EconLog

Who gets transfer payments?, 2002-11-26

One of my sources, 'Mindles Dreck,' pointed to this paper by Tyler Cowen.

In the developed Western democracies, most government expenditures recycle tax dollars, rather than creating a net movement of tax dollars from rich individuals to poor individuals. These expenditures and their associated programs affect individual behavior at the margin, through taxes and subsidies, but many do not redistribute net wealth to the poor.

Cowen argues that when you take into account the adverse effects on growth of high tax rates, the long run impact of the welfare state is to worsen poverty.

Discussion Question. If the government ended Social Security, this would free up "tax capacity" to use for income redistribution. Should economists who favor income redistribution therefore be opposed to Social Security?