Cato's Dated Welfare vs. Work Framework

The Cato Institute came out with a big study recently that argues the familiar point that generous welfare payments undermine incentives to work. The Center for Budget and Policy Priorities promptly replied with a four-page paper rebutting key aspects of the report. 

The most striking point raised by the Center, although not its main one, is that there really isn't such a clear trade-off between work and welfare these days -- and that CATO's overall framing belongs to an earlier era of AFDC. 

That is something we write about here a lot, in the context of the low-wage economy. These days, it's very common for working poor Americans to lean heavily on the public safety net to make ends meet. So many workers these days can't get full-time hours from employers seeking to control labor costs. And even those who do work full-time find themselves with near-poverty incomes. As a result, they qualify for programs like SCHIP, Medicaid, energy assistance, SNAP, and so on -- as well as for tax credits like the EITC. Welfare is more likely to be a supplement to work than a substitute for work. 

All of which raises a very different question than the one explored by Cato: Why do we allow highly profitable corporations like Walmart, Target, and McDonald's to depend on public safety programs to make their low-wage model viable?

Cato, of course, has been a long-time critic of subsidies to corporations. What they perhaps haven't realized yet, though, is that today's welfare state provides some of the biggest subsidies of all by enabling low-wage private sector employers to pay their workers so little and keep profits high.