The Republicans' Inside-Out Approach to Poverty

By starting with the ideological premise that Washington can't fix hardship rather than looking for the most effective tools, Rubio, Ryan, Cantor, and Paul miss the point.

Senator Marco Rubio prepares to give a speech marking the 50th anniversary of the War on Poverty on January 9. (J. Scott Applewhite/Associated Press)

Who’d have thunk it? The hot new topic among ambitious Republicans is poverty. In November, Senator Mike Lee of Utah delivered a speech at the Heritage Foundation on the topic. In December, Senator Rand Paul flew to Detroit to do the same. Yesterday alone, Senator Marco Rubio and House Majority Leader Eric Cantor delivered poverty-related speeches, and Representative Paul Ryan conducted a poverty-related interview. (The Ryan interview is the only one I wasn’t able to watch or read).

Good. Simply declaring that poverty is the problem, rather than the poor—as Mitt Romney famously did when he called the bottom half “victims, who believe the government has a responsibility to care for them”—is progress. Rubio gets particular credit for breaking with GOP jingoism and acknowledging that economic mobility is higher in Canada than it is here. Lee and Paul deserve praise for challenging criminal-justice laws that make it difficult for people convicted of crimes to ever recover economically from their misdeeds.

Still, taken together, the new Republican anti-poverty speeches have a depressingly theological quality. They usually begin with a catechism: Washington can’t effectively fight poverty. “After 50 years, isn’t it time to declare big government’s war on poverty a failure?” Rubio declared in a warm-up video for his speech. “What Detroit needs to thrive,” added Paul, “is not Washington’s domineering hand but freedom from big government’s mastery.”

Rarely is serious evidence offered for these assertions, because they are not statements of fact; they are declarations of faith. In truth, there’s ample evidence that some Washington programs significantly reduce poverty. A 2011 National Bureau of Economic Research paper, for instance, found that Social Security “reduces deep poverty” among the elderly and disabled “almost to zero.” In 2011, according to the Center for Budget and Policy Priorities, the Earned Income Tax Credit and the Supplemental Nutritional Assistance Program (food stamps) together lifted almost 10 million Americans above the poverty line. That doesn’t mean Washington doesn’t waste money. But by denouncing federal-government programs per se, folks like Paul declare an entire category of anti-poverty tools illegitimate. It’s like beginning a speech on national defense by affirming your doctrinal opposition to tanks.

With federal efforts largely ruled out, the Republican anti-poverty crusaders look to one of two saviors: states or the market. Rubio and Lee go the first route. In his speech yesterday, Rubio proposed that “we turn Washington’s anti-poverty programs—and the trillions spent on them—over to the states.” At Heritage, Lee called for putting the states in charge of Medicaid and Head Start. Both are cribbing from Ryan, whose famed 2011 budget called for giving the money Washington uses for Medicaid to states in the form of “block grants.”

It’s worth noting that when Ryan first unveiled his block-grant idea, he touted it as a way to fight not poverty, but debt. (Ryan’s 2011 budget, titled “The Path to Prosperity” includes 10 references to “poverty” and 132 references to “debt”) There’s a reason for that: Block grants are a lousy way to fight poverty. It may be true, as Rubio, Lee and Paul insist, that when it comes to the poor in their states, governors and state legislators are smarter and more compassionate than the Feds (though the folks in North Carolina’s Moral Monday movement might disagree). But they’ll have to be a lot smarter because block grants will make them do more with less.

The reason is simple. Programs like Medicaid and food stamps are (brace yourself) “entitlements.” That means that when recession hits and more people need them, spending on these programs goes up. That may or not be good for the federal budget, but it’s good for the poor, who can see a doctor and afford food in good times as well as bad. With block grants, by contrast, Washington gives the states a fixed amount of money irrespective of fluctuations in need. When times are good, the block grant may be sufficient. When they aren’t, the states—most of which are legally barred from running deficits—generally cut benefits. Theoretically, Washington could send them more money. (And there are hints that Rubio’s proposal might include mechanisms to do that.) But in general, as Ryan’s budget made clear, the point of block grants is to save Washington money, and so far from going up, the block grants rarely keep pace with population growth and inflation. As the Urban Institute noted in a 2004 review of block grants, “The real value of block grant funding tends to diminish over time.”

