John C. Goodman

I don't like to get into partisan politics, because, like Milton Friedman, I believe in ideas and not politicians. But The New York Times editorial page is becoming increasingly partisan. The unsigned editorials these days are almost indistinguishable from the Obama campaign's talking points. Far from being thoughtful, they are vehicles for White House propaganda. Many of Paul Krugman's editorials read pretty much the same way.

So let's consider the two political parties. Think of Democrats as being primarily responsible for the structure of the welfare state (social insurance programs) and Republicans as being primarily responsible for tax policy (including the Earned Income Tax Credit [EITC] — the embodiment of Milton Friedman's negative income tax). Which policies have been better for poor people? If you buy the CEA analysis and the work of Charles Murray, George Gilder and a host of other scholars, the welfare state has led to more poverty, not less of it. On the other hand, almost every Republican tax change has made the tax code more progressive. That is, almost every time the Republicans change the tax law, the burden of the federal income tax is shifted from low-income people to high-income people! That's why almost half the population doesn't pay any income tax at all.

[As an aside, Democrats have been very reluctant to give money to poor people through means-tested social insurance programs. Whether it's food, housing, education or medical care, almost all the cash goes to a constituency that is definitely not poor. That's why it's hard to know how much anyone benefits from these programs. On the other hand, when the Republican-designed EITC delivers $1 to a poor family, the family gets $1 worth of benefit. Of course, the EITC may do other harm through its implicit high marginal tax rate, however.]

I'm not endorsing everything the Republicans have done. Rather, I simply note that under Republican policies we are likely to have less poverty.

All in all, the welfare state probably isn't the primary reason poor people are poor. The main obstacles to success are (1) bad schools and (2) barriers to good jobs in the labor market.

What is the biggest challenge in making bad schools better? The teachers' unions. They are dedicated to the idea that the school system is foremost a jobs program and only secondarily a place for children to learn. Teachers' unions have steadfastly opposed almost every reform idea that has any promise whatsoever in every city and town throughout the country. As for barriers to entry into the labor market, who is the foremost backer of minimum wage laws, Davis Bacon Act restrictions, medieval-guild-type occupational licensing laws and labor union monopolies everywhere? You guessed it: the labor unions themselves.

Yet who forms the backbone of the Democratic Party? The very same organizations that are most responsible for keeping poor people poor and closing off their opportunities to succeed in life. Further, their perverse political influence disproportionately affects minorities. That is one reason why the black teenage unemployment rate is almost 40% — double that of white teenagers! It is one of the reasons for the very large student achievement gap: black student test scores are 70% to 80% of the scores of white students.


John C. Goodman

John C. Goodman is Senior Fellow at The Independent Institute and author of the widely acclaimed book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts."