Middle-Class Welfare State Is Invisible by Design: Ezra Klein

What is a government program? And are you on one right now? Those are the questions Cornell University political scientist Suzanne Mettler has been posing.

For her book “The Submerged State,” she asked a scientifically selected sample of 1,400 Americans whether they had ever used a government social program. Only 43 percent copped to having done so. Then she read off 21 social programs, such as Medicare (FFSOMED) and the home-mortgage interest deduction, and asked the same question again: Have you ever used a government social program? This time, 96 percent said yes, in fact, they had.

According to Mettler’s survey, 60 percent of those who benefit from the home-mortgage interest deduction didn’t think they had ever used a government social program. Fifty-three percent of those with student loans didn’t think they had used one. Among Social Security beneficiaries, 44 percent thought themselves unsullied by the touch of government, and among Medicare beneficiaries, 39 percent said the same. Twenty-seven percent of those in public housing answered in the negative, as did 25 percent of those on food stamps.

The implication seemed to be that Americans are hypocrites, or at least woefully uninformed. But in forthcoming research, Mettler and co-author Julianna Koch dig deeper, and find the reality is more complicated.

Their new paper argues that “policy design” is an important determinant of whether people recognize they’re using a government program or not. Some programs, like food stamps and Medicaid (USBOMDCA), force recipients to go to a government office and apply for them. Those are the programs that beneficiaries are most likely to recognize as government social programs.

Other programs, like Medicare, are provided by the government, but eligibility is mostly automatic, and recipients have paid into them. Beneficiaries of such programs are somewhat less likely to realize they’re on a government dole than beneficiaries of means-tested programs.

Submerged State

Then there’s what Mettler calls “the submerged state.” These policies are mostly, though not exclusively, tax breaks. They include the much-beloved home-mortgage interest deduction and the tax exclusion for employer-provided health care. Recipients of these policies -- and there are tens of millions of them -- are rarely cognizant that they’re benefiting from a government program.

But they are. “Indirect social policies offer benefits that are comparable to direct social benefits both in their purposes and in their costs,” Mettler and Koch write. “Both are targeted to specific groups of people, aimed to reward some kind of activity or some class of persons whom policymakers deem worthy of public support. From an accounting perspective, as well, both types have the same effect: They impose costs on the federal budget, whether incurred through fiscal obligations or lost revenues.”

The costs are significant. Huge, in fact. Tax expenditures now cost the federal government $1 trillion annually -- more than Medicare and Medicaid combined. And they’re regressive.

There is also a pattern to these programs: The more a government social program benefits wealthier Americans, the less obtrusive it is. We design policies for the poor in ways that make it hard to escape the knowledge that the government is providing help. But richer Americans rely on programs that are “submerged.” The Tax Policy Center estimates that eliminating all individual-income tax expenditures would raise levies on the bottom 20 percent by $931. For the top 1 percent, the tax increase would be almost $280,000. (Notably, both President Barack Obama and Mitt Romney have talked about cutting back on tax expenditures for the wealthy, but neither has provided details.) Even so, many middle class and wealthy beneficiaries have no idea that they’re receiving any government assistance at all.

Political Stratification

Not surprisingly, this influences Americans’ attitudes toward government. Mettler and Koch find that the more likely you are to know you have used a government program, the more likely you are to have a positive opinion of them. “These results point to an important but previously overlooked form of stratification in American politics,” they write, “in which some citizens are made cognizant of governments’ role, but others -- although they too benefit from it -- are not.”

Other factors influence whether people think they’ve used a government social program. All else being equal, a 75-year-old is 28 percent more likely than a 30-year-old to say he has never used a government program; a conservative is 50 percent more likely than a liberal to say the same.

Mettler hypothesizes that such differences could play a role in the nation’s growing political divide. “I think one of the drivers of the kind of polarization we have today is policy design and delivery, because we have these policies where people can benefit a lot from the government but become more anti- government because they’re paying higher taxes and don’t think they’re getting benefits.”

I’m more worried about the role submerged policies play in the budget and in good policy. We’re funneling an enormous amount of money to people who, in many cases, don’t need it and don’t even know they’re receiving it. We’re designing programs to be hidden in the annual budget -- tax expenditures don’t show up as spending, even though that’s what they are -- and invisible to taxpayers. That’s economically inefficient and politically problematic.

