Thomas Freedman explains that an increase in the minimum wage should be coupled with an increase in the Earned Income Tax Credit. It will be interesting if, now that the minimum wage bill is passed, all the conservatives who've been talking up the EITC to head off the wage increase still agree that we need an EITC increase, or if that was but a ruse to head off help for low-wage workers. Anyway, we could get into some wonkery here about the wage and how the subsidies work and whether we can afford it, but in the end, this is a simple question of priorities:
Increasing the EITC for families with three or more children -- more than half of all poor children live in such families -- would help an estimated 3 million families and cost about $3 billion. Crucial actions such as improved outreach or removing a built-in marriage penalty could each be done for about $1 billion; more complete reforms that would also help those living barely above the poverty line could cost 10 times that or more.[...]
The federal budget is more than $2 trillion, and Congress's pork-barrel projects have been estimated at $47 billion. Home mortgage deductions -- a benefit for mostly middle-class Americans -- average about $9,500 a year per homeowner. By comparison, the cap on EITC payments last year was $4,400. The average EITC benefit in 2005 was only $1,872.
We have a U-shaped social welfare curve, where various tax breaks and subsidies that we don't call welfare (like the home mortgage and employer health benefit deductions) do the most for the middle and upper middle class, rather little (at least relatively) for the very rich, and very little for the poor. The question isn't whether we can change that. It's whether we want to.
