Ideas in Development

Obviously, this is a big idea, much larger than President Bush's failed plan to partially privatize Social Security. It will get a lot of people stirred up and earn some royalties for Mr. Murray. But its real importance is that, like a hanging, it concentrates the mind. It underscores that Murray's camp and our side live intellectually, morally, and politically on different planets. He (let's hope) is on the outer fringes “ a Pluton “ while we are still Earthlings.

The gap between the leadership and wonks of America's two parties regarding what must be done about anti-poverty policies is very, very wide (much more than among the electorate). And the "conservative" wrecking crew has been doing a good job disparaging government, transfer payments, and services for the poor, as well as running up a record budget deficit. Some tough fiscal fights are ahead, therefore we must be well-armed with the facts, arguments, and policy improvements that will win the day.

Two books stand out as ideal resources for meeting this need.

The first is One Nation, Underprivileged: Why American Poverty Affects Us All, written by Mark Robert Rank. I also plan on enlisting the reform ideas and reflections of Janet M. Currie's book, The Invisible Safety Net: Protecting the Nation's Poor Children and Families.

Rank's book seeks to unmask certain myths about the poor (e.g., they are all "under-class" types, lumpen proletariat, welfare queens, crack-heads, dope dealers, and other undeserving riffraff, living within a multi-generational "culture of poverty"). He does a good job of marshaling good arguments for a greater US commitment to combating poverty. He uses a range of weapons “ data from his own research, Biblical passages and theological arguments, the values that make up the American "Creed", interviews of those below the poverty line, and the vast literature on the subject. Grossly over-simplified, his argument is as follows;

• Persistent poverty in such a wealthy nation is an outrage. Other countries do better and we are not short of ideas on aiding those trying to escape from poverty.

• In the vast majority of cases, poverty does not happen from just individual failings.

• Poverty is a structural problem, meaning that certain societal and economic forces and conditions are the real issue. First, when you only have a modest income and limited assets, a sudden event “ unemployment, a death in the family, an accident, or an illness can plunge a family into the economic abyss. Second, being employable and holding down a good job depends increasingly on education. But not all people start life with the advantages of selecting their parents well. What class were you born in? What's your race? Your parent's education? What about the community where you live “ does it have concentrated poverty? What's the quality of the neighborhood school? All these factors can aid or hinder educational success or failure and upward mobility. Third, the structure of employment opportunities, even in good times, is out-of-sync with the goals of full employment with every full-time job paying a living wage. We're a bit short in both the quantity and quality of jobs. Even in the booming economy of the late 1990's, we were short five to nine million jobs. To avoid poverty for a family of four, the head of the household needs to hold down a full-time job that pays close to $10 per hour; 33.3% of heads of households have jobs that do not meet that standard. So, even if everybody advances some, many will still be outside, looking in. Fourth, growing inequality in the US lessens the positive impact of growth on poverty rates. Fifth, immigration, foreign imports, de-unionization, growing job skill requirements, and the failure of the federal minimum wage to keep up with inflation and productivity increases have caused earnings to stagnate in the lower income quintiles.

• The conditions of poverty affect all Americans. Rank's research documents that many people cycle into and out of poverty. By age 75, 58.5% of Americans have experienced at least one year of poverty. Moreover, nearly 30% of adult Americans have lived five years of their life with poverty incomes. So, the probability of you experiencing poverty is much higher than most would imagine. Indeed, by the time an adult reaches 65 years old, 65 percent of this cohort would have used either a welfare cash program or an in-kind program, like Food Stamps. Looking at it from a different angle, of the roughly "two-thirds of Americans who receive help from a federal public assistance program, 63 % received Medicaid, 52% received Food Stamps, 13% received cash welfare, 10% received Social Security Supplemental Income, and 14% received funds from some other cash welfare program, such as Low Income Energy Assistance. Also by age 65, about 40 percent of Americans have spent five or more years collecting welfare. It could happen to any of us, which means having a decent safety net is in the self-interest of all Americans, because "there, but for the grace of God, I could be poor." (Think of all the middle-class victims of Hurricane Katrina.) Furthermore, having a significant part of America held back by poverty's snares costs us all in taxes, stress, crime, lowered productivity and growth. Poverty affects us all.

• Finally, Rank's book includes a systemic reform agenda for addressing the structural causes of poverty, including: creating adequately paying jobs, increasing the access to and accountability of certain social goods (e.g., education, health care, etc.), buffering the economic effects of family change, building the assets of individuals and communities, and creating a more sensible safety net. Specific options include everything from raising and indexing the minimum wage to crafting tax-based hiring and wage incentives. (Rich detail is provided on each strategy and the arguments above.)

