Wealth Redistribution? (And Homeownership)

Recently, in class, we did an economics section of "random economic lives," from a single person making $70,000 a year, to the US median, down to welfare. The results were quite interesting.

As suggested by the title of this post in mind my the most interesting aspects of the activity involved the redistribution of wealth, through welfare, unemployment, and other such programs programs. The key question being, how much money should these "safety net" programs dispense. Now the answers from the two extremes, Communism and Laissez-Faire Capitalism, are respectively, everyone should get enough so that everyone is equal, and that there should be no government assistance, the market will take care of everything.

Now I believe, and I think it is a widely shared belief, that the right amount lies somewhere in between these two extremes. How much however, is one of the biggest political questions today. The Democratic Party generally favors more, while the Republics generally favor less.

I find myself, as I usually do, on the Democratic side of this debate. For a Family of four, the current month payout is $900, with $500 worth of Food Stamps. (http://www.welfareinfo.org/payments/) Now, According to the United States Department of Agriculture, in December of 2008, even with the thriftiest of plans a family of four could expect to pay between $500-$600 for food every month. Leaving $800-$900 Dollars for every other need: shelter, clothing, heat, electricity, water. This seems too low, and I believe that these benefits should be made higher.

However, especially in these tough economic times, when more people than ever may be needing this aid, it may not be possible to increase these benefits. Raising taxes now seems like a bad idea, perhaps, money saved from others sources, (winding down the war in Iraq?) could be used to raise these benefits.

Finally, one other interesting result, when I was using checking the data for the United States Median income, I noticed something interesting. My hypothetical US median family was renting an apartment, and not saving any money, yet when I check the Home ownership statistics for 2005 (http://www.census.gov/hhes/www/housing/hvs/annual05/ann05t12.html), nearly 70% own a home, meaning not only would people at that income level be buying homes, but people making significantly less would also. I could see that it is possible, but only with very careful budgeting. This may have contributed to the housing crisis.