Simple solutions sound good to policymakers, but are frequently too good to be true. Turns out creating effective policies is harder than it looks!
Food stamps or Medicare? Unemployment benefits or free childcare? When it comes to social impact, it turns out not all welfare programs are created equal. Some social welfare programs actually provide a return on investment. According to a recent article in The Wall Street Journal, Harvard economists Nathaniel Hendron and Ben Sprung-Keyser found that programs focusing on the health of children have a return of an additional $0.75 for every dollar spent. As the children grew up, “they had lower rates of hospitalization and chronic health conditions, saving the government an average of $530 on each child over a lifetime.” The study found that by their mid-30’s, the cost of the health services they received when they were younger had more than paid for themselves, with a surplus of over $7,000 per child.
Following this logic, if we invest more into the health and well-being of low-income children, we might be able to avoid (or at least greatly decrease) paying for Medicare for them when they get older.
All government programs cost money. Valuable taxpayer money that could have been spent by taxpayers towards other purchases or services (like my growing shoe collection). As a citizen, I hope my taxes go towards beneficial, effective programs benefiting not just me, but those around me (shocking coming from a Libertarian, I know).
So, how do government officials prioritize which programs to spend money on? While the government currently funds both services for adults and children, budgets for health services for adults are far greater than those for children. Using data analysis like Hendron and Sprung-Keyser’s study suggest that maybe the government should shift money towards the kids.
As an economist, I am always looking for the unseen effects of policies and the incentives of individual actions. So, I have to ask, why would government officials support putting more funding towards programs for low-income adults, instead of children?
Well, for starters, children cannot vote, but adults can. The incentives for elected officials is to focus on funding programs that voters care about (specifically, the ones that support them). However, the tricky part is when what the voters in a particular state want might conflict with what might be best for the country (cough cough free trade agreements).
Secondly, the birth rate in the US is declining. Sharply. If there are less children, that might make it harder for politicians to justify increasing spending for programs targeting a smaller and smaller percentage of the population. It could be a great political platform: I’m running for the kids!
Lastly, more than 20% of Medicare spending is spent on individuals in their last year of life. End of life care is extremely costly. Don’t get me wrong: human life is valuable, but as with anything, I use the lens of economics to evaluate policies, looking at the opportunity costs. Could a percentage of Medicare’s budget be used more effectively elsewhere? It might be that this is the best way the government could spend this money and we should both increase money to the sick and elderly and increase funding for healthcare for kids, but while the costs of healthcare for kids can be repaid throughout their lifetimes, funding for the sick and elderly cannot and must be financed through other means.
What do you think? Should we work to decrease spending on welfare programs for adults and increase spending for welfare programs for children? Do government officials have a responsibility to use data analytics to determine what programs to prioritize during budget reauthorizations? Who makes the call for where the money should go?
As for me, I think increasing funding for healthcare services for low-income children sounds like a good idea given this new study, but, as a cynical economist, I also know there are never simple solutions to these problems.