MR. FUND: Thank you, David.
Our next panelist is Merrill Matthews, who is the Vice President for Domestic Policy at the National Center for Policy Analysis which was one of the very first groups to talk about how to implement a charitable tax credit.
The NCPA has been very active in welfare and health issues. It was instrumental in the 1989 repeal of the first Federal welfare program in 100 years. That was the Catastrophic Health Care Act. So, Merrill, with that kind of track record on that program, perhaps you can tell us how we can perhaps cannot repeal the welfare state but at least transcend it, which I think is far more a better way of saying it.
MR. MATTHEWS: Thank you, John.
Sam Walton of Arkansas had an idea. He thought if I could figure out a better way, a new way, a more innovative way of getting goods, distributing them from the manufacturer to the stores, we could save money and everyone would benefit. Well, Sam Walton did figure out that new form of distribution and the success story of Wal-Mart and Sam's warehouse stores is history.
What we are talking about, what Senator Coats and Representative Kasich are talking about, what they're looking for, is a new way of distributing welfare dollars to the poor. Is the problem that we aren't getting enough money out there to the poor right now? The answer is, no.
As has been mentioned, we spent about $5.4 trillion on welfare programs over the last 35 years. That works out, if you take the money we're spending in any given year, take all the money going to various types of means-tested welfare programs, divide that by the number of people below the poverty level, you would get about $9,000 per person below the poverty level or $36,000 for a family of four.
That would put them in middle income. We're not spending too little money on welfare. We do not have an efficient system of distributing the money that we are spending.
The charitable tax credit that we're talking about provides this new, more efficient distribution system of the welfare dollar. It takes money and begins to transfer the power from government and large welfare bureaucracies back to the individual taxpayer to let them make decisions as to how they want to use that money.
Now, the Coats/Kasich proposal would begin, by transferring about 4.7 percent of total welfare spending over five years and reducing total welfare spending by 4.7 percent over five years. This is extremely important. And, in fact, this is critical to the whole notion here because you're reducing total welfare spending from the government level.
When I, as an individual, give a dollar to a private sector charity it reduces the money that the government is going to be spending on welfare. That is absolutely critical to this whole proposal.
We're talking about the same money within the system, we're just talking about allocating it in a different way.
Now, ideally, at the NCPA, we would have done something different in the welfare reform bill that just passed. We got an excellent welfare reform bill, we think it's a very good start, but it's not an ideal welfare reform bill.
Ideally, from our position, we would have block granted all of the means-tested programs back to the states and let them use that money to distribute it the way they wanted to. That's not what Congress was able to come up with but we did get a good start in that direction.
Had we done that, when I would give a dollar to a private sector charity it would reduce my income tax by a dollar, the federal government would get $1 less and the federal government could turn around and distribute $1 less in the block grants, so, that you have a level playing field. Same amount of money in the system, it would just be me making the choice rather than the Federal Government where that welfare dollar goes.
As I said, we didn't get that in the welfare reform bill and Congress. Senator Coats, Congressman Kasich are going to have to work within the system that they have in terms of figuring out how to pay for this.
But they have already begun to do that and the critical element is though, that they are looking for ways to reduce welfare spending through the government. And that we think is the key to empowering individuals.
We want to create a level playing field out here so that I have the choice, as an individual, between giving a dollar to a private sector charity or giving a dollar to a public sector charity, forcing them to compete for my welfare dollar.
That is the key to bringing competition into the system and making the system better, more efficient, and helping the poor more.
For generations, all we really had out there for me to be able to get a letter from here to there was to go through the U.S. postal system. A lot of people complained about the U.S. postal system because it was a government monopoly.
Recently, however, over the past few years, UPS came up as an alternative system to get packages from here to there, Federal Express came up as an alternative system and now we, as consumers, have some competition out there. If we want to get something from here to there we can go UPS, we can go Federal Express, we can still go to the post office.
I think that, in fact, the post office, Federal Express, UPS and the consumer have all benefitted by that competition, forcing each one to look at what the other is doing and creating new products, new services, new systems for us to attract our dollar.
If we go to a charitable tax credit, we, as individuals, will have the ability to choose where our welfare dollars are going to go. And we will make that choice forcing private sector charities to have to appeal to us for our dollars, forcing public sector charities to have to appeal to us for our welfare dollars. Both the public charities and the private charities will benefit from that. We, as the taxpayers, will benefit from that. And most importantly, the poor will benefit from that.
Thank you very much.
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