The Standard of Living is used to try to show how good (or bad) our lives are in material wealth. While money isn’t everything, poverty tends to make it very difficult to be happy.
There are several ways to try to measure it, but Standard of Living tends to boil down to Real GDP per person. GDP is an imperfect
measure, so Standard of Living also is as well. But, it’s all we have so let’s use it.
If we want it to rise, we need to get Real GDP to rise. The $64,000 Question is how. As we look at different policy options, we also should prefer longer term effects rather than transitory, short term results.
Take the various forms of Welfare assistance. If we could identify which people were in dire, immediate need, then the short term benefits would be quite apparent. But, the longer a person receives an “Entitlement,” and the more people who do so, then the worse it is for all Americans long term.
- A person on welfare has a reduced incentive to work. He still consumes, but he doesn’t produce any good or service to help grow GDP. Bob Newhart includes this disincentive in one of his comedy pieces.
- Welfare rules make it even more difficult for the person to add to GDP, for if they get caught, they might lose benefits. Sneaking around to prevent losing benefits also promotes a disrespect for the law.
- Receiving welfare reduces a person’s initiative. There’s less reason, less need, to go to school or to learn a trade if you’re being paid for doing nothing. You don’t improve your skills, and you let any skills you may have had deteriorate, so your prospects for earning more in the marketplace become lower.
- The wealth needed to pay for Welfare benefits must be taxed (including inflated) away from possible savings. Savings is the only true source for investment funding. So, investment not only to replace equipment that is wearing out, but also to create better equipment, is reduced. Without better equipment, or even upkeep of existing capital goods, GDP stagnates or even declines. Falling GDP means that people no longer are able to live the way they have been living.
- All of this creates a Victim mentality in society. Those receiving benefits say they deserve the money because they were victims, and those having to pay think of themselves as victims because their money is being taken away to support somebody else. Victim mentality reduces cooperation in society, further hurting GDP.
Now, some people really are in dire need of help. I’m not suggesting that Americans should let them die in the streets. As I’ve said before, Americans are the most charitable people in the world. Even with high taxes and transfer payments, Americans still give well over $300 Billion a year to charity. Without such high taxes used partly to pay for transfer payments, that charitable giving likely would be much higher, and more would get to those actually in need.
Rather than allowing the Food Stamp program to grow to its current 50 Million people size, we should have reduced it, allowing Americans’ good will to take up the slack where help really was needed. The much reduced level of taxation could have been used to grow GDP, making the Standard of Living rise for all Americans, rich and poor alike, go up instead of down.
With more people needing to provide for themselves, more people would be working, producing more goods and services, also pushing up GDP.
“There are no jobs,” you say? That is far from being true. There are jobs to be had – if you really had to work, and there are things you could do yourself to bring in some money – if the rules didn’t prevent you.
One of those rules is the Minimum Wage, which I’ve talked about previously. You can’t work except for at least what the government allows – unless it’s for zero (as a volunteer). This keeps you from growing your skills, confidence, and resume, which would make you more valuable.
Instead of agitating to raise the Minimum Wage, which would hurt most of those who supposedly would benefit, the movement should be toward reducing and eliminating this stultifying block to earning money and improving skills.
Today, we’ve talked about how removing two kinds of government programs would help improve all Americans’ Standard of Living by improving Real GDP. There are many more examples of government programs which hurt Americans, and they also should be removed.