 2011, however, poor folks cashed $55 billion in EITC refunds. The average EITC payment in 2011 was a whopping $2,200. In fact, a married couple with three kids bringing home $50,000 qualified for an EITC check. Folks, that’s not poor. Eligibility for the program has expanded so much that CBO reports 20 percent of those who filed federal returns in 2011 claimed the EITC.

The CTC is nearly as bad. It provides a tax credit of $1,000 per kid. If the tax credit exceeds the amount of taxes owed, the filer gets a refund check. In 2011, $28 billion was written out to people who did nothing to earn this money other than bear children. Thankfully, nearly all of that money went to households that earned less than $50,000.

Unfortunately, though, the nonrefundable part of the CTC – for which the filer’s tax liability was reduced – cost the Treasury $29 billion. And since we’re spending money we don’t have, that’s helping increase the deficit.

Spending on the EITC and CTC is projected to go down because provisions that expanded the programs under the American Recovery and Reinvestment Act of 2009 (the stimulus bill) are set to expire in 2018.

I expect to see pigs fly in 2018 as well.

I don’t have a problem helping people when they’re down on their luck. Common decency and my faith demand it from each of us and from the community groups and churches we’re part of. But the continued expansion of government anti-poverty programs is succeeding only in making all of us poorer.

Contributing columnist Rick Martinez (rickjmartinez2@gmail.com) is news director at WPTF, NC News Network and SGRToday.com

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