Are federal and state income supports in New Mexico too generous?
Approximately 50 percent of the residents of New Mexico are on some form of public assistance.
The programs are numerous including TANF, Medicaid, SNAP, unemployment insurance, and subsidized housing and childcare. A report prepared in October, 2021 by the Legislative Finance Committee outlined the benefits available for families with the assumption that they were enrolled in all of the programs for which they were eligible.
The results were eye opening. A family of three for example, with one job earning $21,960 per year, could receive from the State and Federal government benefit payments amounting to $52,421 per year.
A family of four earning $26,500 per year could take home an additional $77,500 if participating in all of the programs. These number are, in fact, larger than the median income of a working family which, in 2021, came to around $54,000.
At the same time, labor force participation in New Mexico is among the lowest in the nation at around 53 percent. One way to view this is that 100,000 more people would be working in the State if our participation percentage was just up to the national average.
This is not an insignificant number as there are only a bit over 2.1 million folks in the entire state so 100,000 is almost 5 percent of the total population. The question I have asked on more than one occasion is whether our public policy with generous benefits is contributing to this problem. There are ‘Help Wanted’ signs in many businesses in our community and one has to wonder if benefits have increased to the point that people that can work, no longer feel the need to do so.
In the late 1960’s, at the beginning of the ‘Great Society’ programs designed to eliminate poverty in this country, the national average poverty rate was around 12.5 percent of the total population.
Fast forward to 2022 and, you guessed it, that rate is STILL around 12.5 percent despite having expended billions of dollars trying to solve the problem. I believe that government transfer payments actually lead families toward more dependence and here is an example. Let’s say a single parent raising two children with one minimum wage job is collecting $500 per week in combined benefits.
These could come in the form of a housing subsidy, a child care subsidy, SNAP benefits, and Medicaid. Based on a 40-hour work week, the benefits amount to an hourly wage increase of $12.50 before taxes are deducted.
From the math, this single parent has to make over $25 per hour just to break even. Even small incremental increases can cause problems as the subsidy programs begin to drop off as income goes up. It makes absolutely no economic sense to take a job or a better job if the result is having less money at the end of the month.
The end result is an intergenerational cycle of dependence. Folks at the lower end of the economic ladder simply have little or no incentive to try to climb up.
There has been no discussion in Santa Fe over the last few years regarding the reduction of benefits. On the contrary, virtually all of the tax ‘reform’ has been targeted at increasing transfer payments to low income and working families in the form of refundable tax credits.
The Speaker of the House of Representatives is actually on record supporting a guaranteed universal basic income.
I will conclude this article with a quote from an 18th century philosopher that I find particularly relevant to today’s circumstances. It is past time for us to consider a course change as it appears to me that we are in the midst of the sequence described below.
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years. These nations have progressed through this sequence: From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.”
Alexander Fraser Tytler 1747-1813
N.M. Rep. Larry Scott, R-Hobbs, represents House District 62.
