House Budget Committee chairman Paul Ryan (R-WI) is not a fan of the White House budget proposal released today. “The President’s budget is yet another disappointment – because it reinforces the status quo,” Ryan said in a statement. “It would demand that families pay more so Washington can spend more. It would hollow out our defense capabilities. And it would do nothing to preserve or strengthen our entitlements. The President has just three years left in his administration, and yet he seems determined to do nothing about our fiscal challenges.”
He criticizes the Obama proposal for never coming anywhere near balance, spending $56 billion above the agreement Ryan reached with Senator Patty Murray (D-WA), quadrupling debt service costs on a steep ten-year climb to $25 trillion in gross national debt, and looking for more tax hikes. “This budget isn’t a serious document; it’s a campaign brochure,” Ryan concludes.
The Budget chariman’s own proposal for the year is still forthcoming, but he begins the process with a report called “The War on Poverty: 50 Years Later,” which can be read in its entirety here. The report charts the fortunes of no less than 92 separate programs, which cost $799 billion in fiscal year 2012. For example, there are 28 separate education and job training programs, totaling $94.4 billion in cost.
“Rather than a roadmap out of poverty, Washington has created a complex web of programs that are often difficult to navigate,” says the report summary. “Some programs provide critical aid to families in need. Others discourage families from getting ahead. And for many of these programs, we just don’t know. There’s little evidence either way.”
For all of this spending, the poverty rate has gone from 17.3 percent in 1965… to 15 percent in 2012. But over the past three years, “deep poverty” – a household making less than half of the official poverty line – has reached its highest level on record. Meanwhile, the workforce has hit a 36-year-low, and Congressional Budget Office projections say it will decline further over the next decade.
The report cites several factors for workforce decline, including the demographics of an aging population and slow economic growth. “But federal policies are also discouraging work,” the analysis continues. “For example, a rapid increase in disability caseloads has reduced the labor force. But a large problem is the ‘poverty trap.’ There are so many anti-poverty programs – and there is so little coordination between them – that they often work at cross purposes and penalize families for getting ahead.”
One major manifestation of the poverty trap is the incredibly high “implicit marginal tax rate” faced by poor families. The loss of valuable benefits as earned income increases can make the effective burden of each additional dollar approach 100 percent – in other words, there is virtually no economic incentive to work. One study hypothesizes that a single mother with two children living in California could go from $10k in salary to $40k with no appreciable change to her disposable income or standard of living, due to lost benefits and higher taxes.
It is not irrational for people facing a 100 percent implicit marginal tax rate to decline employment opportunities; rates far lower can make it difficult to trade government benefits for work. It’s no surprise to learn that the Affordable Care Act makes the problem even worse, adding up to 13 percentage points to the implicit marginal tax rate.
Workforce decline is one major factor in growing poverty; the dissolution of family ties is another. “Poverty is most concentrated among broken families,” the report notes, citing statistics that have been well known for decades. “For all families, the poverty rate was 13.1 percent. But 34.2 percent of families headed by a single female were considered below poverty, and 22.8 percent of households composed of unrelated individuals were considered to be in poverty.”
Education is important, but existing programs don’t seem to be working in a way that brings educational benefits to children of low-income families. The House Budget report cites studies showing that 47 percent of those born in the bottom quintile remain there if they don’t complete college, while only 10 percent of colllege graduates remain impoverished. However, the gains in college completion rates over the past 20 years have “overwhelmingly favored those from high-income families.” Achievement gaps between different racial demographics have narrowed for grade-school students, but the gap between low- and higher-income children remains stagnant… even though per-pupil spending over the past four decades has nearly tripled.
Media warning shots are already being fired at Ryan over this report. For instance, the L.A. Times suggests, “Pushing the poverty debate forward in an election year poses risks and potential rewards for Republicans, who are tapping into an issue that could motivate base voters inclined to see federal spending as excessive. But the focus could also alienate more moderate or independent voters if hard-liners within the party take a more extreme approach to poverty aid.”
It will be easy to caricature any effective reform proposal as “extreme,” just as every serious attempt to reform the tax system is “extreme.” The overlapping nature of these programs is a defensive feature of government bloat, making it easy to portray every trimmed or eliminated program as food taken from the mouths of babes. And the whole system is perpetually defended as a bulwark against a far deeper abyss for the poor – no matter how unsatisfactory the current results might seem, we are told the situation would be absolutely brutal without them. Of course, there’s no way to test those claims without reforming the programs… and if we agree that we dare not risk reform, there will never be a reliable test.
Is success in the War on Poverty to be measured by the number of poor Americans, or their standard of living? Surely both are factors, but the liberal analysis leans heavily toward the latter, even though everyone seems to rhetorically agree that most safety-net programs should provide temporary assistance for those who are eager to join the workforce. The House Budget Committee report makes a strong case that our anti-poverty programs not only waste taxpayer money, but they’re making it harder for the poor to earn their way to a better life.