How the Government Causes Poverty
and the effect is enormous
Taxation: In order to pay for the things the government wants, it takes money out (taxes) of the productive economy. Ie, it decapitalises the productive economy. This means lower economic growth, fewer opportunities (to start a company), fewer jobs (jobs reduce poverty), increased prices of goods.
Regulation: Government regulations of the economy cost about $1.9 Trillion (as of 2016) for the economy and have the effects of increasing the price of goods and halts or slows the innovation process for the market to reduce prices over time, fewer jobs (higher prices, means less demand), restrict jobs (occupational licenses requirements like braiding hair, reduce jobs).
Education: Most K-12 schools are owned by the government and have a track record of producing low numbers of math and reading proficiencies, in particular for disadvantaged minorities. A bad education and minimum wage requirement means that disadvantaged minorities and teenagers are priced out of the job market.
Healthcare: High medical costs due to government intervention and heavy regulation. Extremely high and costly requirements for new drugs and medical equipment (10+ years and $1.4-2.8billion). Medicare and medicaid cost 65% of overall healthcare spending and have their own set of negotiation and restrictions with pharmacies. FDA restricts suppliers which reduces production and increases costs. Formularies restrict which drugs are produced - usually the newest and most expensive one. Rebates and formularies inflate prices by several fold and those with high co-pay or without insurance fall into poverty.
Inflation: FED money printing and other stimulus plans that hand money to rich shareholders or bond holders while causing inflation for everyone. Higher costs of the CPI basket (inflation) pushes people into poverty.
Energy: Anti-energy policies drive the price of fossil fuels higher which are used for transportation, electricity, synthetical fertiliser, heavy machinery, agricultural machinary.. etc. Prices being higher - especially fuel and food - drive people into poverty.
Crime: High crime areas causes business to leave that area. This means fewer jobs, fewer investments, lower property taxes which means lower funding for education and pushes people in those areas into poverty.
Housing: Higher housing prices due to NIMBY restrictions, high-cost regulations and building codes that make it impossible to build low-cost homes, have increased the prices of homes dramatically in some cities. Easier access to money the government makes available for buyers to buy homes ($7 trillion of mortgages are held by the government through Freddie Mac and Fannie Mae) increases the house prices. The process of building homes so administratively difficult that 40% of the costs happen before a shovel is put in the ground also increases house prices. Rents and mortgages are a big part of people’s wages and can put people into poverty. This is also one of the root causes of homelessness.
Welfare traps: Means-tested poverty programs and welfare traps cause people to stay in poverty by making the marginal tax for moving to a stable job around 90% (ie, if you take a stable job, you lose all your benefits). Also, it is almost impossible to move to a job in another state without losing your state benefits and would then have to re-apply there.
Perpetuating poverty: Another issue with welfare is workless homes. These are families with children who mostly are female-lead single parent households where the children grow up not seeing anyone have a stable job. This has a high risk for intergenerational poverty and the children growing up to also stay on welfare. In addition, there have been many complaints about welfare incentivising single mothers to not get marries. While this issue is complex, prior to the welfare system the black community in the US had only 3% female-lead single parent households and today it is around 70%.