Making Poverty More Expensive: Your Government At Work

If I didn’t know better I’d think the government were intentionally trying to create an underclass of people entirely dependent on the government.

For all the talk about how they’re all “fighting for the poor,” our elected and unelected officials have been doing quite a bit lately to make poverty far less affordable.

A bum with a bottle of malt liqour

Which was it that pushed you out onto the streets? The gas bill? The electricity bill? The new crib?

To give some economic context to this let’s take the case of Bill and Steve. Bill is a millionaire and runs his own company. Steve is barely scraping by, hoping to hold onto his low-paying job. Both have a family and a house and they each really would like to maintain their respective standard of living. This requires both of them to buy certain things–e.g., electricity, perhaps some sort of heating oil or natural gas, a car, gasoline, a baby crib, food.

When Bill and Steve buy things that cost a flat rate like gasoline and electricity they generally pay the same rate per unit purchased. In this case, since Bill has so much more money, he is devoting a much smaller percentage of his income to these commodities, and thus it affects very little his ability to spend money on luxury items or nicer versions of other necessities. A rise in electricity prices would hit both men equally per unit purchased, but the percentage of one’s monthly budget demanded by a rise would take a larger chunk, percentage wise, out of Steve’s monthly budget.

In the case of food, both have to buy food, but obviously Bill is more easily able to afford more food, and nicer food. If the cost of food goes up, both Bill and Steve take a hit, but again, since Bill has more disposable income it merely means buying a marginally lower quality of nicer foods, or less money available for other luxury items. With Steve, since his food budget was already stretched thin, rising food prices make a difficult situation even worse.

In the case of cars, baby cribs, and other items one can buy used, Bill usually buys brand new because he can easily afford to. Steve, on the other hand, relies on Craig’s List for his cribs and the used car lot for his car. Anything which causes the supply of used cars and cribs to drop will cause the cost of purchasing those items to rise, which takes a further chunk out of Steve’s budget.

Suddenly, both Bill and Steve are paying more for electricity, heating oil or natural gas (especially as the weather turns cold), gasoline, food, cars, and other items like baby cribs. The hit to Bill’s discretionary budget is unwelcome, but marginal. For Steve it’s well-nigh untenable. Steve’s kids may not have a merry Christmas at all, since the money Steve and his wife wanted to use for gifts had to go to the electricity bill, heating bill, the food bill, the auto mechanic, and buying a brand new crib for the new addition since no used ones were available.

What might have caused these spikes in prices? Let’s take a look…

  1. “Under my plan…electricity prices will necessarily skyrocket.”

    When the cost of coal goes up and those costs are passed on to the consumer, that causes a greater demand for less-expensive alternatives. That direction is obviously not toward wind or solar, since one of the great geniuses of capitalism is that the much-maligned captains of industry are constantly seeking ways to cut costs without hurting sales. If they knew they could sell just as much electricity and produce it more inexpensively, well then you can bet your Adam Smith Tie they would do so. That they haven’t, while not entirely dispositive, logically speaking, is still indicative, practically speaking. So electricity from coal is more expensive, which makes everything powered by that electricity more expensive. Everything.

