You can’t fix poverty by breaking the safety net

January 8th, 2016 at 3:15 pm

Republican Speaker of the House Paul Ryan and Senator Tim Scott are hosting a poverty forum tomorrow for some of the R presidential candidates. In advance, they wrote a joint op-ed in the Wall Street Journal about how they’d fight poverty, and how the damn liberals keep getting it wrong (“A Republican Cure for Liberal Policy Failures on Poverty”). Jeb Bush also spoke on these issues at a recent town hall.

Poverty’s a serious problem in America, and I of course welcome their interest. But because their diagnosis is fundamentally flawed, their prescriptions often risk increasing poverty and inequality, while restricting opportunities for millions of American children.

Ryan’s theory of the case is that anti-poverty policy as crafted by liberals gives a person a fish, as it were, instead of teaching them to fish for themselves. He writes (with Scott) that, while safety net programs “prevent extreme deprivation,” they’re “not only putting a floor under people’s feet; [they’re] gluing their feet to it.”  Bush says, similarly, that “transfer payments to try to provide for people in poverty [are] actually putting limits on people’s possibilities.”

The solution is…wait for it…less government (Ryan/Scott):

“By limiting itself, government can actually expand opportunity when it gets out of the way and paves the road to collaboration—whether it’s between students and teachers, job seekers and employers, or people in need and people who can help. It is through that free, personal exchange that people learn the skills they need to succeed.”

This is merely a gussied up version of “if your only tool is a hammer, then everything looks like a nail.” The idea, and Ryan’s budgets very much underscore this point, is that we can help the poor more by doing less for them.

The evidence points strongly in the opposite direction. As CBPP’s Arloc Sherman noted yesterday (and Ben Spielberg and I have explained in detail), a large and growing body of high-quality research, like that described in the graph below, shows that the impact of income support and safety net programs like SNAP and Medicaid do not just occur upon receipt and immediately fade away. They have important, positive long-term benefits for children.

snap_inv

Next, the idea that liberal policies have failed is belied by…you know…data. Ryan, Scott, and Bush use the badly designed official poverty measure, which fails to capture the effect of safety net programs. They then argue that safety net programs haven’t worked. An inclusive poverty measure shows that the safety net’s effectiveness at reducing poverty has grown nearly ten-fold since 1967, as Chad Stone explained today.

safenet

OK, this next point is especially important. Bush says in a one-pager that he will eliminate SNAP (formerly food stamps), one of the nation’s most important anti-hunger programs, and replace it and other programs with block grants to states. That’s a big part of Ryan’s agenda as well.

But when you block grant these federal programs, meaning you give states fixed funding to administer them, you tear out one of their most important functions: their counter-cyclicality, i.e., their ability to expand with need. That’s the veritable definition of a safety net program: to catch people when the market fails.

Bob Greenstein documents why such a proposal will likely cause a reduction in food assistance, deprive SNAP of its important countercyclical properties, and increase poverty. The figure below tells a compelling part of that story. It shows how two anti-poverty programs responded in the last recession: SNAP—not a block grant—and TANF, which was block granted in the mid-90s. SNAP worked as it was designed to, expanding to catch those knocked out of work in the downturn. TANF hardly budged.

Source: CBPP

Source: CBPP

Basically, these guys want to turn SNAP into TANF.

Ben S and I will have a longer piece out early next week when we hear what more these politicians have to say at their forum. And as I suggested, we’re wide open to good ideas (they’ve shown interest in expanding the EITC for childless workers, for example). But as it stands, my concern is that want to fix poverty by breaking the safety net. And that’s a really bad idea.

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8 comments in reply to "You can’t fix poverty by breaking the safety net"

  1. Tom in MN says:

    The beatings will continue until moral improves!

    Doesn’t this approach get the economics wrong in that cutting assistance costs us more overall? Didn’t Utah just discover that providing the homeless with a place to live is cheaper than dealing with them on the streets? And the children doing better in adulthood stat you point out means that they cost us less as adults. It’s a huge differential between a tax paying adult and paying to keep someone in prison. Health insurance is the same way, paying for emergency room care is much more expensive than paying for preventative care.

    It has to be they just don’t want to help “those people,” because what they propose will cost more in the long run.


  2. Jill SH says:

    Did I read somewhere that Dr. Ben Carson, reknowned neurosurgeon and presidential candidate, benefitted from some of these programs, like food stamps, as a child? Seems like a good investment, even if we got only one world-class doctor out of the program.


