Question

What is so hard about guaranteeing everyone a minimal level of income support? What problems arise? Why don't we give poor people more cash welfare instead of in-kind transfers like: food stamps, housing assistance, and medicaid

Answer 1

When everyone is guaranteed a minimal income level support it may remove the incentive to work hard. The minimal level could perpetuate the declining labour force participation rate; and disincentivize people to get the employment, and make work seem to be optional. A strong incentive to become poor will be created for those aren’t poor. Also the inflation could be triggered due to the rise in demand for items and services. In the long run there won't be an increase in standard of living due to the inflated prices. Moreover it would be very tough especially in America to get the legislation passed and approved due to the stiff opposition to handouts for the unemployed.

In the in-kind transfers the poor receives what they need most. For example: When the government provides food stamps to poor for buying food for them, it serves the purpose of the aid is intended for. Moreover prevents them from buying non-food goods such as cigarettes and alcohol. Also the in-kind services adapt at meeting a demand or a requirement by raising the supply without causing any increase in prices. Cash transfers are at an increased risk of corruption and theft. Therefore the in-kind transfers are preferred more than cash transfer