To the Editor:

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ames Piereson’s article [“The Redistribution Fallacy,” September] is extremely informative on a subject that is too often discussed only in slogans. By supplying actual numbers, he has made it possible to understand what the government does and does not do when it comes to the redistribution of wealth. One point, though, that remained unclear to me is the source of distribution of cash income (including tax rebates) to households in the middle quintile (said to average $16,000 per household) and the highest quintile (said to average $11,000 per household). Are households in the middle and top quintiles eligible for TANF, SSI, and the Earned Income Tax Credit (the only programs transferring cash income mentioned in the article, all of which are described as assistance for the poor and near-poor), or are these funds coming from other sources?  Further elucidation on this point would be beneficial.

Eric Peterman
New York City

James Piereson writes:

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n response to Eric Peterman’s thoughtful question: The Congressional Budget Office defines government transfers as “cash payments from Social Security, unemployment insurance, Supplemental Security Income, Temporary Assistance to Needy Families (TANF, popularly known as welfare), veterans’ programs, workers’ compensation, and state and local government assistance programs.” In addition to these cash payments, transfers also include the estimated value of in-kind benefits such as those provided through Supplemental Nutrition Assistance vouchers (SNAP, formerly known as food stamps), school lunches and breakfasts, housing and energy assistance, and benefits provided by Medicare, Medicaid, and the Children’s Health Insurance Program. The Earned Income Tax Credit is not considered a transfer and is not included in these estimates.

TANF, SNAP, SSI, and Medicaid are means-tested programs that are available only to recipients below governmentally specified income levels. The wealthy—those in the top income quintile—are not eligible to receive benefits under these programs, nor, as a general rule, are any households with incomes very far above the poverty line. Wealthy households, however, may and do receive transfers through old-age programs such as Social Security and Medicare and also through veterans’ programs, unemployment insurance, and workers’ compensation.

The top income groups—households in the top 10 percent of the distribution—receive nearly all (around 90 percent) of their transfers in the form of Social Security and Medicare, and a small share from veterans’ benefits, unemployment insurance, and workers’ compensation. Households in the bottom 40 percent of the income distribution receive transfers from a wider range of sources, including Social Security and Medicare but also through Medicaid, TANF, SNAP, school lunches and breakfasts, rent and energy supplements, and the like. Even so, households in the poorest quintile still receive around 60 percent of their transfers via Social Security and Medicare and the rest from the mix of sources listed above.

As these figures suggest, our old-age programs—Social Security and Medicare—are the most generously funded of all government transfer programs and are relied upon by recipients at all levels of the income distribution. This is one of the factors mentioned in my article that limits the redistributive effects of federal transfer programs because, beyond a certain age, they are available to poor and wealthy households on an equal basis.

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