Published January 13, 2014
President Obama has signaled that he plans to use income inequality as a political wedge issue in the 2014 mid-term election. The idea is to shine a spotlight on the large disparity between the economic gains for those at the top of the income ladder and those on the bottom rungs, and then to blame Republicans for blocking efforts which are supposedly aimed at narrowing the gap. Think of Bill de Blasio-style populism on a national scale.
The battle lines in this emerging debate are becoming visible over the extension of long-term unemployment benefits and raising the federal minimum wage requirement. Much like the 2012 presidential contest, the president and his allies want to advance proposals that poll very well and which many Republicans oppose for principled reasons in an attempt to paint GOP candidates as insensitive to the plight of those struggling in today’s still sluggish economy.
But this latest embrace of economic populism by the president is not a dead-certain political winner. After all, President Obama has been in office for five years, and Mitt Romney is not on the ballot this year. Like it or not, today’s economy should rightfully be considered the Obama economy, not the Bush economy or the Republican economy. The president may want to assume the pose of an innocent bystander to today’s economic conditions, but attempts to blame his political opponents for sluggish growth and the diminished prospects many families now face should be an increasingly hard sell with voters.
Moreover, a renewed debate on how to help those struggling in today’s economy, and specifically to help the poor escape their current conditions, also provides a political opening for Republicans. Today’s welfare state is largely the construction of decades of liberal political activism. If it is failing, and there is strong evidence that it is in many ways, then that is a stinging indictment of the liberal governing philosophy more than anything else.
Leading Republicans are seizing the opportunity that has been presented to them. Senator Marco Rubio delivered an important speech on the 50th anniversary of President Johnson’s declaration of a war on poverty. In it, Sen. Rubio made it clear that the right diagnosis of the problem is not that the rich are doing too well but that the poor need better opportunities for moving up the wage scale. Congressman Paul Ryan has also let it be known that he believes a new push to provide practical, conservative solutions to the plight of the poor should top the list of GOP priorities.
An effective conservative critique of existing policies starts with the acknowledgement that a strong social safety net is a must in a modern, market-based economy, and that the safety net built here in the United States, though flawed, has contributed substantially to improving the conditions for the poor. The official measure of the poverty rate is completely misleading in this regard because it does not include transfer programs or the taxes people pay in the measure of income. So, in a very real sense, no matter how much the government spends, the official poverty rate remains unchanged.
But when tax and transfer programs are factored into the assessment, and when the consumption patterns of the poor are examined and not just their cash incomes,the picture changes quite dramatically. The panoply of governmental support programs—Medicaid, Food Stamps, the earned income tax credit, housing vouchers, school lunch programs, and many more—substantially raise the living standards of those who otherwise have very low incomes.
This should not be surprising because the investment, especially at the federal level, has been massive. Contrary to conventional wisdom, programs for the poor have not been squeezed by a political class concerned only with the rich and connected. According to the Congressional Budget Office, over the period 1972 to 2012, the ten largest means-tested programs and tax credits have grown at an average annual rate of 6 percent, raising total federal spending on these programs from about 1 percent of GDP four decades ago to 4 percent today.
Where liberalism has failed is in not providing poor families with the financial resources for a better future. The core problem is a complex combination of poor job prospects for families living in low income areas, an educational system that has failed generations of inner city children, and the continued breakdown of family structure among the poor. The result is intergenerational poverty, where single-parent households that are heavily dependent on government assistance raise children who themselves too often remain in poverty as adults—and suffer from all manner of other social ills in the process. The complexity of the problem is compounded by the fact that the presence of large federal assistance programs for single-parent households is likely enabling the continued breakdown of responsible two-parent families.
There is no easy answer to breaking this cycle, of course, but, as Oren Cass notes in an excellent National Review essay last fall, the starting point for reform must be a determination to make work more attractive than government assistance, otherwise the safety net becomes an impediment to climbing the ladder and achieving self-sufficiency. There are a number of different ways to achieve this goal. For instance, Sen. Rubio has proposed wage supplements for those with very low paying jobs, replacing today’s EITC. Government assistance could also be conditioned on participants securing work of some sort, or engaging in activity that puts them on the path to better paying jobs, as was done in the landmark 1996 welfare reform legislation.
But the answer is not simply forced work either. Too many low income children are reaching adulthood without the skills necessary to secure a good job. The problem is that the school systems where these children are educated have been dysfunctional for decades. Conservatives must become the constant and unyielding champions of correcting this major injustice by insisting on better alternatives, including private options, for poor children trapped in low performing public schools.
Conservatives must also make the case that helping families build better lives for themselves and their children cannot be done by a distant and impersonal federal government. The complexity of the social ills plaguing low income communities requires direct, hands-on intervention. That means states, local governments, and non-profit organizations working together to help families escape from the forces that are holding them back. Cass’ proposal is to convert today’s federal welfare programs into flexible funding streams that states could then control and use to build a better safety net for the poor, one that is aimed not just at providing for their material needs today but also preparing them to do better for themselves tomorrow. The Cass proposal would bring about a much-needed shake-up of the welfare program status quo and would bring to the surface new approaches to welfare support that could help poor families achieve their true potential.
Over the coming year, the economic populists will attempt to argue that all would be well in low income America if only the rich were taxed more to pay for universal pre-K, more public school funding, better child care, and on and on. Conservatives should welcome this debate. Over the past five decades, the same arguments have been made many times, and oftentimes resulted in legislation expanding the federal welfare support structure. But the promised results never arrived. There remains far too much despair in our inner cities, with poor schools and broken families. And the public understands that the answer is not more of the same.
James C. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.