Asset tests for programs aimed at helping low-income people have a certain obvious logic to them. The idea is to target assistance to the genuinely needy. But as Rourke O'Brien points out they also create some terrible incentives: "Yet, while policymakers created an asset test to keep hypothetical, unemployed trust fund brats from collecting government checks, these rules are sending a dangerous message to low-income families: Do not save."
Of course, the real issue here is a larger one of political context. Much of America's public assistance policy is driven by a deep, lurking fear that someone, somewhere may be getting benefits he or she doesn't deserve. An alternative way of doing business would be to design policy in a way that's best suited to the genuine needs of the genuinely needy. That would mean making it relatively easy for people to obtain the benefits for which they're eligible, and relatively generous about phase-outs and wealth-tests so that the provided benefits can be a stepping-stone to greater prosperity rather than a ceiling. But relaxed, generous policies like that really do leave the door open to some measure of fraud and conservatives have succeeded in elevating the evasion of this fraud to an absurdly high level. Thus, there's tons of emphasis on trying to detect EITC fraud even though the amount of money involved here is minor compared to tax evasion by the wealthy, but the damage done to an otherwise successful program aimed at making work pay is severe.
At any rate, Rourke's op-ed is aimed at building support for a John Conyers bill aimed specifically at this asset test business, and it seems like a worthy proposal to me.
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