Sunday, November 04, 2007

Eliminating Poverty Through Tax Incentives--A Thought Experiment

I was asked by a fellow space advocate about solutions to eliminate poverty in the world. He sees this as a primary means for reducing the threat of terrorism. I have no argument with the goal; however, I happen to believe that if we waved a magic wand and made all the poor in the world economically equal to a middle-class American today, people would still find reasons to fight. Be that as it may, I thought I'd offer my solution below.

Compassion for the poor, in my mind, is to give the poor some temporary relief until they can get themselves on their feet, support themselves, and get off the dole. However, America's "temporary" expedients of the mid 1960s are still in place, poverty still exists, and [the programs] show no signs of going away any time short of an asteroid strike.

Here's the capitalist solution to this (take it as you will): Reduce taxes AND the government dole. Provide tax incentives and penalties for companies that provide (or do not provide) programs that provide social relief, job training, and housing assistance. In short, provide more incentives for private, not government action. In the U.S. such measures will, in fact, become necessary for the following reasons:
  • The current budget cannot be sustained forever.
  • We are about to face a serious wave of retirements due to the aging of the Baby Boom generation; there will not be the bureaucratic staff on hand to administer our ever-growing programs.
  • Businesses in the U.S. are going to need every productive citizen they can get in the coming 20 years. The favorite statistic bandied about these days is that China now has more honor students than we have students; and as much as some American parents would like to think otherwise, not all of our little darlings are going to become honor students.
  • If businesses are paying for relief and retraining, you can damn well believe that they will have a strong financial incentive to produce results because that sort of training is expensive. And the results are easily measured: when the individuals on relief are able to support themselves, the aid is cut off. Businesses can turn off the spigot a lot more readily than governments.
  • A major new social program would be incredibly unpopular and hard to sell, especially to the younger generations. While the Baby Boomers and their parents might have responded to calls for social justice and the like, Generation X and Gen Y are more likely to respond to financial incentives or penalties--ye olde carrot and stick.
I'm sure you rolled your eyes at least once and probably think I'm being a naive Yank for thinking that capitalism can do that much good. However, I'm telling you that yes, it can.

For instance, I worked for the Walt Disney World Resort for 12 years, and they had SEVERAL high-quality job training programs, including most especially English language training for our mostly-immigrant housekeeping staff. And while there might have been a PR motive, there was also a self-interested motive as well: Disney a) needs the labor and b) wants to maintain its reputation as a provider of quality services. And they can't do that without paying for the training. So yes, it can be done.

Secondly, environmentally safe products have caught on through a combination of government and market pressures. People feel better buying from companies that they know are doing some good--much better than when government comes in promising to do good. The standard joke line here is: "We're from the government and we're here to help you." This might not be as lofty or poetic as calls for social justice or compassion, but if it produces results, who the hell cares?

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