Thelma, Louise, & Chloe's Cliff

Meet Chloe:

Single Mom- resident of US state of Pennsylvania

Chloe has two children, ages 1 and 4 who attend daycare so Chloe can work

Chloe works as a digital print operator with a gross salary of $29K/year.

Happy Story:

Hard to raise two children on only $29K.  However, tax payers help by providing health care assistance (CHIP), childcare subsidy, housing assistance, food stamps, and an earned income tax credit from the US Federal Government.  Chloe receives $28K in tax payer funded assistance.

Total Disposable Income = $57K  ($29K salary + $28K in welfare). 

Chloe’s Cliff  #1 (A $1,000 bonus costs her $9,000):

The store where Chloe works beat all its sales goals.  She is a really talented worker and shared in her store’s success by being awarded a $1,000 bonus just before Christmas.   This made for some extra nice presents under the tree.

The next year, when Chloe reapplied for tax payer funded assistance, she got the bad news-  Chloe’s benefits were going to be reduced because she made $30K ($29K salary plus $1K bonus).   Her food stamp subsidy was significantly reduced and she lost all her housing assistance. 

In total, Chloe now only could receive $19K in tax payer funded assistance.

Total Disposable Income = $48K  ($29K salary and $19K in subsidies).

Chloe’s Cliff #2: (Please don't promote me, I can't afford it):

As we said, Chloe is a good very good employee who has bettered herself by night school.  Her boss got promoted to run a regional network of print shops and Chole was tapped to take over as store manager- a big promotion and $8,500 per year raise.

But Chloe is smart and still hurting from the $9K financial hit she took last year.  She knows that at $37,500/year (Her original base of $29K/year plus $8,500 promotion), she will lose all her government assistance except the health care subsidy for her children which is about $7,500/year.

Total Disposable Income = $46K as compared to her happy story (above) where she had $57,000 a year!

Like Thelma & Louise:

The more Chloe works to better herself the lower her disposable income.  She feels a little bit like the two accidental outlaws in the movie.  But she has to protect herself and her family and therefore needs to take money from other citizens.  

And the bureaucrats that created these cliffs did so because they thought they were doing something good.  Chloe is stuck in her dead end job no matter how much she wants to better herself because the entitlement system keeps her there.  It is not about Chloe- it is the system.

Or did the bureaucrats create these cliffs to make their needy constituents reliant on them so they can hold power?  After all, the people in power are there because they understand how to exploit human nature.

Chloe’s self esteem is not important to the cliff creators.  In fact, Chloe is just an unfortunate casualty; a minority.  A vote that they won’t lose no matter how imprisoned they make her feel.

Addendum:

This posting is not anti-welfare programs.  I believe that social safety nets are important for a well ordered society.

The point is- a well tuned support system smooths the phase out of entitlements as the person’s after tax income grows.  But that would take some work by the cliff creators who will receive no personal benefit if they fix the problem.  The political incentive system is broken.

Here is the data:

The full report can be found here.