Paul Ryan's Obsolete Thinking About Poverty

It's not the 1990s anymore. Any real proposal has to deal with a post-recession world where personal responsibility isn't enough to get Americans on their feet.

Rick Wilking/Reuters

Among the most attractive virtues of the new Paul Ryan anti-poverty discussion paper is its modesty. The paper does not claim to be the last word, but only a first draft.

Even as a first draft, the document reveals important progress over the ugly “looters and moochers” rhetoric too often heard from Republicans in the recent past. It commits real resources to programs that work, especially the Earned-Income Tax Credit. Best of all, it promises that future policy will be guided by research and results, rather than ideology.

Yet for all its merits, the Ryan plan is backward-looking rather than forward-looking. The proposal is premised on a way of thinking about poverty that made excellent sense a decade ago—but that is not equal to the more difficult circumstances of today.

In the late 1990s, a booming U.S. economy created jobs at a rate not seen since the 1960s. Wages even for less-skilled workers rose handsomely. Pretty much anybody who wanted to work could do so, and full-time work offered a path out of poverty. An enhanced Earned-Income Tax Credit topped up wages; a new federal health benefit for children extended health care to families who earned just slightly too much to qualify for Medicaid.

It made sense in those days to think of poverty not as a social or economic problem but as an expression of some more personal affliction or burden: mental illness, adult illiteracy, addiction, family breakdown. That was very much the assumption behind the “compassionate conservatism” advocated by George W. Bush when he sought the presidency at the end of the 1990s. Poor people needed more than a check! Bush was impressed by research that suggested that religious groups did a much better job overcoming addiction than government agencies. His faith-based initiative promised to mobilize committed volunteers to provide an array of support to people who remained trapped in poverty even as the national economy boomed.

Ryan’s anti-poverty proposals share many of the assumptions and attitudes of that agenda from 15 years ago. They start from an assumption that poverty is an unusual and marginal issue in U.S. society. That idea is not articulated, but it is revealed by Ryan’s most attention-grabbing proposal: his “opportunity contract.” Ryan suggests that states experiment with a new approach to means-tested programs. Beneficiaries of those programs would be assigned a social-service provider. That provider—which might be a government agency, a nonprofit private-sector organization, or a for-profit business—would guide the recipient through the welter of government programs available. It would also set goals for the beneficiary, such as attending school or completing a drug-treatment program. The provider would reward good behavior and impose sanctions on bad behavior.

But does it remain true in the context of 2014 that poverty is grounded in behaviors, as seemed to be the case in 1999-2000? The 45 million Americans who rely on food stamps: Do they really need caseworkers to set goals for them? Or have those goals been moved out of reach by economic circumstances?

In the speech introducing his plan, Ryan talked of a young single mother, now working part-time as a retail clerk, who aspires to become a teacher’s assistant. States and local governments laid off more than half a million workers—including many entry-level teachers—in the crisis of 2009. They’re not hiring them back. So what happens if and when this hypothetical clerk meets the goals of her contract and obtains some kind of certification? Many other people with certification of all kinds have found themselves dependent on food stamps or other forms of means-tested relief—or else seeking disability payments, which have become a welfare program in all but name for millions of older Americans.

In 1999-2000, it seemed realistic to draw a sharp line of distinction between the vast majority of adults willing and able to work full-time—and thereby earn a living somewhere north of the poverty line—and the small minority of adults whose bad choices or bad situation rendered them dependent on public assistance. But for half a decade now, that distinction has looked blurry. The specific problem of poverty among those who don’t work full-time is no longer so easily separated from the broader problem of pervasive economic insecurity among those who do.

Liberals and progressives have responded to this grim new reality with proposals for a much higher degree of direct and indirect government intervention in the economy. Conservatives wish to beat them back in order to protect market freedom. That disagreement will divide politics in the next decade. For conservatives to compete effectively, they will want to find ways to enhance economic security that do not put government in control.

