Question

Your friend Burrell says that the government should hire fewer social workers in order to reduce the cost of federal assistance programs. He says reducing administrative costs will allow people to pay much lower taxes.
Consider whether or not his argument is valid.
Most of the leakage in federal assistance programs comes from
a) the administrative costs of running the programs.
b) peoples' responses to financial incentives.
c) the diminishing marginal utility of income.
d) the regressive nature of income taxes in the United States.

Answer 1

Answer: b) peoples' responses to financial incentives.

Explanation:

Burrell would be wrong because the most leakage in federal assistance programs comes from the way people respond to financial incentives.

Some people who have received this assistance from the Federal government have decided that it would be better to keep receiving this assistance instead of working to actually get paid.

This has led to more people seeking assistance thereby increasing the number of people needing assistance and invariably increasing the cost of these federal assistance programs.