The new Congressional Budget Office report on the Affordable Care Act is highlighting one of the fundamental divides between many liberals and conservatives: their views of human nature at opposite ends of the sentimental-to-cynical spectrum, and their corresponding views of how expansive we should make our safety net.
The report projects a drop in the number of hours worked as a result of Obamacare, and said the reduced hours would be the equivalent of about 2.5 million full-time jobs by 2024. Almost all of the drop would be due to voluntary departures from the labor force. The conservative Family Research Council headlined its analysis “Nice work if you can quit it.” The premise seems to be that Americans are freeloaders who will jump at the chance to quit their jobs in order to get free or heavily subsidized health insurance.
The liberal premise is that the “quitters” would be parents who want to be there for their kids, older people with health problems who’d like to retire before they are eligible for Medicare, people working two or more part-time jobs, and dreamers yearning to switch jobs or start a business.
Both sides are to some extent overstating their cases in cartoon-like caricatures. In the case of the liberals, not everyone will have noble or even good reasons for leaving a job or cutting back hours. Moreover, to the detriment of the economy and the federal budget, not every job-switcher or entrepreneur will be a success. As for conservatives, it’s hard to imagine many people giving up wages, salaries or careers because they can now get insurance without them. Also, whatever happened to popular conservative views that “job lock” is bad, while entrepreneurs and stay-at-home moms (or even dads) are good?
It’s telling that White House economic adviser Jason Furman cited the conservative Heritage Foundation in a response to the CBO report on the White House blog. The 2008 report from Heritage largely praised what it called GOP nominee John McCain’s “ambitious plan” to separate health insurance from employment, thereby breaking job lock and giving more power to families. “Individuals who wish to take a better job, change careers, or leave the workforce to raise a family or to retire early” would no longer risk losing insurance, Heritage wrote; they’d be able to buy a policy and “offset its cost with the McCain health care tax credit.”
The debate played out on my Twitter account this way:
Let’s stipulate there will be churn in the job market, some people will decide work’s not worth it, other people will land their jobs, and we can’t tell whether the Obamacare boom in health jobs will be outweighed by a private-sector bust. Does any of it matter? Not if you believe that all Americans should have health insurance. What does matter is that the Affordable Care Act work as well as possible, for individuals, businesses and the overall economy. In an ideal legislative world, the Pollyanna glasses would be on the shelf and so would the dark assumptions that people will behave badly, and the law would be tweaked as legitimate problems arise.
The New York Times has two fascinating stories today that may not seem related, but they are bookends in the debate about what to do about poverty and income inequality.
One is Sam Polk’s confession that he and his former colleagues on Wall Street were addicted to wealth. In Polk’s telling, no amount of money was ever enough and any public policy that threatened their amassing of more money — new hedge fund regulations or higher tax rates, for instance — was viewed as an unfair outrage. As a former substance abuser, he says, he recognized that he was an addict, as much in need of a 12-step program as anyone susceptible to alcohol or drugs.
It’s an intriguing way of thinking about the phenomenon. Social attitudes and the law have evolved on many issues, such as intolerance for drunk driving. Could the public eventually turn on greed and make it safe for Congress to revamp tax laws to make them more equitable? A historic economic crash didn’t create that kind of pressure. The rich and their wealth, as Polk points out, are still lionized. But he has started a conversation that could help change that.
The other potentially high-impact piece is Moises Velasquez-Manoff’s report on what happened to poor members of a Cherokee tribe in North Carolina when a casino opened and families began receiving stipends. Epidemiologist Jane Costello at Duke University studied the impact of the money — $6,000 to $9,000 per person over the course of her research — and found dramatic improvements among children who moved out of poverty, especially those who were young when the payments began. She noted better parenting and a 40 percent decrease in behavioral problems among the children who started off poor.
These findings reinforce other research that shows the debilitating impact of “scarcity” on the poor, the potential benefits of stress reduction, the vital need for good parenting from birth to age three, and the positive impact of direct payments as opposed to a web of complicated and confusing programs. Lots of academics, think-tankers and politicians are talking about these ideas, including prospective Republican presidential candidates Marco Rubio and Paul Ryan. And that’s a hopeful sign.
With Republicans, it all comes down to spending less money. This is the great credibility obstacle faced by the party and its aspiring presidents as they try to formulate ways to address poverty and shrinking opportunities to move up in life.
