Paul Ryan's review of the War on Poverty comes out and in very abject terms says that we have failed. Cutting through all the obvious Republican rhetoric we find a glimmer of hope. It turns out that Paul Ryan actually has a few nice things to say about the Earned Income Tax Credit (EITC). This program essentially allows people to collect more in tax returns than they paid in taxes, it is a way to boost the income of people who sit in the very bottom wrung of society. Well, this is great news, isn't it? Am I the only one surprised to see the GOP "fiscal wonk" come out in support of a proven anti-poverty tool?
I am compelled to temper my optimism and really question why he is demonstrating this support. There is a push going on right now to raise the minimum wage, could the EITC act as a suitable proxy or alternative? The answer is no. The GOP is smart, they see the writing on the wall, and they know to get behind the EITC now in order to fight against the minimum wage hike, but why?
Both programs work to boost real earnings for the bottom of societies wage earners. The difference is that the EITC is contained and the minimum wage is subject to "trickle up" economics (however modestly). If you raise the minimum wage to $10 then everybody making $10, $12, $14 or anywhere in that range see's the value of their work diminished in comparative earnings. This pushes the semi-skilled laborers who work in this pay range to demand comparable wage increases. All workers near the bottom end up with increased earnings as a result of a minimum wage increase. This does not happen with the EITC, it is hidden from view, someone making $12 an hour doesn't realize that it is effectively comparable to someone making minimum wage who is supported through government wage subsidies. What this effectively does is increases the percent of workers at the very bottom of the wage scale, and further diminishes any sort of lower middle class worker.
This is essentially a tax subsidy for companies that hire a large ammount of low payed workers but wants the government to step in to ensure that they have just enough income to purchase the products that they themselves sell. The GOP tax dream works like this. Whoever is still left in the middle class has to subsidize major businesses hiring Americans at unsurvivable wages. The businesses themselves can't be taxed or asked to raise wages or they'd leave America and go create jobs somewhere else. The rich people who run/own the businesses can't be taxed or they won't be able to "create" jobs that middle class workers end up having to subsidize. Eventually, the natural distribution of income switches from its normal bell and turns into a horse saddle; lots of poor people and a few really rich ones too. Whats the problems with this argument? All jobs that be shipped overseas, already have been. You can't outsource retail, service and restaurant jobs; they stay in America no matter what. Shouldn't these Americans earn a decent living in a way that allows all of the lower income earners a chance to improve their lot in life? Don't support expanding the EITC; push for raising the minimum wage!
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