The Left- and Right-Wing Political Power Design: The Dilemma of Welfare Policy with Low-Income Relief

Findings from this experiment contributed novel insights into the theoretical field of welfare policy, addressing fundamental questions about wealth redistribution rules and norms. The expenses of the redistribution pertaining to basic goods, as well as those associated with public (non-basic) but vital goods, are separately estimated by transforming the expenses into functions of the poverty line. The findings reveal that, along the poverty line that treats all citizens equally, the politicians representing opposing ideologies decide how the redistribution of basic and vital goods should be financed. Politicians should come to an agreement, subject to an approval of their decisions by voters-citizens. However, in the absence of such approval, politicians have no alternative but to continue the negotiations. Based on this premise, we concluded that political decisions with an elevated poverty line as a parameter would give rise to inverse working incentives of benefits claimants. This may result in unbalanced books, due to the expenditure on the delivery of basic and non-basic goods to their respective destinations. By keeping the books in balance, we postulate that one half of median income μ, in accord with Fuchs point, may be used in the form of poverty line ½μ for just and fair wealth redistribution in resolving the ideological controversies between left- and right-wing politicians. Through the income exception rule equal to ½μ, as a result of a relief payments simulation, the wealth redistribution system, known since 1962 from as Friedman’s Negative Income Tax (NIT), diminished the Gini coefficient.