The Issue Of Destitution Of Columbia
The United States has stood for nearly 250 years as the shining capital of the free world. Since its inception, the US has been pulling in immigrants from all over the globe for a variety of reasons. Whether those reasons are familial, religious, or economical, there is no doubt that America has been the Land of Opportunity, over and over again for those who needed her. At her core lies the District of Columbia: the territory that houses the legislative, judicial, and executive branches of the Federal Government. Within these three branches live hundreds of subdivisions and agencies, each offering a wealth of benefits to those who would choose to work for them. These benefits range from extreme discounts on health and childcare, access to government-sponsored mortgages, and a locality pay increase that ranges up to 25% of base salary.
According to the Office of Personnel Management, nearly two million employees occupy these agencies and enjoy their entitlements. However, nearly 79% of all federal employees live and work outside of the Capital, leaving the vast majority of total workers within the Capital outside the scope of Federal employee benefits. The lack of these benefits, such as subsidized housing for Federal workers, force the non-federal employees who remain to find other means to cope with such a high cost of living. Official figures show that purchasing power-adjusted gross domestic product per capita for Washington, D. C hovers around $160, 000 – nearly 2. 5x the next closest territory, Massachusetts. Despite this impressive figure, the District still struggles with poverty, having the 7th highest poverty rate proportional to population out of every US State and Territory at a staggering 18. 4%. This paper will dissect the issue of poverty as it applies to the District of Columbia, and what possible government-based solution could be employed to maintain affordability over time in the Capital.
Poverty is already a critical area of concern, and huge funds and government agencies have been created specifically for researching potential and feasible solutions to poverty. In the United States both Federal and local politicians have eased regulations that have allowed massive streams of revenue to flow into the City of Washington. These actions have encouraged investment and talent relocation, and as a result several changes have taken place. In recent years, demand for housing along with goods and services, have caused prices to spike several times over, in-line with wages that have grown an astonishing 21% since the year 2000. This rapid wage growth has not come without its own unintended consequences. In the same time period cited, the population of non-white residents has dropped dramatically. Northwest DC, which has historically been a black neighborhood, is now primarily white and Asian. As of 2014, the black community has dropped from 60% to 50% of the entire District demographic, and as of today the displacement is slowly but surely continuing. This is of concern to several organizations and government bodies who fear no change on this front will lead to an accelerated path of gentrification. As more companies flow into the city, the demand for skilled labor has been increasing in the past decade. An unintended consequence of this leaves unskilled workers with less career prospects, and as a result some will be forced out due to prohibitive rising costs. These events have eventually grown to become a problem of significance to warrant the city council to consider possible countermeasures; that is, to facilitate increased revenue and talent flows while retaining housing and price affordability to those who have become the most vulnerable in the process.
As it applies to many things in the field of economics, there are two core foundations on which solutions can be formed – command/government-based solutions, and market/incentive-based solutions. There are certainly advantages and disadvantages to both systems, and each side has hordes of economists backing them up. For this issue, I am recommending a government-based solution mandating an expansion in the Earned Income Tax Credit. The EITC is a Federal tax credit defined by the Internal Revenue Service as a “subsidy to low-income working families. The credit equals a fixed percentage of earnings from the first dollar of earnings until the credit reaches its maximum. The maximum credit is paid until earnings reach a specified level, after which it declines with each additional dollar of income until no credit is available. ” An expansion in this benefit would target the same low-income working families, however the income threshold would be raised in addition to the value of the credit. This increase would come at a crucial time as evidence has surfaced suggesting that a new trend of migration has started in the suburbs. For the past several decades, city decentralization has been the norm, and suburbs have been built up all around the nation’s biggest cities. However, two professors at the George Mason School of Public Policy sought to prove that the reverse is the new trend; a new ‘back to the city’ recentralization movement, as it were.
The implications of such a phenomenon could have an even more pronounced effect on the affordability of the District as more and higher income people demand to relocate there. Their findings revealed that many neighborhoods have had a net increase in migration, predominantly black neighborhoods by wealthy whites, while outflows to the suburbs have slowly decreased. The implementation of a more valuable Earned Income Tax Credit would directly provide relief to the most vulnerable groups, and could provide a measureable net benefit to those who would otherwise be forced out of their homes. As a command-solution, this benefit increase would be implemented immediately and easily as the framework already exists. Each and every time taxes are filed, the EITC will be given to this wider group of people, encouraging them to stay in affordable housing in the Capital.
All economic solutions have their associated strengths and weaknesses. As stated previously, the most prominent advantages linked with an expansion in the EITC would provide a boost to the groups that need it most, and as a tax credit the effect on unemployment is negligible compared to another popular government-based solution: a minimum wage hike. However, this will come intertwined with one key disadvantage. The Earned Income Tax Credit is a refundable tax credit, meaning it simply reduces or refunds the taxes you currently owe – the would-be filers can only claim this credit if they have an income to declare, and that requires a job. If the job market is in poor condition and unemployment is high, the EITC would be severely hindered, as those who need it most would find themselves unemployed – the same outcome, expansion or not.
Another key drawback is the fact that the EITC isn’t forced onto workers, they must claim it for themselves. In fact, those who don’t file taxes would be statistically more likely to be placed at the lower end of the income brackets. Combined with the fact that between 14% and 20% of all eligible EITC claimants don’t file, hundreds of thousands of dollars that could’ve have been used to combat the rising cost of living for the District’s poorer residents will instead remain with the IRS, unclaimed. As more and more corporations and talent flow into D. C. , those living below the poverty line struggle even more to make ends meet, and in another decade D. C. might be out of reach by many of the poor residents currently living there. Unfortunately this keeps a constant upwards pressure on the official poverty rate, as those living in poverty are typically less educated and some may not even know this benefit exists. While gentrification isn’t implicitly a negative thing, measures must be taken to ensure that families can still afford their communities should they decide not to relocate elsewhere.
Despite these intense disadvantages, I would recommend this approach be implemented immediately because the marginal benefit is far greater than the marginal cost. It may be true that hundreds if not thousands of people in D. C. , and around the country, won’t claim the Earned Income Tax Credit, but those who do will be in a far greater position to battle rising prices and the looming threat of poverty. Unlike a minimum wage increase, the EITC will help everyone that qualifies for it, and generally speaking, the average individual that earns minimum wage is usually always eligible for the credit. Changes in unemployment that can be attributed to a higher minimum wage simply won’t be there, and it is a huge step towards leveling the playing field. Furthermore, the EITC is in a position such that it can easily be expanded or contracted based on yearly results. If my expansion plan results in a net reduction in poverty over the next fiscal year, it can be expanded upon again proportionally until a point of diminishing returns is reached. The EITC is mostly electronic in the modern day, meaning efficiencies can always be found and implementation costs can be reduced, whereas other solutions such as a minimum wage will always have a fixed cost; the price floor prevents costs from being reduced.
If my measure is not adopted, at the current rate of net migration and gentrification in the District of Columbia, it will be much harder to create the changes required to ensure impoverished families and individuals are taken care of. Steps must be taken today because the vision of tomorrow is becoming increasingly set in stone, especially as higher education is becoming a requirement for many career paths – D. C. has the most college educated workers per capita out of all cities in the US. The Government still has the power to stop the exodus slowly enveloping D. C. , otherwise the status quo will remain – the Destitution of Columbia.
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