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.
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.