There’s a great illustration of this phenomenon going on right now. Ironically, it’s welfare reform, which Ryan and Rubio cite as their model. In 1996, Washington made Aid to Families with Dependent Children (i.e., “welfare”) into a block grant called Temporary Assistance to Needy Families (TANF). Because TANF wasn’t adjusted for inflation, its real value declined 28 percent between 1997 and 2011. In the late 1990s, when the economy was booming, that wasn’t a problem because it was easy to find jobs and fewer people needed TANF. But then the economy cooled and then it collapsed. Because TANF is a block grant, it couldn’t meet rising need. So many states began cutting the amount of assistance they gave or making it harder to qualify for any assistance at all.

By 2011, according to the Center for Budget and Policy Priorities, TANF benefits in South Carolina for a family of three equaled only 14 percent of the poverty line. In 2012, the New York Times’s Jason DeParle interviewed some of the mothers who had lost their TANF benefits. He found that they “talk with surprising openness about the desperate, and sometimes illegal, ways they make ends meet. They have sold food stamps, sold blood, skipped meals, shoplifted, doubled up with friends, scavenged trash bins for bottles and returned to relationships with violent partners—all with children in tow.”

Why were these desperate women able to sell food stamps? Because unlike TANF, it’s a still federal entitlement, and thus rose 45 percent between 2007 and 2009 to meet the increased needed sparked by the Great Recession. But that could change, since Rubio and Ryan want to block grant food stamps too.

If Rubio, Lee, and Ryan propose turning the battle against poverty over to the states, Paul and Cantor want to turn it over to the free market. Paul’s big idea is “economic-freedom zones.” As he explained in Detroit, any community where the unemployment rate exceeds 12 percent would see its personal, corporate, and payroll taxes slashed and its capital-gains taxes suspended. The idea, as Paul acknowledges, originated with Jack Kemp, who began championing low-tax, low-regulation “enterprise zones” as a response to poverty in the late 1970s and 1980s. But according to the economist Bruce Bartlett, who worked for Kemp during that time, there’s an important difference between Kemp’s proposal and Paul’s. “When Kemp began talking about this,” Bartlett notes, “it was an untried idea. Now they’ve been created and they don’t work.”

The evidence backs Bartlett up. In 1994, after reviewing “enterprise zones” in 37 states and the United Kingdom, Duke University economist Helen Ladd declared, “the zones have not proved to be a cost-effective means of providing jobs.” A 2002 study by two University of Iowa academics concurred: “Most of the evidence suggests that zones have almost no influence on local growth.” A 2008 National Bureau of Economic Research paper on California’s enterprise zones found that, there too, “the program is ineffective in achieving its primary goals.” In fact, Detroit itself, the city where Paul delivered his speech, already has 16 “Renaissance Zones,” which are exempt from most city and state taxes. But according to Lyke Thompson, director of the Center for Urban Studies at Detroit’s Wayne State University, “none of that stuff has made a really powerful difference in the city.”

The reason seems to be that local businesses treat enterprise zones like international businesses treat the Cayman Islands. They maneuver to capture the tax and regulatory benefits without creating much of lasting value, while sometimes hurting the higher-tax localities nearby. California’s enterprise zones, notes the Los Angeles Times, have “encouraged companies to move into zones, use the tax credits until they expire, then lay off their workers and move to another location for some other benefit … Instead of lifting up communities, businesses breeze in and move out, shuttling around the state from zone to zone at public expense.” Ladd comes to the same conclusion, noting, “The main effect of the tax and regulatory relief provisions [of enterprise zones] is simply to relocate firms to the zones from nearby locations.”

