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The RIGHT way to help the poor: Cut fares

The Price Boston Pays- MBTA Transportation
David Schachner | Flickr Vision | Getty Images

Conservatives have a lot of good reasons to hate welfare programs, but I think you can really boil it down to two major problems: First, there's the moral hazard of the government taking one person's property and giving it to another in order to gain political power. Second there's the fact that so many so-called anti-poverty programs basically encourage people not to work and seem to keep multiple generations of recipients reliant on the government for their most basic material needs. But this week, Israel is doing something that should make even the staunchest conservative anti-welfare opponent sit up and take notice. It's cutting public transportation fares by 15% across the board.

Now don't get me wrong. This is still a government plan that will cost taxpayer money. But unlike so many other government expenditures that essentially pay people not to work, this is a program that will make working that much more attractive an option by making it less expensive to get there. Like so many other developed democracies, Israel's welfare base also happens to be the fastest growing part of its population. Making it less costly for its poorest people to get to even the lowest-paying jobs makes sense for Israel, as anything that shrinks the welfare rolls without creating political outrage is a major plus. And just getting poorer citizens used to the culture of work is another positive.The plan, devised by Prime Minister Benjamin Netanyahu and successful businessman-turned Finance Minister Moshe Kahlon, comes just as Israel's public transportation options are expanding across the country. It also comes about two years after cuts in welfare benefits were enacted with furious responses from the effected communities and their political mouthpieces. This fare-cutting move seems to be a good economic and tactical move from a government that wants to prove it's not hostile to the poor.

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U.S. politicians and true advocates for the poor and working class should watch the results of this new Israeli policy very closely. Israel may be very different from this country in a lot of ways, but what they both have in common is the financial and cultural strain of multi-generational poverty despite multi-generational government housing, food, and educational assistance. Compared to the financial "benefits" of working low wage jobs, staying on public assistance is often a very attractive option for Americans and Israelis. Throw in the cost ad hassles of a longer commute, and sometimes just getting to work can be a deal breaker for a lot of people. This is what critics mean when they say welfare often "pays people not to work."

Let's illustrate this point with some real world examples. Take the now-infamous city of Ferguson, Missouri. Ferguson's unemployment rate at the time of its 2014 riots was already much higher than the national average. But for the people who did have jobs, studies showed that almost all of them drove alone in cars more than 25 miles each way to get to work. That's an extremely expensive way to travel for the very low median income jobs Ferguson residents typically held. Since there is no real mass transit option for Ferguson residents to get to the major employment centers, there's little politicians can do to reduce their commuting costs. But imagine if they could.

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In our major cities that do have significant mass transit options inside the city and in the surrounding areas, more and more of the lower wage workers are commuting further and further to work. Gentrification from the private sector and public sector caused housing shortages make it too expensive for too many people to live close to work. Government mismanagement of public transportation has driven up the cost of commuting at the same time. And to add insult to injury, most public transportation systems charge higher fares based on how far you travel.

But instead of shoving more money into welfare programs to "benefit" unemployed people who won't or can't pay to work so far from home, why not put those same funds to work by using them to bankroll a significant cut in transportation fares? Cutting mass transit fares avoids much of the wealth redistribution moral hazard by simply extending the benefits to everyone. It also serves as an incentive to go to work and would provide more money to handle the total cost of working, like paying for child care.

On the political side, it would break the all-too-familiar story of local politicians hiking fares every few years to pay for pay raises and benefits for politically connected transit unions. When that happens, poorer workers are literally being forced to pay for raises for relatively richer people who also have better benefits and job security. Cutting fares is not by any means a panacea, but it's the kind of program that has a lot more positives than most taxpayer-funded, politically corrupt, "anti-poverty" efforts.

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Of course, none of the above will impress the most libertarian among us who want to reduce all government activity and spending bar none. But let's just take a time out for a reality check. Does anyone really think the politicians are ever going to stop promoting welfare programs of some kind or another? Does anyone think the government will ever cede a large amount of its control of mass transit to the private sector? We conservatives may want these things to happen, but they aren't very likely anytime soon. The best we can hope for is for better management and better ideas from the politicians and bureaucrats who insist on controlling significant portions of our economy.

Taking money from programs that serve as incentives not to work and using it to pay for cutting mass transit fares would be an example of better government management. Israel is doing it now and it would be a good idea to import this plan here.

Commentary by Jake Novak, supervising producer of "Power Lunch." Follow him on Twitter @jakejakeny.