  2. The ethanol subsidy. As I discussed previously, the ethanol industry does nothing to curb net pollution, but it does a whole lot to drive up the cost of everything that relies on corn. Like food. And gasoline, since ethanol is more expensive to produce than gasoline, which makes the gasoline-ethanol blends we have to buy at the pump more expensive. Plus, since it drives down gas mileage, Steve is forced to buy gas more frequently.
  3. Cash for Clunkers. Along with the ethanol subsidy, this is among the most egregious examples of government-engineered transfers of wealth from the poor to the wealthy. The government subsidized the purchase of new cars (in the vast majority of the cases by those who were going to buy a new car anyhow) by taking used cars out of the market–used cars that often times had no problems, but were simply “on the list.” These were cars that still ran just fine, and would for years. But the government needed to be seen as doing something bold to reduce carbon emissions, so they bought and destroyed all these used cars, thus reducing emissions in no appreciable way, but very signficantly reducing the number of used cars available for purchase by those who could not afford a new car, government hand-out or not. Fewer used cars in the market meant higher prices for the ones that were available. Steve suffers, and is forced to fork over more money to a dealership or a bank.
  4. Killing “killer” cribs. Yahoo News reports that the Consumer Product Safety Commission has banned the sale or re-sale of drop-down side cribs. They report that over the past 10 years, “at least 32 infants and toddlers” have died due to malfunctions or poor usage of the drop-down side feature. (Odd to see this administration suddenly concerned about baby safety, what with nary a peep of concern over the millions of babies who have died since 2000 due to abortion). While no infant mortality is to be taken lightly, 32 out of how many millions who were not aborted, were born, and survived such cribs makes those 3.2 per year an accident, and certainly not a reason to blanket-ban such cribs. (An aside: With higher fixed sides, mothers are forced to bend at the back and reach further down, either to lower a sleeping child gently into the crib or lift the child out. Shorter mothers, or those with bad backs or other disabilities may find that impossible, while mothers who don’t have bad backs may hurt their backs as the children get bigger.) But beyond that, the rule enacted by unelected bureaucrats also outlaws the re-sale of these cribs. So if you have one that you’re not going to use any more you can no longer sell it lawfully, so those who need a crib but who cannot afford a new one just had an entire chunk of the pool of possible cribs taken off the market. As with the above items, this drives up the cost of the remaining used cribs and forces many people to buy new ones they really cannot afford.
  5. Drilling moratoria and the war on domestic oil production and refining. The continuing, unwarranted moratorium on off-shore drilling in the Gulf of Mexico, in conjunction with the ridiculous statutes that prevent drilling in so many other places, have and will continue to drive up the cost of gasoline, heating oil, and all petroleum-based products; not to mention driving up the cost of anything transported by an internal combustion engine–i.e., everything.

So, with all of these things going up in price (and I’m sure there are other examples), whom do you suppose will feel the pinch more: Millionaire Bill? Or Barely Scraping-by Steve?

Toss on top of that increased taxes on “the wealthy,” and Bill also has less money to re-invest in the company he runs, thus reducing the number of employees he needs or is able to hire. Steve suffers again due to a shrinking pool of job openings.

Is the government trying to create a permanent underclass of those dependent on the government?

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14 thoughts on “Making Poverty More Expensive: Your Government At Work

  1. Elaine says:

    Another kind of government regulation that makes life more difficult for the poor is that related to ownership of automobiles — mandatory insurance, annual license plate or parking stickers, emissions tests and inspections, etc.

    While mandatory insurance laws are certainly well-intentioned, and driving is technically a privilege and not a right, not being able to afford a car severely limits one’s ability to find suitable employment — particularly in areas without adequate public transportation. A person may be able to scrape up the cash to purchase a “beater” but then on top of that they have to come up with the money for insurance, title, plates, stickers, etc. I know from experience that coming up with the money to pay for the annual registration sticker (now $98 in Illinois, and more expensive in other states) can be a hardship if your money is tight for whatever reason.

    I believe there are, in some areas, private charities that accept old cars as donations, fix them up and provide them to people who cannot afford to purchase cars themselves. Helping people who are struggling to get by pay for their insurance, registration, and (in areas where required) emissions tests/inspections, I think, is an act of practical charity that ought to be encouraged.

  2. Tracy says:

    Phil, his point is the economic impact of an idiotic regulation. I have a drop down crib. Every year I check it to make sure all the screws are tight and everything is in working order…because they do get loose. Just like with all products, you need to be responsible and maintain them or they will break. I mean, how disconnected do you have to be to not see that your crib side is loose, when you put your most valuable and precious baby in it? I would like to see the statistics on the homes of those children who died and if there were any other contributing factors- like drug use, neglect- anything that might lead to someone no noticing that the side of your crib is coming off!! Although this is a tragedy, I would have to put most of the blame or negligence on the parents, not the crib manufacturers. I mean almost ANYTHING when not working or maintained properly can have some harmful or accidental potential to serious injury or death- you don’t put air in your tires, they get low, potential blow out, potential serious accident. These are the risks we all take in everyday life in just living our lives. In our capitalist society, we have to be compassionate, but also practical and reasonable. This ban was a knee jerk reaction based solely on emotional impact and political gain. No one wants to see kids get hurt let alone die.

    1. Phil says:

      Phil, his point is the economic impact of an idiotic regulation.

