Tag Archives: taxes

US policy fails at reducing child poverty because it aims to fix the poor

If we want to help kids, it’s time to focus on money, not marriage.

[This piece was originally published by the Washington Post at Post Everything.]

From the first federal social welfare program for Civil War widows to Social Security and the 1960s War on Poverty, government support for poor families in the United States has attempted to enforce a moral hierarchy based on marriage: Widows got pensions they were considered to have earned, for example, while single mothers got shame and stigma for their moral misdeeds.

Since the 1960s, as marriage rates have fallen and women’s employment opportunities have improved, fewer and fewer women rely on husbands for their material needs. Now, the majority of children no longer depend primarily on the income of a married father. And yet, our policies to alleviate poverty still remain focused on correcting the behavior of poor people – especially their marital behavior – rather than addressing poverty itself.

The stated goal of the 1996 welfare reform law, for instance, was not to alleviate poverty but to encourage marriage and reduce single parenthood. The problem was seen as poor character rather than poor income, and the solution was imagined as a matter of replacing the dependency of so-called “deadbeat” parents on the state with dependency on a spouse. Those who insisted on remaining unmarried were singled out for special censure: In the words of one architect of the reform effort, Ron Haskins, “mothers on welfare, even those with young children, should be encouraged, cajoled, and, when necessary, forced to work.”   Today, many policymakers still want to impose conditions on families receiving food stamps and housing support, and as of 2015, marriage-promotion programs aimed at reducing poverty through matrimony had cost the federal government nearly a billion dollars.

One wonders if the money could have been better spent. There are about 6 million poor families with children in the United States — which means nearly 1 in 5 families with children in the wealthiest nation on the planet are living in poverty. My analysis of the latest federal data shows that, on average, these families’ income — including tax credits and all sources of welfare — is about $9,000 below the poverty line. That means ensuring no children grow up in poor households would cost $57 billion a year. (To put that in perspective, that’s how much money we’d get if Apple brought back the $200 billion it has stashed overseas, and paid just 29 percent tax on it – it’s a big problem, but it’s small compared to the wealth of our society.)

We know growing up poor is bad for kids. But instead of focusing on the money, U.S. anti-poverty policy often focuses on the perceived moral shortcomings of the poor themselves. We don’t try to address poverty directly, or alleviate it; we simply try to change the way poor people behave, especially poor parents. Specifically, we offer two choices to poor parents if they want to escape poverty: get a job, or get married. Not only does this approach not work, but it’s also a cruel punishment for children who cannot be held responsible for their parents’ decisions.

Policy that addresses poverty by punishing the poor for their perceived misdeeds plays on some popular misunderstandings, especially about marriage and parenting. Many non-poor people mistakenly believe that our lax attitude toward marriage is behind the child poverty problem. That’s why a Heritage Foundation claim that marriage reduces the chance of living in poverty by 82 percent has been a staple on the Republican campaign trail this season, and welfare money has been diverted from alleviating poverty to promoting marriage among the poor.

Yes, the children of single parents face steeper odds of success than their fellow citizens whose parents are happily married. Many single parents – the vast majority of whom are women – experience chronic shortages of money, time and social support. Their children are less likely to be closely supervised, to be well prepared for kindergarten, to graduate high school, and to make it through young adulthood free from entanglements with the criminal justice system. The intuitive case for more marriage is easy to see.

How then, as the share of children born to unmarried mothers has risen from just 1-in-20 in 1960 to 8-in-20 today, is it possible that child poverty has fallen, educational attainment has risen, and (at least since the 1990s) crime rates have fallen dramatically There are two answers.

First, single parenthood doesn’t just cause these social ailments, it also reflects them. Some of these problems are merely the consequence of whatever caused their parents to be single in the first place: poverty, illness, incarceration, weak relationship skills, and so on. In other words, successful people are more likely to raise successful children and to have successful marriages. Research on marriage among poor Americans clearly shows that the majority want to be married, but they aren’t for a variety of reasons related to their poverty. Faced with poor prospects in a marriage partner, some women reason, “I can do bad by myself,” as reported in the book “Promises I Can Keep,” by Kathryn Edin and Maria Kefalas. Some couples place marriage on a pedestal, and plan to postpone it until they are financially stable. As one young man with a pregnant girlfriend put it, “I’d rather get engaged for two years, save money, get a house, make sure … the baby’s got a bedroom.” For too many, however, that moment never arrives.

