The Height of the Net
From the October 14, 2013, issue of NR


America long ago committed to providing for the basic needs of all its citizens, constructing a so-called safety net of government programs to catch those unable to support themselves. But an effective safety net must be positioned at the right height — safely above the rock-hard floor yet still well below the tightrope. The value of the baseline government benefits provided to someone not working must be significantly lower than the income that person could earn in an entry-level job. That “income gap” creates the economic incentive to work in the first place, ensuring that all who are able will strive to climb back up and into the labor force.

Unfortunately, a combination of macroeconomic trends and counterproductive policy choices has significantly eroded the incentive to work. Wages for low-skilled and entry-level positions have stagnated, while many of the positions that would have afforded a middle-class lifestyle have vanished entirely. At the same time, the safety net has grown to encompass an ever wider panoply of benefits that have become ever more expensive as health-care and education costs have exploded. This system of benefits, obviously requiring careful design and management, has neither. Countless programs are delivered through an alphabet soup of agencies, leaving no holistic anti-poverty approach and no one accountable for measuring or maintaining a meaningful income gap.

The results are as predictable as they are depressing. Labor-force participation is at a 35-year low overall, and an all-time low for men. (If participation were as high as it was before the recession, today’s unemployment rate would be above 11 percent.) There are 2 million fewer Americans working than there were before the recession but 2 million more Americans receiving disability payments. The number of food-stamp recipients has climbed by more than 25 percent since the recession ended, and more than 100 million Americans now receive some form of food assistance each year. The War on Poverty is in its 50th year, and yet the poverty rate today is as high as any previously recorded — and 30 percent higher than it was in the 1970s.

Conservatives, whether genuinely awakened to the severity of America’s poverty crisis or merely chastened by the disastrous aftermath of Mitt Romney’s “47 percent” remarks, are at least taking notice. Representative Paul Ryan held House Budget Committee hearings on the issue. Proposals to reform existing programs, create new ones, increase spending, or decrease spending are flying from all sides. None of these ideas are likely to succeed unless they are built atop a new framework, one that establishes a benefit-delivery system capable of clearly separating those who work from those who do not, and one that maintains a substantial income gap between the two.

By some measures, the War on Poverty has already succeeded. If the goal is simply to guarantee that every American has access to food, providing an average of more than $3,000 of food stamps each year to households in need is a nearly unqualified victory. If the goal is access to medical care, a Medicaid program spending an average of $7,000 each year for a family of three represents extraordinary progress. Indeed, counting the full range of federal benefits as “income” to low-income households leads to a substantial reduction in the poverty rate.

But simply transferring enough resources to someone so that he is no longer “poor” treats only the symptom; it does not move him toward self-sufficiency or a foothold at the bottom of an economic ladder that could lead to better opportunities. To the contrary, it hinders that process. Therein lies the paradox at the heart of anti-poverty policy. Every dollar spent to reduce the suffering of an impoverished person reduces the incentive for that person to improve his own condition by earning an income — not only because the need has become less pressing, but also because the system will in fact punish him for any success by taking the dollar away once he earns one of his own. The “handout” is locked in perpetual battle with the “hand up.”

One could say, “So what?” Why not just spend the money to ensure everyone’s needs are met, and let work be its own reward? For one, fiscal constraints preclude the possibility of further expanding benefits for the further-expanded pool of beneficiaries that this approach would attract. But even if one were prepared to undertake the taxation and redistribution necessary to implement such a policy, the result would undermine societal values of individual responsibility and self-reliance and impede the upward economic mobility that is possible only for those who enter the work force in the first place. Thus the conservative emphasis on work requirements and other incentives to move people into jobs. And thus the effectiveness of welfare reform in the 1990s, one of the great conservative policy successes of recent decades.

But welfare reform was actually quite limited, replacing the traditional Aid to Families with Dependent Children (AFDC) with the new, work-focused Temporary Assistance for Needy Families (TANF). TANF is not even among the top five federal anti-poverty programs in either expenditures or enrollees. Medicaid, the Supplemental Nutrition Assistance Program (SNAP, commonly referred to as “food stamps”), the Earned Income Tax Credit (EITC), Supplemental Security Income (SSI, commonly referred to as “disability”), and even Pell Grants for higher education are larger. And when all the spending is added up, the results are stunning.



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