The Agenda

How Paul Ryan Has Changed the Debate Over Poverty and the Minimum Wage

Paul Ryan’s new anti-poverty proposal is sprawling and ambitious, and it will take some time to unpack the many ideas contained within it. Callie Gable has written an able summary, I’ve offered some preliminary thoughts on how it fits in the context of Ryan’s role in the Obama era, and Ross Douthat has discussed how the proposal fits in the larger conversation over reforming the Republican Party. Recent months have surpassed my expectations. Utah Sen. Mike Lee’s willingness to embrace family-friendly tax reform was an early indication that something was afoot, but Lee is a junior senator from Utah who, for all his intellect and ideological rigor, is not the GOP establishment — quite the opposite. The warm reception of the YG Network’s superb Room to Grow was another sign that there was a real appetite on the right for a more substantive conservative domestic policy agenda focused on the barriers to upward mobility. And a series of speeches and initiatives from Florida Sen. Marco Rubio stimulated discussion and debate on the right while demonstrating that at least one ambitious conservative was unafraid to embrace the cause of policy innovation, with an explicit focus on the need to reform federal programs to make them more work-friendly. Rich Lowry and I argued several months ago that the GOP should be “the party of work.” We weren’t writing as voices in the wilderness. We were anticipating what looks to be an emerging consensus, or so we hope.

Enter Ryan and his anti-poverty proposal. Briefly, I just want to remind everyone that the great Republican failure of the past year has been the frankly pathetic inability of the party’s standard-bearers to counter calls for a steep increase in the one-size-fits-all federal minimum wage. We have often discussed why a federal minimum wage increase is an unwise idea, and many others, including Andrew Biggs and Mark Perry, have done the same. I’ve often argued that if we care about increasing the disposable income of poor families and giving them the ability to accumulate savings, we really ought to focus on the cost of living by, for example, tackling local land-use regulations, which raise the cost of housing while effectively denying poor people access to remunerative employment opportunities. Suffice it to say, this is not an issue for the federal government to take on. The better known and more widely embraced alternative to an increase in the federal wage, an increase in federal wage subsidies, actually is in Congress’s hands. Rubio has advanced the idea that wage subsidies should increase for childless workers. We at National Review have published a number of articles to that effect, and it’s long been a hobbyhorse of mine. And Michael R. Strain of the American Enterprise Institute has done yeoman-like on what a wage subsidy increase should look like, as has friend of The Agenda Oren Cass.

But there’s been one small problem, which is that actually existing Republican lawmakers have been reluctant to raise the actually existing earned-income tax credit (EITC). Ezra Klein wrote a stinging post at Vox on this subject back in May, riffing on a typically excellent Ramesh Ponnuru column:

“The typical pattern for Republicans on minimum-wage increases is to hold out for a while, sometimes even a few years, then acquiesce,” writes Ramesh Ponnuru at Bloomberg View. But he thinks there’s a better way. In particular, he thinks there are better policies Republicans could propose that would help the same people.

One, he says, would be expanding the Earned Income Tax Credit, “an earnings subsidy that targets poor households much better than the minimum wage does and poses no threat of destroying jobs.”

There’s only one problem: Republicans oppose expanding the Earned Income Tax Credit. In fact, they’re trying to cut it.

Indeed, Klein singles out Paul Ryan and the Ryan budget for trimming the part of the budget (“the income security budget function”) of which the program is a part. Now, however, Ryan has not only embraced expanding the EITC for childless workers — he has largely embraced President Obama’s proposal for doing so, the difference being that he favors funding it via different means, the details of which will (of course) have to be fleshed out in the future. 

The EITC is not a perfect program, and there is an ongoing debate over how exactly it impacts the labor market. There is room to reform the EITC. Yet it is hard to deny that for workers with modest skills who’ve found that the market value of their labor has been under severe pressure, it has been a lifeline. Ryan has, in this discussion draft at least, chosen to accept the EITC’s flaws for now and to expand it. When asked to put up or shut up on raising the returns to work for low-wage workers, he has decided to put up. That strikes me as a pretty big deal. Where Ryan leads, let’s hope other GOP lawmakers will follow. 

Further thoughts: In the past, Ryan has expressed an interest in Britain’s Universal Credit, a concept devised by Iain Duncan Smith, who currently serves as the secretary of state for work and pensions. Yet the Universal Credit, which aims to consolidate a wide array of anti-poverty benefits, has suffered from severe implementation difficulties, as Nigel Morris of The Independent reports:

One wonders if this is part of why Ryan has decided to stick with the EITC in roughly its current form rather than embrace a radically new structure, at least in the near term. 

The new credit, which combines six working-age benefits and credits into a single payment, has been championed by Iain Duncan Smith, the Work and Pensions Secretary, as a way of ensuring the unemployed always have an incentive to find a job.

Under his original timetable, 1 million people would be receiving the payment by April, rising to 1.7 million a year later.

But the DWP admitted that only 3,200 had been enrolled for Universal Credit by the end of November, nearly all of them as part of a pilot scheme in four job centres in the North-West of England. The vast majority are young single jobseekers, the least complicated category of claimant.

The British left has been more scathing still, as the implementation has proven enormously expensive. The Universal Credit may well be a good idea that has nevertheless proven premature. In light of the problems still plaguing the new insurance exchanges, it is easy to see why Ryan might have shied away from a potentially very complicated overhaul of the EITC. 


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