Means Testing of Social Programs

Kathy G. is against it — as are many progressives, it seems. The main reason is that means testing is thought to “make the relevant programs a lot more politically vulnerable.” I used to believe this, but I’m now skeptical.

A paper by Robert Greenstein (in a 1991 Brookings book, The Urban Underclass) initially spurred my rethinking. He noted that some of our most important means-tested benefits, including the Earned Income Tax Credit and Medicaid, fared quite well during the Reagan era. Christopher Howard’s recent book The Welfare State Nobody Knows updates Greenstein’s argument and analysis. Peter Whiteford has an informative examination of cross-country patterns, with a focus on Australia’s successful use of targeted benefits. My own preliminary assessment of the evidence is here (pdf).

That doesn’t mean I favor means testing of Social Security benefits. When you have a universal program in place that is contributory, functions well at reasonable cost, and enjoys considerable public support, it makes sense to keep it universal. But for a number of other programs I worry about progressives getting hung up on the alleged superiority of universalism.

5 thoughts on “Means Testing of Social Programs

  1. But this is considerably backwards — progressive tend to favour means testing because it reduces the costs of welfare by targetting it, and the reduced cost means that headline taxes can be lower and thus less politically objectionable, because voters focus on gross, not net, tax rates.

    This despite that means testing is, as Frank Fields used to say, entirely bankrupt, because of the poverty trap effect due to colossal marginal “tax” rates.

    Conservatives tend to hate the political effect of means testing, because it makes the taxes used to fund welfare less visible.

  2. Dear Lane Kenworthy — I’m just writing as someone (very much a non-economist) who is interested in the issues you discuss (I published a book called The Trouble with Diversity on diversity and inequality) and who has learned from reading your posts and who has recommended your website to others. My reason for writing is just to let you know that people are reading, responding to and using your work.
    Best/
    Walter Benn MIchaels

  3. Lane,

    Before anyone can sensibly say he opposes means testing, he must acknowledge scarcity of resources and the fact that this scarcity requires trade-offs. In particular, the reality is that we are on an unsustainable fiscal course. Our projected long-term fiscal imbalance under current spending policies and current level of taxation simply grows too large to be sustainable. See projected fiscal imbalance (chart uses CBO numbers). (If link doesn’t work, URL is http://www.heritage.org/research/features/budgetchartbook/fed-rev-spend-2008-boc-P6-Entitlement-Reforms-are-Needed-to.html )

    A second piece of reality is that it is neither politically nor economically feasible to solve this fiscal imbalance problem sufficiently solely by raising taxes, or even by raising taxes and cutting Defense spending (as some “progressives” suggest).

    Therefore, the question for “progressives” should be: If you oppose means-testing, what non-Defense spending would you prefer to sacrifice so that Bill Gates can get a Social Security check? Medicare? Education? Infrastructure? Bear in mind, a LOT would have to be cut. Or would you prefer that EVERYONE’S Social Security check be a lower dollar amount so that Bill Gates can get that check?

  4. I wonder if you’re overlooking another important objection to means-testing and one that might bear on the efficacy of these programs. Means-testing keeps out not only those who are technically ineligible but many who have neither the time nor bureaucratic skill to navigate cumbersome and unfriendly bureaucracies. Think of the early successes the NWRO had. What are the relative participation rates or coverage of eligible populations between programs that are means-tested and those that aren’t?

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