MAKING THE SAFETY NET MORE VISIBLE, EFFECTIVE, AND UNDERSTOOD What are the programs that make up Currie's invisible safety net?

• Cash: Earned Income Tax Credit, Supplemental Security Income (SSI)

• Health care: Medicaid, State Children's Health Insurance Program (SCHIP)

• Nutrition: food stamps, Special Supplemental Program for Women, Infants, and Children (WIC), school lunch and breakfast

• Housing: Public housing, Section 8 and other assisted rental housing, low income housing tax credits, homeless programs, housing block grants, US Department of Agriculture programs

• Child care: Head Start, Child care and development block grant

Total expenditures for children amount to $170.1 billion (including cash welfare, which only amounts to 8% of the total). Indeed, the book's central focus is children (and their families). Currie is dedicated to maintaining and fixing a safety net system that, even at the risk of Murray's boogey-man (paternalism), protects the interests of infants, children and youth. Taking issue with the sort of blanket anti-government creed and critique of the welfare state typically espoused by radical Republicans, she argues that existing programs, in fact, work pretty well. Without them, millions of youngsters would not be fed, sheltered, taught, nurtured, and protected. Third, these other public anti-poverty programs (not Temporary Assistance to Needy Families/Aid to Families with Dependent Children) could be improved in their equity and efficiency. Currie also has some practical ideas for doing so, which I will summarize later.

Let's begin with her book's central theses.

• The anti-poverty safety net is much more than AFDC/TANF (cash welfare). This non-welfare safety net works. Post-transfer poverty for children is significantly lower (5.3 million), due to its effects.
• For reasons of basic morality and equal opportunity, children should not be punished for not being able to change the initial socioeconomic or racial cards they are dealt.
• Welfare reform during the Clinton Administration weakened welfare as a safety net in a number of ways. It has generated both failures and successes, confounding the expectations of both conservatives and liberals. The welfare rolls have dropped significantly. More are working. But the numbers of former welfare recipients that are classified as severely poor has risen. Many of those that are employed have joined the working poor. In addition, TANF is no longer designed to serve a countercyclical function and grow in fiscal resources as the number of jobless increase and applications for its help rise. (Welfare is no longer an entitlement for all who are eligible. There is a ceiling on its available funds.) Consequently, the less well known safety net has become a more important backstop. This family of programs should not be put on the chopping block when budget cutting season begins again.
• Like all institutions, these programs are not perfect; it is a reasonable claim that a low (and "acceptable") level of fraud characterizes these programs. Such misuse of these programs could (and should) be reduced further. Part of the problem is the complexity of the regulations on who qualifies. What is termed "fraud" oftentimes turns out to be a difficulty in navigating the system and its rules. For example, "qualifying children" are not defined consistently across programs. Simplification and standardization could help solve this. The IRS rules on the EITC alone are a 50 page document.
• There are ways to build on the current safety net system, not tear it down. According to the author of Invisible Safety Net, these programs can be further improved in their poverty fighting capacities and become administratively simpler and more cost-effective.

She discusses in detail the following reforms:

1. Make every child eligible for a core set of benefits, including child care and housing vouchers, specified medical services, and food and nutrition programs.
2. Charge for these benefits using a sliding fee scale where the poorest pay nothing, people with more money pay a modest fee, and those above a cutoff pay market value.
3. Collect the fees through the income tax system.
4. Allow families to opt out of using and paying for these services.

Currie imagines these changes requiring the issue of an electronic card. Eligibility would be radically simplified because they are now a package of services not lots of programs to apply for. The shortfalls in reaching larger numbers in the housing programs and persistent inefficiencies in house production efforts lead Currie to "voucherize" these programs. Head Start's failure to reach more of the eligible could be easily solved with more money or by providing vouchers. Making these systemic changes while maintaining their federal nature would expand coverage to almost all poor households with children, as well as simplify administration. (One could regard these safety net reforms as complimentary to the "pro-savings" asset building agenda pushed in the book, The Plan, authored by Emanuel and Reed.)

To sum up Currie's case, the US has a safety net system not known for its European-style generosity, but it does improve family well-being, protect kids, and invest in their cognitive and social skills. (There are very high returns on investments in early childhood education. America's business community is rallying today around the need for universal pre-school.) And the less visible safety net can be improved with a few easy to administer changes.

The political barriers are another matter. As long as Congress and the Presidency are dominated by the right wing of the Republican Party, Currie's suggestions will not be carried out. But her ideas are still far more politically realistic than Rank's.