It’s true that Democrats seem to always want to spend more and resist pruning programs, and that has resulted in lower ratings from the public when it comes to controlling the deficit. But Republicans are dealing with an empathy gap that is directly related to the economy and could be consequential in a national race. The GOP trailed the Democrats 45 percent to 17 percent in an NBC-Wall Street Journal poll last month on the question of which party does a better job “showing compassion and concern for people.”
The current fight over emergency federal unemployment benefits for the long-term jobless is a real-time showcase. Republicans at first seemed generally resistant to extending the relief, even though there are still three people for every job available and it is traditional to approve the benefits, no strings attached, in those circumstances. The “softer” position now emerging among some is that the expenditure must be offset by a spending cut somewhere else in the budget. The party never made that demand when fellow Republican George W. Bush was in the White House. But now, as usual, it’s all about the money, and never mind the stress created among the long-term unemployed as Congress searches for a way forward.
Former Capitol Hill aide Ron Haskins, a Republican expert on income issues at the Brookings Institution, put the money question to Rep. Paul Ryan, chairman of the House Budget Committee, at an Economic Mobility Summit on Monday: Are spending cuts a necessary part of his plans to alleviate poverty? (Watch it here; the question is asked at 1:07).
Ryan’s answer was less direct than Haskins’ question, but the answer that came through eventually was yes. “It has nothing to do with a line on a spreadsheet,” he started off. “It has everything to do with is this working or not.” We can’t measure this, he continued, by “how much money we throw at it.” Throwing less at it, he added, would be a better idea because freedom and free enterprise are “brought forth by keeping government limited.” As the war on poverty stands now, he said, “we’re biting off more than we can chew” and cramping the roles that civil society, private enterprise and individuals should play.
The premise that government should recede as a major force in solving such a profound and complex problem is flawed, but let’s put that aside. Ryan and Florida Sen. Marco Rubio, both potential presidential candidates, are saying interesting things about the current safety net and its shortcomings. They lament the uncoordinated, overlapping nature of government programs meant to help, and have ideas for change.
Rubio, in a speech marking the 50th anniversary of the War on Poverty, proposed putting all the anti-poverty money into “a revenue neutral Flex Fund” and turning it over to the states. He cites all kinds of experiments states are conducting to help get people into work (never mind that President Obama proposed ways to encourage that trend back in 2011). Given the severe disparities in Medicaid, education and other areas when states take the lead, this idea raises concerns, but it’s well worth chewing over.
An even more compelling idea is Rubio’s proposal to replace the Earned Income Tax Credit with a “federal wage enhancement” for low-wage jobs. It would apply to single people as well as the married couples and families covered by the EITC, and it would be synchronized with regular paychecks instead of coming as a year-end lump sum.
Both of these ideas have the potential to reduce complexity and maybe even scarcity, both of which cause mental fatigue that researchers say drains poor people of IQ points and the capacity to make good decisions. The Flex Fund would even rise and fall with slumps and peaks in the economy. But Rubio’s team has indicated the enhanced wage part of the package would be revenue neutral, meaning families could suffer if singles are added. That pesky money question yet again.
At Brookings, Ryan laid out two unassailable criteria for reform, simplicity and standards. He suggested that we look to Britain’s Universal Credit, which collapses six means-tested programs into one overall payment. The Universal Credit tapers off gradually as people’s incomes increase (as opposed to the abrupt loss of help in this country that is, as Ryan suggests, a disincentive to work), and features tougher job-search requirements. The Universal Credit is having its own bungled rollout at the moment – “a rough patch, no two ways about that,” Ryan said – but he called the basic concept “very sound.” It remains to be seen how this works in real life, but early research on direct cash payments to the poor suggests it could be effective. And it certainly sounds like it would relieve stress and logistics problems for beneficiaries.
As for standards, Ryan means work, and most people would probably agree that those who receive government benefits should work if possible. But Ryan didn’t mention that many of these people already do work, nor did he get into the “if possible” part. In some cases people have child-care and transportation needs that make it impractical to work. Most important, and he knows this as well as anyone, there are – I’ll say it again — three people for every available job. Would he be willing to spend federal money to directly create jobs? Because at this point, how else could we get people into slots fast?
The Rubio and Ryan poverty offensives have a number of analysts saying they perceive a sea change in the focus and rhetoric of Republican leaders, and in the prescriptions they are proposing. Ironically, though, Ryan pinpointed the GOP’s core problem when he said that opportunity is all about trust. “Government when used wisely can increase trust,” he said at Brookings. “Where there is trust, there is collaboration. Where there’s collaboration, there is economic growth.”