    • Procopius says:

      I haven’t read his book, so I’m not sure what his reasoning is. I have read that what he said was that his mother resisted taking the benefit as long as she could, but at one point they were so desperate she had to give in and accept it. I have read that he stated, in his autobiography, that they “couldn’t have made it” without the program. But as I understand it he wants to end the program because every single person who has ever had to use it becomes a useless drone who will never amount to anything or seek to improve him/her self. This is one of the reasons I would prefer to pay little attention to him.


  3. Sukh Hayre says:

    It doesn’t matter which party is in power, what needs to get done, gets done. The two-party system of democracy is just to keep the masses happy. It gives us all someone to cheer for, someone to hate, and if things go wrong when our guys in power, it gives us the out that, “things would have been way worse if the other guys had been in power”.

    The reality is, monetary policy had to be depleted before fiscal policy could be implemented so that there was as little leakage from the domestic economy to that of the developing economies. Now that monetary policy has pretty much gone as far as it can go, fiscal policy, in the way of infrastructure spending and renewable energy investments (including better insulating existing homes) will be the next step taken.

    The reality is, consent has to be manufactured to show the Republicans as regressive 1%’ers. This will not only give the Democrats the electoral power to do what needs to be done, but will also give them the people’s mandate to do so.

    I wouldn’t be surprised if the BRICs aren’t doing all they can to ensure that the economy crashes in 2016 because they would be better off if the economic reset button is pressed, globalization as we know it comes to an end, and the U.S. is stuck with the American masses demanding Republican solutions to fix what is wrong in the U.S., while the BRICs implement policies similar to the policies that the U.S. should have implemented during the Great Depression.

    The reality is, the developed world did all that it could to maximize the benefits of globalization before their hegemony, and the ability to print the world’s reserve currencies came to an end. Life is going to be different going forward, but there is also the real possibility to make it better for everyone.

    The reason that wealth was allowed to become concentrated in the hands of the 0.1% is because this limited the disposable income that the 99% had to pay for imported manufactured goods and oil. This was the right policy for as long as globalization and hegemony were still a developed-world advantage. Money in the hands of the 0.1% of Americans are a lot easier to get back into government hands than if it is in the hands of foreigners. In the hands of foreigners, it would have to first return goods or services to non-Americans before it could be collected back by the government.

    Remember, government debt is different than household debt because, in the end, all that government IOU’s can be used for is to pay taxes owed to the government.

    That’s my “conspiracy” theory and I’m sticking to it.


  4. Ogden Wernstrom says:

    Reductions in benefits are equivalent to increases in taxes. Ryan should be concerned about the effective marginal tax rates on those receiving benefits – *that* is what glues recipients’ feet to the floor.


  5. Robert Zonis says:

    “their prescriptions often risk increasing poverty and inequality, while restricting opportunities for millions of American children.”

    For Republican elites, this is a feature, not a bug. By their actions, it is obvious that they have decided to fly (relatively) higher by grinding all the rest of us into the ground.


  6. Smith says:

    You can not count poverty programs, need dependent programs, like EITC, SNAP, TANF, and unemployment benefits to say they reduce poverty. That is why Saez and Piketty don’t count them when discussing income inequality. The safety net, especially long term use of the poverty and unemployment safety net, is used to address failures of the economic system. The only justification for expanding them is in anticipation of reducing their use by addressing root causes of their need. That’s not the justification I’m gleaning from arguments offered here.

    The fact that EITC expansion might be favored by conservatives should confirm the argument it is corporate welfare designed to supplement sub standard wages and the symptoms of low income. It does next to nothing to address root causes, and takes pressure off drive for higher minimum wage, which raises everyone’s wage from the ripple effect. Just the opposite, EITC puts downward pressure on wages, and penalized employers paying fair wages. It distracts from the fight for labor power and restoring competitive labor markets. It robs middle class Peter to supplement the wages of low income Paul.

    Finally, look at ratio of wage earners to number in household. Seems to be the number one cause of low income households, bit of common sense to that too. Something addressing that, including childcare issues, is more likely to be effective addressing needs of low income households.


  7. Procopius says:

    They really love that “teach a man to fish” proverb, but that’s not what they propose to do. They never have any proposal to how they’re gonna “teach a man to fish,” what they always propose is “take away the fish and make the man learn how to fish on his own — if he survives.”


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