Tag Archives: welfare

The Importance of How

The essential question that faces all policymakers is “what should we do about problem X.” That question has two parts. Once problem X has been identified, and a goal has been established (solving problem X), the remaining question becomes how. 

After all, we could dramatically reduce crime by locking citizens in their homes between, say, 7:00 p.m. and 7:00 a.m. We could reduce the transmission of flu by decreeing that all Americans wear masks during flu season. You can probably think of other methods of approaching social problems that would undoubtedly achieve their goals, but would simply create hostility, division and other problems.

Of course, deciding the proper “how” requires some fundamental agreement on the nature of the problem. We’re seeing this now, with the issue of immigration. Republicans define the problem as too many of “those people” entering the country; Democrats see it as the challenge of distinguishing between criminals and legitimate refugees entitled to help while hampered by obsolete laws and a dramatically under-resourced system.

When I taught my Law and Policy students, I focused upon the importance–and complexity–of those “how” solutions. Do we have broad agreement on the problem and what a satisfactory solution might look like? If so, how do we craft a policy that will achieve that solution without inadvertently creating or exacerbating other problems?

I recently read a Washington Post column that focused on a vivid example.

There is a grim, fairly popular story of the American social contract that goes roughly like this: Motivated by entrenched racial hostility, the greed of the rich (or maybe something else), the richest country on the planet refuses to develop a true welfare state that might secure the well-being of its citizens.

The column proceeds to examine the extensive social science research confirming the nature and extent of America’s inequality, and the multiple social problems that have been attributed to poverty and inequality.

Taxation and redistribution have been successfully resisted, branded as illegitimate scams to feather the beds of welfare queens. Globalization and technological disruption have been embraced even as the institutions designed to protect the most vulnerable workers — unions, minimum wages — have lost their power to provide for a dignified living.

In this American story, the less fortunate — Black, Brown and White — are left to scratch by as best they can, often falling into a deep well of misery. The rich engorge themselves way beyond anything seen in other wealthy, industrialized societies of the West. And yet, though the destitution is clear for all to see, recent research suggests that the story built around it is, at best, incomplete.

In fact, as a number of researchers have confirmed, the United States spends a lot of money on redistribution–on that word Republicans find so repulsive: welfare. The problem isn’t that we haven’t funded programs intended to help the needy, the problem is how those programs work–or (mostly) don’t.

Inequality might not cause these symptoms on its own. Instead, many of America’s social maladies stem from the strategies it has chosen to mitigate the lopsided distribution of income, which leave its citizens singularly vulnerable.

The essay went on to suggest “fixes” with which I largely disagreed, because I have concluded that the worst aspect of America’s social welfare system is its tendency to divide, rather than unify our citizenry. (Our patchwork “system” is also wasteful, far too bureaucratic, and inaccessible to the working poor, but those are problems for a different post.)

As I have repeatedly argued, public policies can either increase or reduce polarization and tensions between groups. Policies to help less fortunate citizens can be delivered in ways that stoke resentments, or in ways that encourage national cohesion.  Currently, far too many Americans have very negative attitudes about welfare programs for poor people. In contrast, overwhelming majorities approve of Social Security and Medicare. That’s because Social Security and Medicare are universal programs; as I’ve previously noted, virtually everyone contributes to them and everyone who lives long enough participates in their benefits.

Just as we don’t generally hear accusations that “those people are driving on roads paid for by my taxes,” or sentiments begrudging a poor neighbor’s garbage pickup, beneficiaries of programs that include everyone (or almost everyone) are much more likely to escape stigma.

In addition to the usual questions of efficacy and cost-effectiveness, policymakers should evaluate proposed programs by considering whether they are likely to unify or further divide Americans. Universal policies are far more likely to unify, to create social solidarity–an important and often overlooked argument favoring a Universal Basic Income.

In our current, highly polarized political environment, we need to focus on whether the solutions to social problems unify or further divide our quarrelsome nation.

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Listen To Peter

A former member of the Reagan administration issues occasional broadsides about social welfare policies, using the pseudonym “Peter the Citizen.” I almost always agree with his positions, which are deeply informed and far from the dismissive and inhumane proclamations of too many of today’s Republicans.

