10/19/2012 06:51 pm ET Updated Dec 19, 2012

Gary MacDougal in the NY Times Last Week -- Patent Medicine in the 21st Century

Gary MacDougal, an adviser of yesteryear to Republican Governor Jim Edgar of Illinois, popped up on the op-ed page of the New York Times last week with the longstanding Cato Institute (and Heritage Foundation) line that we spend a trillion dollars on the poor and get nothing for it. In the past I haven't gone out of my way to reply to the argument but since it's now popped up in the mainstream media and comes from someone ostensibly outside of Cato and Heritage, I think regular people need to see an answer. More than one friend has asked me what's up with Mr. MacDougal's story.

MacDougal draws his analysis from a report by Michael Tanner of Cato, which is the same as an oft-released analysis by Robert Rector of Heritage. Both Tanner and Rector call the spending "welfare," the point of which is obviously to cast doubt on all of the spending from the outset. A trillion dollars on welfare? Wow, who knew?

So what is it? Remember, by the way, that we're talking about federal and state spending combined. That's especially important when we get to health care. Anyway, there are roughly three parts to the spending.

One good-sized part of it is composed of programs that add to income. I kind of doubt that most people would characterize the Earned Income Tax Credit as welfare, since it adds to the income of parents, especially single parents, who are working as hard as they possibly can and still make very little. But it is spending on income supports and it's important public policy that we absolutely need. I'll come back to this.

From there we start to wander. The second -- the biggest single part -- is health care. When you add the federal and state spending on Medicaid, you get close to half of the money Tanner and Rector call "welfare spending." The rest of the health programs for low-income people -- community health centers, the maternal and child health program, and so on -- get you even higher. Of course being able to afford health care does have an indirect income effect, so I can't say it's irrelevant, but the bulk of the money obviously is going to pay hospitals and nursing homes and physicians.

The third part of it really goes off. The Tanner-Rector argument in this area is actually about opportunity, not income -- things we do to help low-income children grow up and find their way out of poverty and things we do to help people succeed in supporting themselves and their families. This large group of programs includes Head Start, Title I of the Elementary and Secondary Education Act (known to some as No Child Left Behind), job training, and many more. Housing and community development programs are included, too, as is child care.

One begins to see how they get to a trillion dollars. You can see for yourself. The documents are on the Cato and Heritage websites.

Beyond the apples and oranges and kitchen sink nature of what's included, there are four other very important points to be noted here.

One, the portion of the public policies they deride that supports the income of workers (and the much smaller number of people not working) is keeping 40 million people out of poverty. There would be almost twice as many people in poverty without these programs. These are successful policies. And they aren't my numbers -- they come from the Center on Budget and Policy Priorities.

Two, the real story here is that we have become a low-wage nation. Half the jobs in the country pay less than $34,000 a year. A quarter pay less than the poverty line for a family of four, which is $23,000 now. These are figures from the Economic Policy Institute. The Earned Income Tax Credit and the Child Tax Credit go only to people who have jobs, and large portions of Medicaid, food stamps, child care assistance, housing vouchers, Pell grants, and many of the other programs listed are either income supplements or have a cash equivalent value that in effect adds to the income of low-wage workers who would otherwise have a much more difficulty time making ends meet.

So yes, even if you do an honest accounting of expenditures and not beef it up by throwing in the kitchen sink, we spend a lot on income support, both in cash and in kind. But we're not wasting it. We're responding to the disastrous state of our labor market that is leaving millions of hard workers in poverty or close to it.

Third, one thing we actually don't do is spend much money on welfare itself. TANF, as it's now called, get $17 billion in federal funds annually. It hasn't been raised in 17 years. It's now largely irrelevant in many states. In half of them fewer than 20 percent of children living in poor families receive cash assistance. That's a big reason why there are 6 million people whose only income is from food stamps, at a third of the poverty line. They should really stop the attacks on welfare. There's no there there any more.

Finally, MacDougal calls for turning everything into a block grant, saying states know better. Baloney. Think Mississippi. Or think bigger. Texas. You give it to the states with no strings attached and some will do okay but others will be horrible. They want to block grant food stamps. The states would set the eligibility rules and benefit levels. Stop with the slogans and be honest about the realities.