If Americans who either rent or own their homes outright were asked to accept a tax increase of $150 billion in order to subsidize the mortgage payments of their indebted friends, it seems unlikely they would find that appealing. The same goes for asking Americans who don’t get health insurance through their work to spend $100 billion or so annually subsidizing the benefits for those who do. Of course, that’s exactly what’s happening right now, but it’s hidden in the tax code, so most Americans don’t know it and can’t protest it.

It is in part because these policies aren’t visible that they’re so difficult to change. That’s the thing about submerging a large part of your welfare state. Sink it deep enough, and it becomes almost impossible to dredge up.


http://www.bloomberg.com/news/2012-03-01....

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According to Mettler’s survey, 60 percent of those who benefit from the home-mortgage interest deduction didn’t think they had ever used a government social program.

I stopped reading this propaganda right here. The government 'Allowing' me to deduct something from what they already stole from me is not a social program or welfare.

Saying that it is seems like a ploy to get more and more Americans to be comfortable with the looting.

F this.

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According to Mettler’s survey, 60 percent of those who benefit from the home-mortgage interest deduction didn’t think they had ever used a government social program.

This is as far as I read. This idea that when the government doesn't take xx dollars from you, you are on a "social program" is bull****. By their definition, anyone who takes the standard deduction is also on welfare. Author is a government apologist/propagandist.

ETA: and federal student loans aren't a benefit, they are a labor-entrapment program.

People view welfare as charity that the recipients didn't pay for. Hence why people are fine with social security but hate SSI for meth heads. Welfare in general fundamental breaks the human law that you only get back as much as you put in. This creates resentments in the people who receive it and resentments in the people who pay for it.

Medicdan+1000

Plus, the only thing the home mortgage interest deduction does is raise the price of housing, to the benefit of realtors and banksters, primarily.

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I stopped reading this propaganda right here. The government 'Allowing' me to deduct something from what they already stole from me is not a social program or welfare.

Huh? The interest deduction is the definition of a government social program.

The author argues left and right in the piece if you read it. A bit schizo, but when your money comes from the government I can't blame you for covering your bases.

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Of course, that’s exactly what’s happening right now, but it’s hidden in the tax code, so most Americans don’t know it and can’t protest it.

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because we have these policies where people can benefit a lot from the government but become more anti- government because they’re paying higher taxes and don’t think they’re getting benefits.

Absolutely. If you don't pay a portion of tax that someone else pays simply by virtue of your social condition (indebted homeowner) then you are a beneficiary of gov social engineering. The only thing that will change it is the flat/fair tax.

What a ridiculous premise. According to this analysis, everyone who has ever had mail delivery has been on a social welfare program.

Yes. The government never 'took' your mortgage interest from you, the bank did. The government is giving you a portion of that back, ergo it's welfare.

"60 percent of those who benefit from the home-mortgage interest deduction"

Since when is getting 28% of your own money back, a social program?
Since when is keeping your money, sending less in taxes, a social program?

"The government is giving you a portion of that back, ergo it's welfare. "

Wrong. The government is TAKING LESS OF YOUR MONEY.

It is ALL your money. Taking less of it is still theft, just less theft.

Same goes with SS - I paid into that fund
Such BS

Because you are "getting back" in proportion to the amount of debt you incurred ... the more debt the more you get. It's plain as day.

If everyone got the exact same amount it would not be a "social program" ... but your net benefit is dependent on the amount of debt you incur, thus it's a social program. Why should I as a "free-and-clear" homeowner have to subsidize your tax liability due to your inability or unwillingness to pay for your own house?

Nope, welfare is receiving a benefit without paying or working for it. I work my ass off so I can get this house paid off soon. To equate that with a slug standing in wall mart using there food cards, which they neither paid for or worked for is quite silly, and disingenuous. A deduction or a return due to OVERPAYMENT of your own labor is NOT, I repeat NOT welfare. Its not like this is money the .gov freshly mints to send to homeowners.

Seems some of you need to spend some time in a dictionary learning the definitions of words.

Logic, not emotions people.

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If everyone got the exact same amount it would not be a "social program" ... but your net benefit is dependent on the amount of debt you incur, thus it's a social program. Why should I as a "free-and-clear" homeowner have to subsidize your tax liability due to your inability or unwillingness to pay for your own house?