Recently, he sent comments on an exchange about “The Dignity of Work.”

He began by examining an assertion by Matt Weidinger of the American Enterprise Institute, to the effect that “FDR’s vision promoting the dignity of work is under assault by Democrats providing relief to able-bodied adults.” Weidinger was taking issue with the (widely lauded) expanded child tax credit, arguing that

These “child allowances” replace a program that today provides tax relief and associated assistance only to parents who work, amplifying the new program’s embrace of relief over work.

As Peter points out, many of Weidinger’s arguments about the “success” of welfare reform and the potential negative effects of a child allowance are misleading when they aren’t simply wrong. They certainly don’t reflect the mainstream view of researchers and experts who study anti-poverty programs.

Indeed, they also seem to be out-of-step with his one-time colleague, Ron Haskins, who is considered by many to be the “architect” of welfare reform.

Peter quotes from Haskins–another conservative, albeit one who seems much more knowledgable about the history and current status of welfare reform– on several points, and I encourage readers to click through for a broader, more in-depth analysis, but I was particularly struck by the back-and-forth on restricting child support to children whose parents work. As Peter writes, Weidinger is simply wrong to suggest that supporters of a child allowance are rejecting “work in favor of relief.”

Haskins served as a member of the Committee on Building an Agenda to Reduce the Number of Children in Poverty by Half in 10 Years. That committee produced a report that recommended a child allowance.

In testimony summarizing the findings, conclusions, and recommendations from the Committee’s report, A Roadmap to Reducing Child Poverty, Haskins describes the possible pro-work effect of a child allowance: Because child allowance benefits are not reduced as earnings increase (at least not until incomes reach 300 percent of the poverty line in Policy, they provide a more secure floor than means-tested benefits, one that does not penalize intermittent work.

At least 17 developed nations have some form of a child allowance. The U.S. federal tax system’s current $2,000 child tax credit is akin to a once-a-year child allowance. Many families with children benefit from its $2,000 per child reduction in taxes. However, currently, these benefits are not universal: families with no or very low incomes (and the very rich) are not eligible. Haskins also explains the importance of extending aid to poor children living in “families with no or very low incomes,” citing the possible long-term employment (and other) benefits for children themselves. Child poverty compromises the health, learning and development of our children and their future employment opportunities and well-being. …

I would file this last observation under “duh.” An enormous amount of data demonstrates that children raised in poverty are stunted in later life–they are less productive, and less likely to be steadily employed. But even if that were not the case, what sort of person says “if your parent doesn’t have acceptable employment, kid, we’re taking it out on you”?

Weidinger echoes GOP talking points to the effect that welfare checks under AFDC “flowed mostly to households in which no one worked and many remained on benefits and in poverty for years.” As Peter notes in response,  AFDC checks “flowed mostly to households” without earners because it was targeted to very poor families.

In most states, a job would make a family ineligible for assistance because the income eligibility limits in all states were very low and recipients faced a high marginal tax rate when they went to work (100 percent for AFDC after four months of work).  Notably, the expanded child tax credit will be very different than AFDC, because checks will “flow mostly to households” with earnings.

The Weidingers of this world act on the longstanding and pernicious American premise that being poor equates to being morally defective–and evidently, they don’t want to feed poor children if that will help their morally-defective parents.

I understand arguments that focus on the best way to deliver social benefits. I will never understand the argument that we shouldn’t feed and clothe children if we disapprove of their parents.

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Rich Man,Poor Man…

Let’s talk about welfare.

Usually, when you hear someone railing against “welfare cheats” and/or “encouraging dependency,” the objects of scorn are unwed mothers, people of color and other impoverished populations. The people who express these sentiments resent the use of their “hard-earned” tax dollars to help support people who are clearly unworthy.

There are a number of uncongenial facts that don’t influence those diatribes: the fact that our current social welfare system (if you can dignify it by calling it a “system”) is monumentally inadequate (most people who are struggling to put food on the table don’t qualify); a large percentage of those who do receive benefits are children, the disabled and the elderly; and– triggering my rant this morning– the most dependent and often unworthy beneficiaries are the rich.