It’s hard to see how Republican activities foster any of that. House Republicans, including Ryan, voted last fall to cut $40 billion and up to 4 million families off food stamps – while leaving in place huge subsidies to farmers and agribusiness. Ryan’s famous budgets, meanwhile, eliminate major chunks of federal spending, in large part by turning entitlements (everyone who qualifies gets them) into block grants or vouchers (defined amounts of money that almost always fail to increase enough to hold their value).
Some of the ideas coming now from Ryan and other Republicans have potential for bipartisan support and good results for the people they are meant to help, and could even save money in the long run. But they won’t get a serious hearing from Democrats if the upfront goal is to starve and shrink government programs that fight poverty. That’s a prescription for a trust gap.
Poverty-related stress causes an IQ loss greater than pulling an all-nighter, according to a book called Scarcity. Economist Sendhil Mullainathan of Harvard and psychologist Eldar Shafir of Princeton, the co-authors, say that goes a long way toward explaining why poor people have trouble making good decisions and plans for the future. They also say that’s good news — because it means the problem is situational, the stereotypes are wrong, and there are remedies.
Those remedies range from keeping it simple (one-stop-shops and direct payments) to first doing no harm (like, for instance, cutting off unemployment benefits to the long-term unemployed, with home losses and all the other hardships that will bring).
For all of you who have ever stayed up too late or all night, you know how you feel the next day. That is, not like tackling big challenges or sticking to disciplined master plans. Policymakers need to keep the scarcity effect in mind at all times as they consider safety-net programs. You can read more about this subject in my new piece at Al Jazeera America.
The president is making it clear how he wants to spend this year and the next two — working on issues like inequality, mobility, wages and jobs. But Congress hasn’t been in a partnering mood the last five years, and there’s not much he can do by himself.
The administration has been able to make substantial headway toward its environmental and energy goals without going through Congress, such as stringent new fuel standards worked out with the 13 major auto companies. Obama also announced 23 executive actions to reduce gun violence after the Newtown shootings, and two more just this month.
His options are far more limited on economic and safety-net issues, a problem I explore in a piece today in The Daily Beast. It’s going to be a tough, uncertain slog, but as White House economic adviser Jason Furman put it, Obama does not intend to devote the rest of his presidency to simply making the Obamacare website “better and better and better and better until it’s just the best thing in the history of humanity.” In his words: “There’s a lot of other things we want to do.”
It seems like politicians would have learned how to talk about poverty by now, but many of them haven’t. Some are judging the poor and needy, while others are judging them for making such judgments. It’s striking how much moral condemnation is built into this debate and how counterproductive it may turn out to be – especially when the facts speak for themselves.
Sen. Tom Harkin seemed to be on the right track in a floor speech the week before Christmas when he urged fellow lawmakers to have more empathy for people who are not “the big wheels in our society,” but the low-wage workers who keep that society functioning. “We have a duty, I think, to put ourselves in their shoes,” he said.
It was a Rodney King moment of sorts — can’t we all just get along, and feel compassion for each other, and help people get through what nearly everyone acknowledges are hard times? “We have to stop being so harsh,” Harkin continued. And who could disagree with that, the week before Christmas?
Except then Harkin used what could only be described as harsh language to condemn Sen. Rand Paul for saying on Fox News Sunday that it is a “disservice” to the long-term jobless to extend their emergency unemployment benefits. “I think it is offensive to suggest that they are lazy and don’t want to work,” Harkin said. “To me it is morally repugnant to conclude that they will somehow be miraculously better able to find a job if we simply let their kids go hungry.”
“Disservice” was the word that launched countless denunciations of Paul, mostly from Democrats, though it’s clear that many Republicans disagree with him as well. Still, why use a phrase as inflammatory as “morally repugnant?” Today on ABC’s This Week, Sen. Charles Schumer chose the milder “insulting” to the unemployed. On Saturday, President Obama went with “just plain cruel,” but he blamed “Republicans” and did not single anyone out.
Whether you agree with his policy prescriptions or not, Paul is a Republican who has shown concern about poverty. He is a champion of charter schools and his plan to save Detroit – a Kempian mix of tax cuts, regulatory relief and other incentives to locate there — was treated seriously even by analysts who said it wouldn’t work. Paul brought up that proposal on This Week as part of what seemed like a softer reframing of his views. He responded tacitly to Obama by saying that “what’s really cruel” is to have “an economy without jobs in it,” and said he is not opposed to extending unemployment benefits if they are offset with money found elsewhere. He did say that studies show jobless benefits create “some disincentive” to work. But Schumer was the only one who used the word “disservice.”