      In that case, the salient point is that the regulation was idiotic; the economic impact of it is just a red herring. If a product is legitimately unsafe (or meets some unstated standard of reasonable dangerousness) then it is irrelevant whether banning it will result in disproportionate economic impact to poor families. All product safety decisions will have disproportionate effect on poor people. It’s a serious stretch to call this a Catholic issue; I can envision many of the church leaders in my hometown looking at the statistics and saying, “This is a sacrifice that people are going to have to make to make the world a safer place for children.” That doesn’t mean that they are right–their math skills might lead them to think the danger is far greater than the reality. But that doesn’t make them bad Catholics, does it?

      1. Tom Crowe says:

        Phil, the regulation was idiotic *and* it disproportionately hurts the poor–both can happen at the same time. I chose to write about both in this instance. It doesn’t make them bad Catholics, but it is still an unnecessary regulation that disproportionately hurts the poor. Lots of the safety regulations which disproportionately affect the poor are good and proper, so the economic impact on the poor, while unwelcome, is unavoidable. This is not one of those.

  3. Phil says:

    So, when a crib is taken off the market for safety reasons, this raises the price of cribs because families are forced to buy new cribs. And this unfairly penalizes the poor…

    By this logic, of course, everything that is ever taken off the market for safety reasons will cause poor families to spend disproportionately more than rich families.

    So, either we must accept the logic that it must occasionally be acceptable to cause some degree of economic hardship to poor families, or we must accept that it is never, ever acceptable to ban a product for safety reasons. Which is it, Tom?

    1. Tom Crowe says:

      Third option, Phil: this isn’t a true safety risk. As I mentioned in the article, 32 over 10 years=3.2 per year. If we spread that over each instance of a baby being put into a crib that means only 3.2 times out of the hundreds of millions of opportunities resulted in such a death. So you presented a false dichotomy.

  4. Joseph J. Pippet says:

    JMJ † Mr. Crowe. Thank you for this highly informative article. This is a Truthful article not Conserative It is a Catholic teaching that is not average, Catholics are Not average We are “Catholic”, “Catholic”! Not liberal,not conserveative nor right,nor left, etc.We may be lukewarm (that’s Bad not average)never average that’s Demeaning to ones being. Many catholics may have difficulty understanding Catholic teaching because of Poor teaching of our own Bishops, Priests,etc. who were suppose to be Catechists, Alas they weren’t that’s why we have Catholics who say thy are average Catholics, ain’t no such person. Mr. Smith even your name is not average it’s a common name, Not average. If you were ever taught Critical Thinking in school (Catholic ?)than i suggest you use it to try and read Mr. Crowe’s Thoughtful article, after that read your comment about his Knowledgeable writing than see if you can see the Teacher’s teaching to you.Respectfully with Love, Joseph J. Pippet Wildwood,N.J. USA

  5. ND Envirochick says:

    I have a drop-side crib which I currently use with my nearly 2 year old. I have never had a problem with it, nor did my sister who originally purchased it to use with her now 8-year old. I am short – a mere 5′ 2″ – and have attempted to use a fixed side crib with no success at all. I even bought an exercise step and put in front of the fixed side crib to give me extra height, but still couldn’t navigate its use properly. My sister is even shorter. I thank God that I had my child when I did. I was also fortunate to have a sister who kept her nursery furniture. I guess we’ll save it for our grandchildren to use.

  6. GREG SMITH, Average Catholic says:

    Tom (Crow not Peters) Interesting conservative economic analysis. I’m not sure what it has to do with Catholicism and specificly, from and American Papist perspective, I’m not sure that Bendict XVI or John Paul II wouldn’t seriously disagree with you.

    1. rskempf says:

      These government programs are driving us toward socialism. In the case of ethanol subsidy, they are not even close to effective and efficient.

      Let me be perfectly clear. John Paul II, and Pope Benedict XVI are both emphatically against reduced freedom. They are totally against socialism.

      They are for individual charity and subsidiarity but not collective socialism.

      By the way, this is real catholocism, and not your common social justice program that most parishes are stuck in (temporarily).

      1. Greg Smith, Avg. Catholic says:

        In fact both popes have argued that we need to avod the extremes of unfettered capitalism AND socialism. BTW I believe the St. Vincint de Paul Society and other social justice at a our Average Catholic parish would pass muster with the pope should he come visit.

    2. Tom Crowe says:

      GREG SMITH, Average Catholic: I’m not sure the point of your post since you said a whole lot of not much except how unsure you are of things.

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