Can the U.S. Strengthen the Safety Net?
By Charles Kindleberger
This article was originally published in our the 2014 edition of the Peace Economy News. Please sign up below to receive our 2016 newsletter when it comes out later on this summer.
Earlier this year there seemed to be evidence of new concern for the nation’s poor. Fifty years after the beginning of President Johnson’s “War on Poverty,” politicians on both sides of the aisle proclaimed that ending poverty was still an important national goal.
Sen. Mark Rubio gave a long speech in January expressing concern, if few specifics, other than transferring federal safety net programs to the 50 states. House Ways and Means Committee Chair Congressman Paul Ryan released a 200 page report put together by his committee staff that, as one might expect, claimed that federal poverty programs often don’t work, even as a close look at the report highlighted many examples deemed to be “effective.” Senator Ran Paul expressed interest in creating “economic freedom zones” in depressed areas where flat individual and company 5 percent tax rates would encourage investment.
Then in early March, President Obama submitted his annual budget. Its proposed expenditures stayed within the overall compromise limits reached by Congressman Ryan and Senator Murray last year. His budget contained poverty reduction and economic growth measures, while continuing a reduction of the federal debt as a percent of the gross domestic product. Immediately, the Republican leadership in the Congress declared that it was not a serious document. They deemed it “Dead on Arrival (DOA).”
On April 1st, Congressman Ryan unveiled a new 10 year budget aimed at eliminating the federal debt. His “Path to Progress” appeared to be a repeat of previous budgets in which two thirds of the proposed cuts would come from programs designed to assist low and moderate income individuals. Over 10 years his budget would cut Pell Grants for low and moderate income college students by $125 billion, and SNAP (food stamps) by another $125 billion. An additional $500 billion would be cut from unspecified mandatory programs (things like Medicare and Medicaid) as well as $791 billion in non-defense discretionary programs (things like education, research, law-enforcement, early child care and low income housing assistance). Defense would be increased by $483 billion over 10 years. The Affordable Care Act would, of course, be repealed; Medicaid would be cut by 25 percent and conveyed as a “block grant” to the states. Individual and corporate tax rates would top out at 25 percent, causing an estimated revenue short fall of $5 trillion (Urban Institute and Brookings Tax Policy Center).
This is a budget that may find use during the election season, but with a Democratic Senate and President, in terms of actual enactment it too is DOA. Is any progress on safety net programs possible this year?
Wouldn’t it be great if the House and Senate could focus on smaller specific steps? Here are some for consideration.
Earned Income Tax Credit
The EITC was put in place by President Gerald Ford in 1975 and has long had bi-partisan support. Even Congressman Ryan’s report indicates that it is an “effective tool for encouraging and rewarding work among lower-income individuals.” The EITC could be made more effective in several ways including allowing single men and women to participate.
Job Training
Who can deny that finding work is central to the fight against poverty, and that many of the unemployed (especially the 2 million long term unemployed) need new or upgraded skills? At minimum, Congress should reauthorize the Work Force Investment Act that expired in 2003.
Child Care and Development Block Grant
The Senate voted to reauthorize this program with a vote of 97 to 1. It would encourage health and safety standards for child care centers and allow more day care assistance, thereby providing more opportunity for poor people with kids to work.
Emergency Unemployment Compensation
House Speaker Boehner said he would not consider an extension for the 2 million who continue to search for work after their initial 26 weeks have run out unless the extension was paid for. Several months ago it was reported that the Senate had reached a bi-partisan agreement allowing a five month, retroactive EUC measure that would be financed.
Financial Security Credit
This innovation would allow low income families to place all or part of their tax return into a savings account. Those who maintained the deposit in the account for at least 8 months would receive a matching amount up to $500. The government provides middle and upper income households with programs (IRAs, 701k, etc.) that encourage savings. Why not the poor?
Is it naive to think that any of these programs could be implemented in an election year? Maybe, but the polls tell us that the American people are upset. A recent Pew Research Center/USA Today survey revealed that almost 70 percent think that the government should do either “a lot or some” more to fix the gap between the rich and the poor. About two thirds recognize that over the last 10 years and longer the gap between the very rich and everyone else has increased dramatically.
Major legislative accomplishments are not likely this year. But programs that provide incentives for low and moderate income people to work and save, and that don’t cost too much should appeal to a cross sections of republicans and democrats. Let’s keep pushing.