A recent essay from Commondreams.org focuses on that last item, and details the ways in which wealthy Americans benefit from a wide array of tax breaks and government subsidies that somehow escape mention when Republicans complain about entitlements for the poor.

Those favorable provisions are often hidden in the tax code.The enormous stock market gains that investors have made since the end of 2008–estimated at some 30 trillion– can be held tax-free until the stocks are sold, and can also be passed virtually tax free by the super-rich to their children, who can take their inheritance subject to a so-called stepped-up provision which allows them to erase all the accumulated gains. In many instances, that means without paying a single dollar in taxes. As the author notes, “This massive subsidy for the super-rich, along with gift tax and estate tax loopholes, has allowed families like the Waltons to avoid paying their debt to society.”

Then there are what we euphemistically term “tax expenditures.”

Tax expenditures include mortgage deductions, interest and dividend exclusions, and reduced rates on capital gains. According to the Center on Budget and Policy Priorities, “the cost of all federal income tax expenditures was higher than Social Security, the combined cost of Medicare and Medicaid, or the cost of either defense or non-defense discretionary spending….These tax expenditures are ‘upside-down,’ providing their largest subsidies to high-income people even though these individuals are least likely to need financial incentives to engage in the activities that tax expenditures are generally designed to promote, such as buying a home, sending a child to college, or saving for retirement.

The total loss of tax revenue from just the mortgage and property tax deductions is nearly double the amount spent on public housing programs.

The Common Dreams article didn’t even mention the corporate subsidies I have so often criticized on this site: the subsidies for fossil fuels, payments to corporate farmers, and numerous, highly favorable tax provisions that allow corporations to evade taxes on huge profits, among many others.

Many of these provisions are defended as necessary to “incentivize” socially-useful activities, although research suggests that (with a few exceptions) there is very little evidence for that assertion, and in the case of those fossil fuel “incentives,” what we are incentivizing might more accurately be called “socially suicidal.”

Speaking of socially desirable activities, most Americans would include raising healthy well-adjusted children in that category. Making that task easier for poor families and/or single parents seems to me to be a better investment in the common good than incentivizing oil companies to locate new fossil fuel deposits.

But of course, poor people and single parents lack the means to hire lobbyists…

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Fascinating!

On the original Star Trek series, when Mr. Spock was confronted with a new and unexpected bit of information, he would raise one Vulcan eyebrow and intone “fascinating.”

I don’t have a Vulcan eyebrow, but “fascinating” was my reaction to a 2013 academic paper written by Johannas Haushofer and Jeremy Shapiro, with the not-very-sexy title “Household Response to Income Changes: Evidence from an Unconditional Cash Transfer Program in Kenya.”

Stop yawning, because this is important. And fascinating.

In the U.S., lawmakers (and not just right-wing ones) have long taken a punitive approach to the poor. Even self-labeled “compassionate conservatives” like former President George W. Bush have proposed programs that would “help welfare recipients develop middle-class values.” (Because clearly, if you are poor, you must be morally defective.)  American attitudes toward the needy have their roots in 15th Century English Poor Laws that prohibited “giving alms to the sturdy beggar.”

American social welfare programs built on that model have numerous, demeaning—and costly—restrictions on eligibility. After all, if “we” don’t watch “them,” they’ll cheat us hardworking taxpayers.

Most recently, a number of state legislators have piled on; convinced that any assistance allowing recipient discretion would “obviously’ lead to imprudent choices, they have even passed rules about what welfare recipients can buy at the grocery store with their food stamps.

Imagine what would happen if we simply sent poor people some cash! (Um…perhaps like Social Security…?)

Well, it turns out we don’t have to imagine it; an NGO called “GiveDirectly” has been doing just that in Kenya. GiveDirectly chooses beneficiaries at random; the only criteria is income below poverty level. The organization is rigorously evidence-based, and the paper I came across is one of several independent research projects examining the results.

So what happened?

Recipients spent more on health and education. Alcohol and tobacco expenditures did not increase. The researchers found

no evidence for an increase in tension within households, no significant spillover effects on non-recipient households, and no general equilibrium effects at the village level, with the single exception that we observe an increase in female empowerment at the village level. Together, these findings suggest that simple cash transfers may not have the perverse effects that some policymakers feel they would have, which has led for a clear policy preference for conditional cash transfers or in-kind transfers.