Judgmental remarks are not limited to one party or the other. As a presidential candidate in 1999, reacting to a House GOP plan to postpone tax credits for the working poor, George W. Bush annoyed his fellow Republicans by saying they should not “balance their budget on the backs of the poor.” Ohio Gov. John Kasich, by his own account, told a conservative state lawmaker that St. Peter would judge him on what he did to help the poor — not on how small he kept the government.
The language of compassion is a better bet. In fact, the conservative Republican Kasich used the same words as liberal Democrat Harkin six months ago when he was trying to expand Medicaid under the new health law. He asked state legislators to “put yourself in somebody else’s shoes. … Walk in somebody else’s moccasins. Understand that, you know, poverty is real.” That’s got to be less alienating than a warning about how you’ll be judged in heaven.
In the case of long-term unemployment benefits, the issue facing Congress on its return, precedent and a lot of facts are on the side of those who want to extend them. There are nearly three unemployed people for every available job. The long-term unemployment rate is 2.6 percent, twice as high as when emergency benefits were allowed to expire in 2003. Expiration now will suppress demand, lower the GDP and result in 200,000 or more lost jobs, according to a range of economists. And, most visceral, there are severe hardships looming for people who, far from channel-surfing on their couches, have been searching frantically for jobs for months. On Christmas-week calls with reporters, Democrats featured two such women. Both were facing possible loss of their homes, and one of them broke down in tears.
That’s more than enough fodder to make the argument for renewing the long-term relief. No need for anyone to go around talking about moral repugnance, even if that’s how they feel.
“Let this session of Congress be known … as the session which declared all-out war on human poverty and unemployment in these United States,” President Lyndon B. Johnson declared on Jan. 8, 1964, in a State of the Union speech delivered less than two months after the assassination of John F. Kennedy. In the next few years Congress created Medicare, Medicaid, Head Start and food stamps, among other programs.
Fifty years later, there’s a lot to explore, from the data that show how opportunity is slipping away, to the people who are living that reality, to the politicians who are supposed to be helping make sure that some form of the American Dream remains both a beacon and an achievable goal. We even have a new pope who has criticized “unjust social structures” and the “scandal” of poverty.
Today the poverty rate is 15 percent, down from about 19 percent in 1964. Yet by multiple measures, the country is not better off. The real value of the minimum wage is $7.25, down from a high of $10.77 in 1968, and more than 4 million people have been jobless for 27 weeks or more (twice as many as 10 years ago). The income gap between the rich and poor has turned into a Grand Canyon unmatched since 1928, and the income disparity between Fortune 500 CEOS and their employees is now at least 10 times as gaping as it was in 1950. The wealth or assets gap has also grown; nearly 82 percent of wealth gains over the last 20 years went to the top 5 percent of households while the bottom 60 percent lost ground. Furthermore, despite our Horatio Alger mythology, one international study suggests it’s easier to climb the economic ladder in Canada, Australia and Scandinavia than it is in the United States.
These issues are top of mind for Democrats and Republicans. There are, of course, ideological chasms when it comes to the role of the government, illustrated right now in contentious national debates over jobless benefits, food stamps, the minimum wage, Medicaid expansion and tax rates. Proposals to shrink the traditional safety net are a de facto prerequisite of running for the Republican presidential nomination, and there are many on the table from aspiring nominees. Democrats want to expand that net and pay for it with higher taxes or cuts elsewhere. Both sides are watching with interest to see if New York’s new mayor, Bill de Blasio, is able to make progress on campaign promises to close the gap between the haves and have-nots in his city.
Yet there are patches of common ground. For instance, politicians and business leaders in both parties praised an expired stimulus program that subsidized private-sector jobs for the unemployed; the companies often kept the workers even after the salary subsidies ended. Taking the longer view, there is some bipartisan support for certain types of education reform and spending, such as accountability and preschool, as well as on the importance of education as a long-term necessity to shrink the income gap. “In the end, all roads lead to education. People have to have the skills which are valued in the workplace,” says Republican economist Douglas Holtz-Eakin.
President Obama, who has championed universal preschool as a way to improve children’s economic prospects, opened the larger conversation in December with an assertive speech on declining economic mobility and rising income inequality. He said he would focus the remainder of his presidency on “the defining challenge of our time: making sure our economy works for every working American.” That’s not a controversial goal. Whether he’ll stick to the subject, and whether he’ll find partners in Congress, are the questions of the year.