Dan J. Harkey

Master Educator | Business & Finance Consultant | Mentor

Political Economy of Dependency: How Governments Benefit from Keeping People Poor- Part II

Dependency, driven by incentives in political institutions and program design, is a central social policy concern that policymakers and researchers must understand to address reliance and promote autonomy effectively.

by Dan J. Harkey

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I.  A Lens for Understanding Incentives: Public Choice, Not Conspiracy

Public Choice Theory applies economic reasoning to politics: politicians, bureaucrats, and voters respond to self-interest and incentives rather than altruism.  James M. Buchanan and Gordon Tullock’s The Calculus of Consent pioneered this approach, arguing that rules and decision processes shape behavior—producing rent‑seeking, bureaucratic expansion, and policy persistence even when outcomes are inefficient. 

Core ideas include rational ignorance (citizens underinvest in political knowledge when a single vote has low payoff), rent-seeking (interest groups invest resources to capture policy favors), and budget-maximizing bureaucracies (agencies seek larger scopes and staffs).  These insights explain why governments may prefer visible transfers over complex reforms that reduce dependency but threaten established coalitions. 

Buchanan’s broader legacy reoriented analysis away from “benevolent planner” assumptions toward constitutional rules and constraints on discretionary power—a precondition for limiting government failure alongside market failure. 

II.  The historical pattern of patronage machines and the politics of need illustrates how cycles of dependence are entrenched through political organizations that build power by mediating resources to people with low incomes, creating a cycle that persists over time and underscores the need for deliberate intervention.

The Tammany Hall machine in 19th–20th-century New York exemplifies how political organizations built power by mediating resources to impoverished populations—jobs, emergency aid, favors—while extracting votes and loyalty, illustrating the political roots of dependency and its long-term implications for social policy.

Scholars and historians long noted the duality: machines helped immigrants navigate city life, yet simultaneously exploited their vulnerability and diverted public funds (e.g., the Tweed Ring scandals), sustaining a political order that thrived on continued need. 

Even as reformers eventually broke Tammany’s hold, the lesson endures.  When access to benefits depends on brokers rather than rules, dependency becomes a political asset rather than a social problem to solve. 

III.  The Great Society: Ambition, Gains, and the Incentive Trap

President Johnson’s Great Society launched the War on Poverty and landmark civil rights, education, and health programs.  Poverty rates fell dramatically from ~19% in 1964 to near ~11% by 1974—an achievement shared with a strong macroeconomy but clearly aided by expanded social supports (Head Start, ESEA, Medicare/Medicaid, food assistance).

Recent evaluations show that programs like Head Start produce durable gains in health and human capital for disadvantaged children, highlighting the potential of early investments to foster upward mobility and long-term progress.

Critics counter that reductions were driven primarily by economic growth and that many antipoverty programs performed or proved inefficient, with benefits diffused and bureaucracies entrenched.  Even sympathetic analyses concede mixed effectiveness across program components and persistent implementation challenges. 

Political economic takeaway: Big expansions create constituencies.  Agencies, providers, and advocacy groups develop budgetary and institutional interests in program survival, sometimes crowding out reforms that could transition recipients from dependency to autonomy. 

IV.  Modern Mechanisms of Dependency: How Rules Can Trap

1) Benefit Cliffs: When a Raise Makes Families Worse Off

Benefit cliffs occur when small income increases cause families to lose multiple benefits, such as SNAP, Medicaid, or housing assistance, resulting in effective marginal tax rates over 100%, discouraging work and savings.

Field evidence and recent surveys document that low-wage workers actively avoid raises to preserve essential benefits; policy proposals recommend transitional benefits or smoother tapers to align work incentives and reduce instability. 

States and national organizations are now exploring pilot fixes (e.g., phased reductions, harmonized eligibility), acknowledging that cliffs hurt families, employers, and taxpayers by stalling progress.

2) Work Requirements: Do They Promote Self-Sufficiency?

On SNAP and Medicaid, multiple rigorous analyses find stricter work requirements often reduce program participation without meaningfully raising employment, while imposing administrative burdens on vulnerable groups (e.g., homeless adults). 

Think tank comparisons show contested evidence: some TANF-specific research suggests employment gains in targeted contexts, but translating those effects across programs remains uncertain.  Policy design and local labor markets heavily mediate outcomes. 