I came across this article because I have recently become aware of psychological studies connecting poverty with a host of deleterious psychological consequences, and I was exploring the literature reporting on those consequences for a book I’m writing. (I had previously understood the link between insecurities of various kinds and social unrest, but I was unaware of this particular line of research.)

As an article in New America Weekly reported, the human brain has specific reactions to any form of scarcity; it seems that cognitive capacity can only be stretched so far. This has been dubbed the “bandwidth tax,” shorthand for the proposition that scarcity inhibits the brain’s ability to focus on multiple tasks. This isn’t a big surprise to anyone who has agonized over whether to use her limited funds to buy baby formula or see the pediatrician.

Interestingly, the levels of stress associated with poverty can be assessed physically; people produce a “stress hormone” called cortisol, levels of which can be measured.

Haushofer and Shapiro measured them.

Transfer recipients experience large increases in psychological well-being, and several types of transfers lead to reductions in levels of the stress hormone cortisol.

Apparently, cash transfers to desperately poor people are followed by increased access to education and medical care, and lowered levels of a stress hormone that interferes with good decision-making.

Fascinating.

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When It’s for Me, It Isn’t Welfare–It’s Economic Development

Welfare is an interesting word. Like so many other politically-charged terms, it means rather different things to the different people who use it.

To the self-defined “makers,” welfare is a “handout”–government takes tax dollars that have been paid by responsible, productive folks and gives them to needy people who may be unfortunate but are probably just lazy or unmotivated. These handouts breed dependency, and they’re morally suspect.

Of course, as many observers of government largesse have documented, when you look at the numbers, most of the “takers”–i.e., the recipients of most of the dollars redistributed by government– are corporations. Big ones, that pay their CEOs, other executives and shareholders extremely well.

The “handout” definition

..is what we’ve been trained to believe, largely by politicians who smirk patronizingly at poverty but pay billions of your dollars to corporations…

Welfare is a many-headed dragon, but you won’t comprehend how big corporate welfare is unless you mine the data.

The independent, nonpartisan watchdogs at www.goodjobsfirst.org compiled the data. Those facts detail 453,000 business subsidies handed out by 289,000 state and local governments, and 164,000 freebies from the federal government.

It’s a $70 billion a year pipeline of public money.

The Chicago Tribune has explained corporate welfare better than I ever could:

Illinois has given away $4 billion over the last few decades with little proof the investments actually produced more jobs, more independence in the hands of working people or even benefit to the state at large. That narrative plays well in Indiana, because the Illinois reputation as a wasteful, even corrupt, welfare black hole is enhanced.

Luckily, Indiana isn’t like that.

In fact, Indiana is far worse.

While Illinois was handing over $4.8 billion, Indiana was sweetening the pot with $7.2 billion. Only six states — including giant economic forces New York and Michigan — have spent more local money this way.

Indiana governments are frugal with you, but less so with big-bucks corporations. The state gives away this money as direct cash, indirect subsidies, publicly financed bonds at low or no cost and tax abatements on the theory that average Hoosiers benefit from priming the economic pump.

Here’s how hard you’ve been pumping.

Indiana has dispensed 7,758 of these welfare goodies since 1986, the vast majority since 2009. (Emphasis added)

So who are Indiana’s “takers”?

You have given $703 million to General Motors. Community Health Systems of Tennessee, which owns Porter Regional Hospital and eight other hospitals in Indiana, has gotten $403 million.

Michelin has 308 million of your dollars. Eli Lilly hauled off $200 million. Indianapolis even gave real estate giant Simon Properties $180 million to build a downtown shopping center. Duke Energy took $204 million. Nestle and its Edy’s Ice Cream operation took $199 million in property tax deferments. Honda got $166 million.

These welfare checks are necessary, as the theory supposes, because they guarantee jobs that otherwise would not exist, although no one much tracks the jobs or the provable tax benefit….

Sometimes the sweet deal does not even pretend to produce jobs.

I guess welfare dollars are only morally suspect and socially addictive when poor people use them to feed their children.

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