Category Archives: antipoverty

How to Improve America’s Welfare System

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Several months ago I had a post entitled “A Balanced and Sensible Antipoverty program,” describing four characteristics of effective antipoverty programs: work requirements, work incentives, supporting married, two-parent families, and supporting business growth.
The Budget Committee of the House of Representatives has just released the outline of a new plan, “Expanding Opportunity in America,” designed to implement the above basic principles of welfare reform.  The introduction states that “Fifteen percent of Americans live in poverty today – over 46 million people. … A key tenet of the American Dream is that where you start off shouldn’t determine where you end up. …  Of all Americans raised in the bottom fifth of the income scale, 34% stay there and just 38% make it to the middle class or above (see the chart below).”
CaptureThe idea is to let selected states experiment in consolidating separate means-tested programs such as SNAP, TANF, child-care and housing assistance programs, into a new holistic Opportunity Grant program.  The purpose is to make these programs more effective in lifting welfare recipients out of poverty. Here is how the program is envisioned to work:

  • Each participating state will approve a list of certified providers who are held accountable for achieving results such as moving people to work, out of poverty and off of assistance.
  • Needy individuals will select a provider who will conduct a comprehensive assessment of that person’s needs, abilities and circumstances.
  • The provider and the recipient will develop a customized plan and contract both for immediate financial needs and also for long term goals towards self-sufficiency.
  • Successful completion of a contract will include able-bodied individuals obtaining a job and earning enough to live above the poverty line.

The U.S. is currently spending over a trillion dollars a year on welfare programs for low income families and individuals.  A good way to increase both the efficiency and effectiveness of federal programs is to shift them over to state control.  The Opportunity Grant program proposes to do this on an experimental basis.  It makes good sense to try it!

A Balanced and Sensible Anti-Poverty Program

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The American Enterprise Institute’s Robert Doar recently testified before the U.S. Senate Committee on the Budget with ”Back to Work: How to improve the prospects of low-income Americans”.  His recommendations are based on the four principles:

  • Work requirements as a condition of public assistance.  The work first approach has been shown to have better outcomes with regard to attachment to the labor force than even approaches which focus on training and education.
  • Robust work supports for those who are working at low wages.  The Earned Income Tax Credit accomplishes this and should be extended to childless adults.
  • Business growth and investment.  Policies that raise the cost of doing business and deter growth do little to create what the poor need most: jobs.
  • Foster married, two-parent families.  We need to mitigate marriage penalties in public assistance programs and we need to be honest about the consequences for children of single parenthood.

Mr. Doar points out that 10.2 million American’s are unemployed at the present time, 3.6 million have been jobless for more than 27 weeks, 7.3 million are involuntarily working part-time and 837,000 workers are so discouraged that they have stopped looking for work.  Labor force participation has dropped from over 66% in 2007 to 63% today while the poverty rate has risen from 12.5% to 15%.
CaptureRaising the minimum wage will not help the job prospects of most poor Americans.  Only 11.3% of individuals who would benefit from raising the minimum wage are living below the poverty line.  The Congressional Budget Office estimates that raising the minimum wage to $10.10 per hour would lead to 500,000 people losing their jobs.  CBO also estimates that the Affordable Care Act will reduce full-time employment by 2.3 million by 2021.  Given the strong anti-correlation (see the above chart) between labor participation and poverty, this means that the poverty rate may go higher yet.
The conclusion to draw from this excellent poverty synopsis (with lots of references) is that there are intelligent and effective ways to fight poverty and also much poorer ways to try to do it.  Good intentions are not enough!

Trash Talk from the New York Times

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The Budget Committee of the House of Representatives has just issued a report “The War on Poverty: 50 Years Later”, providing an excellent summary of federal antipoverty programs and their cost at the present time (budget year 2012).  Highlights are:

  • The federal government spent $799 billion on 92 different programs to combat poverty
  • Over $100 billion was spent for 15 different food aid programs
  • Over $200 billion was spent on cash aid
  • Over $90 billion spent on education and job training (over 20 programs)
  • Nearly $300 billion spent on healthcare
  • Almost $50 billion spent on housing assistance

The report also points out that many low-income households face very high effective marginal tax rates, approaching 100%, if any members are employed, because making more money means losing welfare benefits.  This discourages low-income individuals from working at a time when the labor-force participation rate has fallen to a 36-year low of 62.8%.
CaptureHere’s the situation: we have a rapidly growing federal budget with huge deficit spending (see above chart), a stalled economy with low labor-force participation, and an inefficient welfare system which encourages people not to work. Surely our goal should be to motivate welfare recipients to become productive citizens by returning to the workforce.  So doesn’t it make sense to revamp our welfare system to be more efficient as well as to create more incentives for recipients to get and hold a job?
Apparently this does not make sense to the New York Times.  Two days ago they ran an editorial “Mr. Ryan’s Small Ideas on Poverty”, castigating Paul Ryan for “providing polished intellectual cover for his party to mow down as many antipoverty programs as it can see.”  The editorial goes on to say that “it’s easy to find flaws or waste in any government program, but the proper response is to fix those flaws, not throw entire programs away as Mr. Ryan and his Party have repeatedly proposed. . . . For all their glossy reports, Republicans have shown no interest in making these or any other social programs work better.”
Putting it as charitably as possible, the NYT is being unhelpful.  It is a beacon of progressive thought for millions of Americans.  But it is apparently unwilling to give any credence to a sincere effort by fiscal conservatives to reform a major government program to make it operate more efficiently and effectively.