Medicaid work-requirement pilots (e.g., Arkansas) largely failed to boost employment and led to increased coverage losses due to reporting frictions.  In this archetypal case, bureaucratic hurdles shrink assistance without improving self-sufficiency. 

3) Bureaucratic Growth & Budget Incentives

Government employment recovered rapidly post-pandemic; state and local payrolls expanded, and agencies cite persistent social needs to justify budgets.  The political economic risk is mission creep: when measured success is caseloads served rather than caseloads exited, organizational incentives tilt toward managing dependency rather than ending it.   

International comparisons also note that definitions and measurements of public employment vary widely, complicating transparency and reform. 

4) Medical Debt & Institutional Collection Practices

Investigative reporting shows that many hospitals—including nonprofits—use aggressive collections tactics (lawsuits, credit reporting, lien judgments), which entrench financial fragility and discourage people from seeking care.  While industry groups contest methodologies, multiple independent analyses highlight the scale and harm of these practices.

5) Attention-Based Media & Civic Ignorance

Engagement‑optimized algorithms and cable news “sell anger”, amplifying divisive, moral, and emotional content over accuracy.  Studies and audits show that engagement ranking boosts polarization and misinformation, undermining informed citizenship—creating rational ignorance and emotional mobilization, ideal for short-term politics but harmful to long-term governance. 

Simultaneously, civic education has languished: national assessments show declining civics/historical proficiency and chronically low investment, weakening citizens’ capacity to scrutinize policy incentives.

V.  How Governments “Benefit” from Dependency (and Why It Persists)

·       Vote Pools and Policy Leverage: Concentrated beneficiaries can form reliable constituencies; politicians signal program expansions to secure electoral support.  Public‑choice models predict such logrolling and coalition‑building, mainly when benefits are targeted and costs are diffuse. 

·       Budgetary Power: Agencies frame persistent needs as proof of program importance, buttressing larger appropriations and staff.  Metrics rarely prioritize exits or durable mobility, fostering Bureau‑maximization dynamics. 

·       Short‑Run Stability: Minimal relief can reduce unrest without addressing causes, making incremental tweaks politically safer than structural reform.  The Great Society record underscores real gains but also institutional path dependence once programs are entrenched.   

·       Information Asymmetry: Weak civics and algorithmic media environments keep the public under-informed about trade-offs (e.g., benefit cliffs), enabling status‑quo retention and policy complexity that deters scrutiny. 

VI.  Breaking the Cycle: Policy Designs That Reduce Dependency and Respect Reality

1) Smooth the Cliffs.

Adopt transitional benefits that phase down assistance proportionally as earnings rise; harmonize eligibility across SNAP, Medicaid, childcare, and housing to prevent combined marginal tax rates above 100%; transparently model cliffs so workers and employers can plan. 

2) Measure Mobility, Not Just Caseloads.

Tie agency performance to exits with sustained earnings, not raw enrollment served; publish public dashboards tracking benefit taper outcomes across departments.  (Bureaucratic incentives respond to metrics.)

3) Evidence-Based Work Supports, Not Punitive Requirements.

Replace broad work mandates (which often cut access but do not raise employment) with job placement, scheduling stability, childcare, transport, and skills pathways proven to increase earnings—especially in tight labor markets. 

4) Civics Investment and Algorithmic Accountability.

Rebuild K–12 civics and civic‑reasoning curricula; incentivize platforms to incorporate stated user preferences and quality signals (not mere engagement) in ranking.  Audits show such shifts can reduce divided content without crushing participation. 

5) Healthcare Collections Reform.

Limit “extraordinary collection actions” by nonprofit hospitals; strengthen charity‑care access and transparency; advance federal protections on medical‑debt credit reporting.  Evidence links aggressive collections to financial precarity and worsened health.

6) Transparency in Program Trade‑Offs.

Publish simplified benefit calculators showing net resources as income rises; use behavioral nudges to encourage incremental advancement rather than stalling at thresholds. 

VII.  Conclusion: Aligning Incentives with Upward Mobility

Governments do not need malevolent intent to benefit from dependency.  Institutional incentives—electoral, budgetary, and informational—can entrench policies that manage poverty rather than end it.  The fix is not austerity or endless expansion, but redesign: smooth cliffs, measure mobility, invest in civic competence, and reform algorithms that reward outrage over understanding.  When rules reward independence, and information empowers citizens, the political economy of dependency can flip—making the path from poverty to self-sufficiency the winning strategy for officials, agencies, and voters alike. 

Notes & Further Reading