Over the weekend, the San Francisco Chronicle delivered a stunning message that discourages and demotivates American workers from earning more income and promotes greater government dependency.
It's all thanks to sloppy incentives created by the Affordable Healthcare Act.
The Chronicle reported that Karen Pollitz, a senior fellow at the Kaiser Family Foundation, said last week that workers in California should consider reducing their 2014 income and work hours in order to qualify for Obamacare subsidies.
"If they can adjust (their income), they should," said Pollitz. "It's not cheating, it's allowed."
For a California family to fall under the 400% of poverty-level ceiling (the threshold to qualify for government assistance), the family's net income must be at or below $62,040. However, if they make just $1 more than this amount, they will not qualify for thousands of dollars in public assistance to purchase healthcare.
Earning $62,041 would trigger a massive increase in taxes and cost of healthcare premiums for the family.
In progressive terms, that amounts to a loss of a subsidy worth more than $10,000 each year for a family of four.
This is all part of a perverse welfare system that has for decades discouraged economic advancement.
As these Obamacare incentives now begin to creep into the lives of the middle class, the government is playing an extremely dangerous game with state dependence. This will have a staggering impact on the economic health of the middle class.
Incremental Income Displacement
For decades now, a debate has swelled on the influence of welfare on the motivations of Americans to find work or advance their careers to the next level. Some critics have argued that welfare discourages work and enables some to live off the production of their neighbors.
Meanwhile, supporters of the system believe it is a vital safety net that prevents Americans from living in squalor and limits economic inequality.
While the welfare system may have the best intentions, it is poorly designed. It's a flawed system that creates disincentives for workers to climb the ladder of economic development.
Then individuals decide to stay at lower-paying jobs to maintain welfare benefits instead of taking better pay, more responsibility, and freeing themselves of government dependence – a line known as the "welfare cliff."
Just take this example from Pennsylvania…
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.