One question should have been asked of Sen. Cory Booker, D-N.J., at last night’s Democratic presidential debate: Why do you want to spend $96 billion to achieve nothing?
Of course, silly ideas are not rare at any gathering of politicians, and last night was no exception. But proper scrutiny wasn’t provided by the debate’s moderators. Take Booker’s housing plan, for example. The presidential aspirant claimed that the rent is too damn high and said he’d subsidize poorer families by providing a refundable tax credit for rent.
The only problem? It would make no difference at all.
Booker says that some half renters are “rent-stressed.” This means they pay more than 30% of their income in rent, leaving arguably too little for the rest of life. That could be true, and if it is, there’s no doubt we’d like to help them. Yet Booker’s plan is to offer a refundable tax credit which would work out at roughly $4,800 per family for those roughly 20 million households.
My calculations suggest that’s $96 billion a year — which is a lot to pay to achieve nothing.
This won’t really lead to any change in the percentage of families that we consider “rent-stressed,” because we don’t actually count tax credits when measuring who is rent-stressed. Sad creatures like me who actually read footnotes recognize Booker’s numbers, and they’re from the Joint Center for Housing Studies at Harvard. I checked with them for their definition of income and it is, more or less, the same one used to measure the official poverty rate.
It doesn’t include anything to do with taxes, nor any benefits or aid that comes as goods, services, or vouchers. It’s purely about cash income.
So this includes Social Security and cash welfare, but it doesn’t include Medicaid, food stamps, or cellphone plans. Nor, obviously, Section 8 housing vouchers nor any other system of subsidies to housing. Crucially, it also doesn’t include anything that comes through the tax system. Not child tax credits, the Earned Income Tax Credit, nor a tax credit meant to aid in paying rent.
So, we would start with 20 million households officially counted as rent-stressed, we’d spend $96 billion a year, and we’d end with 20 million households still rent-stressed. This might not be the way to design public policy.
Of course, a tax credit would indeed help people pay the rent. But before we do that, we’ve got to more realistically measure how many people still need help after what we already do.
When we add in the EITC, food stamps, Section 8, and all the rest of the hundreds of billions we already spend each year on alleviating poverty, how many families still spend more than 30% of their total income on housing?
Booker is not counting what we’re already doing to fix the problem before deciding we must spend more. The only sensible approach is to work out the full effects of what is already being done so that we can work out whether more should be done — you know, exactly what the senator isn’t doing.
So, I offer a simple question for a moderator to ask in the next debate: “Sen. Booker, why do you want to spend $96 billion a year to achieve nothing?”
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