How to do so is the question that preoccupies the “reform conservatives” profiled in The New York Times Magazine last month. To date, the answers proposed do not meet the magnitude of the problem. Ryan’s pre-crisis version likewise falls short. Not only does it conceptualize the poverty challenge in a mistaken way, but it also will aggravate the larger problem of insecurity by imposing hardships on the near-poor.

Ryan’s poverty plan does not itemize costs and pay-fors. But unless Ryan has utterly repudiated his previous budget plans, his expansion of the Earned-Income Tax Credit and his expensive ideas about casework, combined with his promise of deficit-neutrality, do imply large cuts in other forms of means-tested assistance, most likely food stamps and Medicaid. (Remember, the various Ryan budget plans have always ruled out near-term changes in Medicare, Social Security, and other non-means-tested social programs.)

The Obama administration has raised the cost of means-tested programs in part by expanding eligibility to people further removed from poverty. If the Ryan budgets restore the pre-crisis status quo—or even approach it—they will impose added economic pressures on people who, if not actually poor, are much less well off than they were before 2008. It’s estimated that the typical American household lost a third of its net wealth in 2008-2009 and has not recovered it yet. Median incomes too have not yet returned to pre-crisis levels.

In the spirit of discussion, then, let’s add some other elements that need to be present in a conservative program for addressing the economic insecurities of the time:

  1. Conservatives should and will oppose measures that either override market wages (as the minimum wage does) or expand government employment (as universal state-provided pre-kindergarten education would do). Instead, conservatives should support ideas for “topping up” wages outside the market—not only the Earned-Income Tax Credit, but also food stamps.
  2. Conservatives who resist the Medicaid expansion in Obamacare need to think seriously about some other way of providing deductible health-care coverage for lower-income Americans. For people in the bottom quartile of the population, a small co-pay is sufficient deterrent against health-care overuse. The high-deductible/health-savings-account approach lacks relevance to people who aren’t paying income tax and can’t amass the savings to cover a big unexpected medical bill.
  3. Expect Democrats to make early-childhood education their big proposal in the presidential election of 2016, as Bill de Blasio did in the New York mayoral election of 2013. If nothing else, such programs function as huge job-creation schemes. The better approach is to fund parents to make their own childcare arrangements—and to focus public resources instead on early childhood nutrition. The present U.S. system of child tax credits excludes people who earn too little to pay income taxes. The reform-conservative idea of crediting child tax credits against payroll taxes would improve the situation, but better still would be straightforward European-style mother’s allowances. These put a more secure and predictable floor underneath income, especially for part-time workers. The experience of Germany suggests that even relatively small mother’s allowances can considerably reduce the incidence of abortion, a goal that should appeal to many conservatives. 
  4. The Ryan plan raises the idea of studying government regulations with a view to identifying those that burden the poor. It’s also true that certain oligopolies and monopolies—notably cell-phone and cable-television companies—structure their fees to ensnare unwary and unsophisticated customers. Consumer protection and deregulation need not be alternatives to each other. Canada’s governing Conservative Party has introduced effective and popular rules to protect consumers from cell-phone overcharges. Republicans who inveigh against “crony capitalism” might do well to direct their ire here.
  5. Above all things, low-wage Americans need a tighter labor market. Yet President Obama is advancing immigration reforms that would not only legalize millions of new workers—but are also inviting new waves of illegal migrants to seize their opportunity while they can. Conservatives have their own reasons for preferring restrictive immigration, most importantly that recent immigrations have depended much more heavily than the native-born on social services. More immigration means more public spending and more taxes. Conservative values here coincide with the economic interests of working Americans. One of Donald Rumsfeld’s famous rules was, "If you can't solve a problem, make it bigger." That seems to be the immigration reformers’ approach to the problem of wage insecurity in the lower half of the job market. Immigration restriction would thus seem integral to poverty reduction.

More important than any specific proposal however is the larger spirit of the Ryan discussion paper. Conservatives are back in the idea business. They are competing to offer solutions, not only complaints. Game on—at last.