Government Intervention Analysis
Government Intervention vs. Market-Based Solutions
A free market is characterized by inequality in opportunity, wealth, and income. Government intervention is, therefore, necessary to contribute to the redistribution of income in a society. According to the law of diminishing returns, marginal utility reduces with the increase in income. Redistribution of income can, therefore, lead to a gain in the welfare of society, hence justifying income redistribution from a utilitarian viewpoint. Government intervention in assisting low-income families is also one of the solutions to reducing economic inequality based on Rawls’s social contract, which states that the perfect society is one where an individual would be happy to be born in any situation without knowing where they would end up. Based on the social contract, most people would not choose to be born in a free market due to the concentration of rewards in the hands of the small minority. Government intervention in assisting low-income families, therefore, facilitates the creation of an ideal society.
Winners and Losers of Earned Income Tax Credit
Low-income families have been helped by the Earned Income Tax Credit, while taxpayers have been hurt because the government relies on taxes to keep the program running. The intervention also has to some extent, hurt low-income families. For instance, the Temporary Assistance to Needy Families program offers emergency grants to enable families at risk of losing the capability to work and manage basic human needs, but according to Campbell (2014), the asset limits set on many assistance programs provided by the government prohibits parents from saving money that they can use in case of an emergency and purchasing things such as cars to assist in moving their families out of poverty without the risk of losing the benefit.
Externalities and Unintended Consequences of Government Intervention
Putting a limitation on assets can unintentionally have a negative impact on the long-term economic development of low-income families due to the fact that savings are important in achieving financial security (Neumark et al., 2018). For instance, when SNAP benefits are only available to families with assets below a specific limit, families may opt not to accumulate assets or limit the level of spending to retain the benefits. The rules of the programs exempting certain assets can also affect the financial choices in households. SNAP programs may, however, create high tax revenues because low-income children grow up healthier and produce higher incomes over their lifetimes (Neumark et al., 2018). Research conducted by Chetty et al. (2015) indicated that children under 13 years living in families that had access to a housing voucher to move to a neighborhood with low poverty levels from a public housing development had a 32% higher likelihood of attending college and earned 31% which is almost $3,500 more annually as young adults compared to their counterparts in families that had no access to a voucher. The boost in total lifetime incomes was projected to be $302,000.
Earned Income Tax Credit Cost Trend
The cost of the Earned Income Tax Credit varies with the state of the economy. For instance, the current Covid-19 pandemic has rendered most people unemployed hence increasing the beneficiaries of the program. According to Marr et al., (2021), the unemployment rate was projected to be 9.4% early this year, thus prompting many people to file for Earned Income Tax Credit refunds averaging at 8.4% throughout 2021, as shown below.
In 2021, childless workers are eligible to receive up to 543 dollars based on the proposed framework expected to respond to the rising need for assistance to improve the well-being of low-income families.
Credible Economists’ Opinions on the Success or Failure Of The Earned Income Tax Credit
The success of the Earned Income Tax Credit can be interpreted based on the TANF’s hypothetical work incentives characterized by strict rules and time limits that eliminate benefits for failing to meet work requirements. Earned Income Tax has failed to substantially improve the financial well-being and income of recipients even when they increase employment (Lewis & Beverly, 2013). Recipients who opt for Earned Income Tax end up in jobs with periods of reduced income and joblessness because most recipients with less job prospects are less likely to find employment. The law also allows states to determine the level of benefits and policies on work and eligibility, resulting in inequitable outcomes. Black children are, therefore, more likely to live in states where the program is weak. This contributes to the failure of the program because there is inequality in reducing poverty levels among Whites and Blacks since minority groups are placed in a disadvantaged position (Mead, 2014). The program could also fail in effectively eliminating poverty because it does not facilitate the increase in work levels due to the limited effort to get people to work.
Recommendation
The Earned Income Tax program provides important help to struggling families by ensuring that low-income individuals have access to affordable healthcare and that there are more education opportunities for low-income children. These efforts play a noteworthy role in reducing hardship and poverty and promoting an increase in revenue in the long run when children who benefited from the program get employed. The program should, therefore, be continued, and policymakers should focus on some modifications to increase its success. The main modification that should be considered is expanding the program to allow eligibility over a wide income range and incorporating people from 19 to 70 years of age.
References
Campbell, A. L. (2014). Trapped in America’s safety net. https://doi.org/10.7208/chicago/9780226140582.001.0001
Chetty, R., Hendren, N., & Katz, L. (2015). The effects of exposure to better neighborhoods on children: New evidence from the moving to opportunity experiment. https://doi.org/10.3386/w21156
Lewis, M., & Beverly, S. G. (2013). Earned income tax credit. Encyclopedia of Social Work. https://doi.org/10.1093/acrefore/9780199975839.013.116
Marr, C., Hingtgen, S., Sherman, A., Windham, K., & Cox, K. (2020). Temporarily Expanding Child Tax Credit and Earned Income Tax Credit Would Deliver Effective Stimulus, Help Avert Poverty Spike. Center on Budget and Policy Priorities.
Mead, L. (2014). Overselling the Earned Income Tax Credit. National Affairs.
Neumark, D., Asquith, B., & Bass, B. (2018). Longer-run effects of anti-poverty policies on disadvantaged neighborhoods. https://doi.org/10.3386/w25231
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Question 
Analyze one (1) of the following government intervention programs:
-Assistance for Low-Income Families focusing on Earned Income Tax Credit (including Child Tax Credit)
Government Intervention Analysis
Write a 700- to 1,050-word summary of your analysis. Identify the intervention and the market failure leading up to the intervention. Complete the following in your paper:
Analyze the arguments for government intervention as opposed to arguments for market-based solutions. Hint: See the information about market failures.
Examine who has been helped and who has been hurt by the selected government intervention.
Examine externalities and unintended consequences of such intervention. For example, consider whether the SNAP program and health coverage for low-income families result in higher future tax revenues because low-income children grow up healthier and produce higher incomes over their lifetimes.
Analyze whether the cost of the intervention you selected as a share of GDP or the number of participants is increasing, decreasing, or varies with the state of the economy based on the cost trend(or number of participants) since its inception or since 2000.
Analyze credible economists’ opinions on the success or failure of the intervention that you chose in achieving its objectives.
Recommend whether the program should be continued as is, discontinued, or modified based on your conclusions. Defend your recommendation.
Note: Use of charts and graphs is encouraged with appropriate citations. Any charts or graphs retrieved from the Federal Reserve Bank of St. Louis FRED website may only be included when the data sources used by FRED are US government sources such as the Bureau of Economic Analysis or the Bureau of Labor Statistics.
Cite at least 3 academically credible sources.