C&L:

St. Paul, MN – Minnesota Republicans are pushing legislation that would make it a crime for people on public assistance to have more $20 in cash in their pockets any given month. This represents a change from their initial proposal, which banned them from having any money at all.

…House File 171 would make it so that families on MFIP - and disabled single adults on General Assistance and Minnesota Supplemental Aid - could not have their cash grants in cash or put into a checking account. Rather, they could only use a state-issued debit card at special terminals in certain businesses that are set up to accept the card.

This is, essentially, welfare paternalism: and it’s not necessarily all bad.  One way to deter people from public assistance programs is to make sure that it is a less attractive option than working for a living.  For most people, the shame of being on public assistance, and the hassle of getting approved, is enough to deter them already (that is, of course, until necessity trumps principle).

However, excessive paternalism can actually cause negative externalities, such as limiting the mobility of the poor by preventing them from being able to use public assistance funds for activities which would help them find a job:

an unemployed person has to utilize public transit to go out in the world and be proactive in seeking work. Instead, they present the poor with isolation, not letting them use their debit card, sit home and not seek employment.

The same free-market principles that make excessive central planning inefficient also apply here: excessive paternalism in public assistance payments limits the ability of the poor to find a job by limiting their monetary freedom.  For example: if public buses aren’t equipped to take these debit cards, then how do they get to job interviews?  How would they get back and forth to work for the first few months of their employment until they have enough money to leave the welfare system?

There are common-sense ways in which these benefits can be and are already restricted.  For example, New York State actually uses debit cards to dole out most of its benefits.  And in NYS, lottery retailers can only sell tickets for cash.  There is one non-essential purchase that is inherently impossible to make.  Many retailers also do not accept food-stamps, which makes life more difficult for people on public assistance (but not untenably so).  But NYS doesn’t go to the extent that Minnesota’s proposed law does, which is so restrictive that it becomes less likely that the poor will bother trying to find a job in the first place.

However, excessive paternalism creates inefficiencies that are counter-productive from a tax-payer standpoint.  If the object is to get people off welfare, then we can’t restrict their freedom to the point where it’s harder for them to get a job in the first place.  Measures like this are far more based in punitive moral judgments than they are in fiscal reality.  And the GOP is not doing Minnesota taxpayers any favors by limiting the fungibility of public assistance benefits in this fashion.