Jed Kolko, one of the authors of the 2008 California study, notes that “enterprise” (sorry, “economic-freedom”) zones might prove more effective if instead of merely cutting taxes in a certain area, you also blitzed it with job training, child care, and other services that substantially improved the quality and mobility of the local workforce. But for Paul, that’s not an option, since it would require government’s dreaded “domineering hand.”

What Paul wants to do for the economy, Cantor wants to do for education: Free it from a “federal government” that allegedly “has spent billions of dollars to improve schools in low-income areas with little to no effect.” Cantor’s answer is “school choice,” which he calls “the surest way to break this vicious cycle of poverty.” Like enterprise zones, school choice—giving kids in traditional public schools vouchers to attend private ones or establishing charter schools, which operate like private schools in their freedom from government oversight—is an old idea. And it’s not an idea to which time has been especially kind.

Indeed, Cantor’s sweeping rhetoric about school choice is at odds even with experts on his own ideological side. In a remarkable 2010 essay in the journal National Affairs, Frederick Hess noted that three key early school-choice boosters—the Manhattan Institute’s Sol Stern, education historian Diane Ravitch, and Howard Fuller, who designed Milwaukee’s much-discussed voucher program—have all in recent years “publicly expressed their disillusionment” with its results. After reviewing the evidence, Hess concurs that “it is time for those who would like to transform America’s schools to let go of the dream that choice by itself is any kind of ‘solution.’” Hess, it’s worth noting, is director of educational-policy studies at the conservative American Enterprise Institute.

School choice certainly isn’t worthless. Some private schools that take vouchers, and some charter schools, are excellent. But the very lack of regulation that allows gifted educators to create great schools also allows less talented, less idealistic people to create lousy ones. And, so far at least, the magic of the market hasn’t led the former to chase out the latter. Last June, Stanford’s Center for Research on Education Outcomes published the most comprehensive study yet on charter schools. In the 26 states studied, 25 percent of charter schools showed significantly higher gains in reading than traditional public schools. Nineteen percent did significantly worse. In most, there was no significant difference. In math, traditional public schools slightly outperformed charters, though in a plurality of cases there was no significant difference. These results aren’t a reason to abandon charter schools. But they’re not a reason to sacralize them either.

But Cantor blows right by this messy reality. He’s particularly excited about Louisiana, where Republican Governor Bobby Jindal has offered private-school vouchers to low-income students. “Just look at the results,” Cantor beams, after describing a meeting with an energetic voucher recipient named Bryan in New Orleans. But Cantor doesn’t cite any results. He cites one anecdote.

The results, it turns out, are highly ambiguous. To qualify for Louisiana’s voucher, you must attend a school that received a C, D, or F grade from the state or be entering school for the first time. But last November, Louisiana acknowledged that 45 percent of the schools taking vouchers were themselves rated D or F. And most of those schools couldn’t be rated at all since the state didn’t provide data on them. A 2012 Reuters story noted that although vouchers have placed poor kids in some of Louisiana’s best private schools, the slots in such schools are scarce. By contrast, “The school willing to accept the most voucher students—314—is New Living Word in Ruston, which has a top-ranked basketball team but no library. Students spend most of the day watching TVs in bare-bones classrooms. Each lesson consists of an instructional DVD that intersperses Biblical verses with subjects such chemistry or composition.”

The basic problem with Cantor’s speech, and with those of his fellow Republican anti-poverty crusaders, is that they’re epistemologically backward. They don’t start with the assumption that since poverty is bad, any method of fighting that has proven effective has merit. They start with the assumption that since the federal government is bad, the only anti-poverty measures with merit are those that circumvent it. That doesn’t mean all the ideas Cantor and company propose are ineffective. But they’re disproportionately ineffective because proven effectiveness wasn’t the key criteria for their selection. Ideological comfort was. Until that changes, the GOP’s new focus on poverty won’t improve its own fortunes or those of America’s poor.