From Marco Rubio, a new approach to ending poverty
I realize that I ought to be writing about Chris Christie, the recently re-elected Republican governor of New Jersey, who has just had a brush with political death. But though I wish Christie well, and though I continue to believe that he is one of the most promising elected conservatives to have emerged in my lifetime, the Republican future rests less on the fate of individuals and more on the fate of ideas. And this week, one of Christie’s fellow presidential aspirants, Florida Sen. Marco Rubio, introduced a genuinely new idea for helping tens of millions of Americans escape poverty.
On Thursday, the 50th anniversary of President Lyndon Baines Johnson’s declaration of a “War on Poverty,” Rubio gave an address that weaved together stories from the lives of his immigrant parents with the barriers to upward mobility facing people very much like them today. “America is still the land of opportunity for most, but it is not a land of opportunity for all,” Rubio told the assembled crowd, drawing on the fact that 70 percent of U.S. children raised in poverty never achieve middle-income status.
Conservatives are known for celebrating American exceptionalism, and Rubio does so himself. Yet in this speech, he raised a number of awkward truths, like the fact that more Canadians surpass their parents’ incomes than Americans. Moreover, he offered a clear-eyed, if not complete, diagnosis of the reasons why so many Americans raised at the bottom of the income distribution remain stuck there. In the past, the U.S. economy was dynamic enough to replace jobs lost to automation or offshoring with new jobs. Yet that dynamism has suffered in recent years, and the result has been a series of jobless recoveries, each more disappointing than the last. After decades during which the educational attainment of Americans steadily increased, educational gains have stagnated. Nonmarital childbearing has grown more common, a seemingly self-reinforcing development in which the diminished economic prospects for less-skilled men make them less attractive as partners, and the sons of single mothers find it exceptionally difficult to stay in school.
Recognizing the complexity of the problems facing poor Americans, Rubio doesn’t propose a single silver bullet for fighting poverty. Rather, he calls for a two-pronged approach that rewards those who step on the first rungs of the economic ladder by taking low-wage jobs, and gives state and local governments more flexibility in meeting the needs of their most vulnerable citizens.
Though there are major details to be ironed out, Rubio’s basic idea is to consolidate anti-poverty programs into a single Flex Fund, which would be disbursed to state governments to design and fund their own anti-poverty initiatives. At the same time, he calls for replacing the earned income tax credit with a federal wage enhancement designed to raise the effective hourly wage for low-wage jobs. Rubio states that whereas the EITC offers very little to single workers without children, his wage enhancement would help increase disposable income. And whereas the EITC arrives in the form of a lump sum payment, the wage enhancement would come with every paycheck.
In the question and answer session that followed the speech, Rubio noted that the idea for the Flex Fund and the new wage enhancement came from Oren Cass, Mitt Romney’s former domestic policy director and the author of “The Height of the Net,” a National Review article that outlined a very similar proposal. The most noteworthy difference between Cass’s proposal and Rubio’s is that while Rubio presents the Flex Fund and the wage enhancement as separate programs, Cass sees them as part of a seamless whole. It remains to be seen if Rubio is thinking along the same lines.
Essentially, Cass’s goal is to make work, including low-wage work, more attractive than non-work. At the same time, he recognizes that the most straightforward way of achieving this goal — stripping the non-working poor of the in-kind transfers, like food stamps and Medicaid, that help them lead decent lives — is not an acceptable option. And so he envisions a system in which the working poor receive cash transfers, in the form of a federal wage subsidy, while the non-working poor would take part in a state-administered safety net, financed by the federal Flex Fund, state funds, and public-private partnerships. The idea builds on the logic of the welfare reforms of the 1990s. In that era, the goal was to ensure that families wouldn’t lose food stamps, Medicaid, and housing assistance just because they started to earn a modest income. Cass’s goal is to see to it that families don’t lose their purchasing power as they earn more, but that they can free themselves from the strictures, and perhaps the stigma, of in-kind transfers.
In Cass’s proposal, the funding formula for Flex Funds would be pegged to the size of the population deemed to be in need and it would grow at the same rate as the federal poverty threshold. States would have complete freedom to spend the money as they see fit, provided they use it to meet the needs of their poor residents. As people transition from the non-working poor to the working poor, Flex Funds would shrink and money would be shifted to the new federal wage subsidy.
By design, the state-administered safety net will “feel” different for its beneficiaries. Assistance that flows to the non-working poor will come with strings attached. The working poor, in contrast, will receive funds that they can spend as they please. Cass offers a scenario in which two households, one working, one non-working, would under the present system be offered $3,000 in nutritional support. Under his system, the non-working household might still receive food stamps while the working household will receive cash via the federal wage subsidy. It is easy to see why cash would be more attractive — for one thing, it would allow working poor families to set their own priorities. Cass’s wage subsidy would also be relatively easy to administer, as it would essentially function as a reverse payroll tax.
You could say that Cass’s proposal has a moralistic dimension. It explicitly differentiates between those who work and those who don’t. Those who work are entitled to help without hassle, as their decision to work represents a first step towards economic independence that deserves to be honored. Those who do not work are given a combination of help and hassle from state programs designed to nudge those who are capable of economic independence in that direction, while also meeting the needs of those who are incapable of making the leap.
Not everyone is taken with Rubio’s call for a Flex Fund. Robert Rector, an expert on anti-poverty programs at the Heritage Foundation, condemned the proposal in an interview with McKay Coppins of Buzzfeed on the grounds that it isn’t likely to produce conservative policies, particularly in liberal states. Rector’s skepticism about granting states autonomy in running federally-funded safety net programs runs deep. But it must be said that if Rubio’s proposal mirrors Cass’s, the availability of the federal wage enhancement, with its promise of a substantial effective increase in disposable income, will be a powerful inducement for people to enter the labor force.
Others on the right object to the idea of wage subsidies on the grounds that they are welfare by another name, and that poor Americans, whether they work or not, should rely first and foremost on charity and state and local government. What is clear is that Rubio has injected new life into the debate about how to get Americans stuck in worklessness and poverty out of it, and for that he deserves praise.
PHOTO: A man pushes a cart up the road while scavenging for bottles and cans during a winter nor’easter snowstorm in Lynn, Massachusetts January 2, 2014. REUTERS/Brian Snyder