The tax credit inflates the value of your house(wither it's payed off or not) and is in general a payoff to the to the banks and real estate companies. The person receiving the money back doesn't benefit in the slightest due to the inflated value of the house the incentive causes.

Tax credits and medicare are good examples of welfare that lowers everyone's quality of life.

Yep.

Tax expenditures are the worst form of welfare in that most people think they're not getting a benefit, but indeed they are, and it's at everyone's expense.

"Because you are "getting back" in proportion to the amount of debt you incurred ... the more debt the more you get. It's plain as day."

You are not getting back anything. You are keeping *your* money.

You don't 'get' more. It was always yours in the first place.

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The government 'Allowing' me to deduct something from what they already stole from me is not a social program or welfare.

They didn't steal from you, 50%+1 voted to have the tax system that we do. Your special carve-out is in fact stealing from me, the renter, but I don't blame you, I blame the 50%+1 that likes free cheese. You are operating within the system and taking advantage of it, and you've adapted your financial choices to its vagaries, and that's OK.

Me, I've done the same, though as a single childless renter there are not terribly many opportunities to get back what the government stole from me, and when there are some I am likely going to take them.

Otis -

I think you're mistaken in your view about renters vs. owners. Renters pay property taxes and maintenance costs, albeit indirectly, as they are included in the rent calculation that the owner makes. They also get the benefits of any mortgage deductions, etc., but also indirectly and in the same manner.

Granted, if there are other factors, e.g., rent control, shortage of appropriate housing in the area due to zoning, etc., you may not see all of the costs or all of the benefits of the mortgage deduction in your particular case, but over the long term and in the aggregate, renters pay their proportional share of all the costs (i.e., nobody is going to rent at an overall loss) and and receive their proportional share of all the tax benefits (i.e., landlords have to be competitive with their rents).

Otis--Peter is right--all costs are passed onto the renter so they are in effect getting the same tax advantages, albeit indirectly. I promise you it is in every DCF model you use in Real Estate.

That being said, I'm all for killing all tax deductions and credits and all forms of social engineering and favoratism

Ben:

The only way you get 'that money back' is if you have a mortgage, and pay mortgage interest to .... a bank.

You never paid that money - those particular, specific dollars and cents - to the government. You paid them to a bank. The only way a renter can qualify for the same tax 'money back' is to pay mortgage interest to a private institution ... a bank. Not the gov't. The gov't is giving you other people's money to subsidize what you're paying to the bank.

Sure, it means that when you do the math, your amount owing to the gov't is reduced, but don't fool yourself, renters pay for your tax break.

It's 100% welfare.

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Otis--Peter is right--all costs are passed onto the renter so they are in effect getting the same tax advantages, albeit indirectly. I promise you it is in every DCF model you use in Real Estate.

Even then, in that case, it affects the market value of the homes in question. Would prices be higher or lower if there were no interest rate deduction? And what of folks who own their homes free and clear? If the mortgage interest deduction went away homes would be cheaper due to reduced demand, and thus assessed values would tend to be lowered, thus property tax assessments would be lower. So while I may reclaim _some_ of the current deduction vicariously, any portion of the deduction I don't receive is tantamount to theft.

I'm sticking to what I said. It's propaganda to help soften the idea that socialism is A OK. See everyone's doing it. You have been doing it too. So why not keep doing it and make it better. F That.

When the Have not's make up 51% of the voting public, it's over. Clearly this journalist has an agenda.

Otis -

There is certainly a distortion in market prices due to the deduction, no one is arguing that there isn't. I was merely pointing out that the argument that the owner benefits at the expense of the renter is fallacious.

The theft exists, but the real beneficiaries are the real estate industry (higher prices = higher commissions), the banking industry (larger mortgages = more interest), and local gov't (higher assessed values = higher taxes). The gov't, by allowing such a deduction, is subsidizing them at the expense of everyone else, not only the renters.

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You are not getting back anything. You are keeping *your* money.

Yes, but I as a "free-and-clear" owner get nothing and the gov keeps all of my money on this and thus I am subsidizing your debt - and yes we all pay more too because of your unwillingness or inability to pay for your domicile.