Poverty clearly lowers the chance of a successful marriage, even as being single may make it harder to escape poverty. This pattern is the subject of a long-running debate among social scientists. Although we can’t agree on the exact breakdown of cause and effect, any reasonable researcher will concede it runs both ways.

But the second answer is perhaps more important for today’s poverty debates. It is that the number of single-parent families doesn’t drive the poverty rate – rather, it mostly helps determine which families and children will be poor, not how many will be. How many people live in poverty is largely the outcome of our policy choices, about jobs and wages, and support for poor families. Akey study compared poverty rates and family structure in 18 countries, finding that the United States had the highest rate of poverty among single-mother families – more than 40 percent, compared with 5 or 10 percent in the Nordic countries. No country had as large a difference in poverty rates between single mothers and the rest of the population as the United States  – that’s our unique penalty for single parenthood.

So how could we actually do it? A new report from the Century Foundation – by the respected poverty scholars Irwin Garfinkel, David Harris, Jane Waldfogel and Christopher Wimer – lays out some of the options. They take two approaches, expanding the current child tax credit (CTC), or joining much of the rich world in using a child allowance that gives families with children cash without conditions.

Our current tax policy (principally the CTC and the Earned Income Tax Credit) reduces child poverty to the shameful 17 percent it is from the catastrophic 24 percent it would be otherwise. The problem with these credits is that they only help people with jobs, leaving those who can’t work – which is most of the poorest families – without assistance. They mostly aren’t working because they don’t have valuable skills, have health problems, or can’t manage a job (or jobs) while caring for their families. Yet you need a job to claim the CTC, on the cruel logic that the government doesn’t want to “disincentivize” work. The current CTC costs about $50 billion per year but does almost nothing to help the very poor, because coercing or cajoling them into getting a job is useless. So we have 3.4 million children living in “deep poverty,” in families with incomes less than half of what the government says they need (again, after accounting for all government benefits).

On the other hand, a universal child allowance could help everyone, and it might be more popular since middle-class voters would get a check, too. Although you end up giving non-poor people money they don’t really need (some of which you could tax back), this is better than the tax credits because it more efficiently reaches the poorest families. Using a child allowance, the report says we could cut child poverty in half, and reduce deep poverty by two-thirds – for about $200 billion per year. That seems like a lot – it is, after all, about one-eighth of what the Pentagon has spent on Afghanistan, Pakistan and Iraq* – but wouldn’t you sleep better at night knowing your poorer neighbors were sleeping better at night?
What about those pro-marriage policies? In short, they have failed; despite more than a billion dollars, marriage promotion programs have produced no increase in marriage. Furthermore, just as our tax policy doesn’t help people who can’t work, marriage doesn’t help people who can’t marry workers capable of supporting them and their children. A child allowance would provide an income floor for those who aren’t married (they’ve been widowed or divorced, had abusive partners, have no one to marry – or, more rarely, don’t want to get married). And it would do so without coercing them into marriage or shaming them for being single, because all parents would get it, married or not.

Our social policy – especially in the post-1996 welfare reform era – says a spouse’s income is a good way to pay for children, and a job is a good way to pay for children, but government support is not. And the people behind our policy feel this so strongly that, rather than shape welfare policy to provide for the needs of children, they have crafted programs instead to pressure parents into either getting a job or getting married. And when neither of those is possible – or they are practically so undesirable that they may as well be impossible – then the suffering of the parent and her children is the cost of teaching that lesson to everyone else.

We know enough now to see that this approach doesn’t work: It doesn’t increase compliance with social norms on marriage and employment, and it doesn’t stop the scourge of child poverty. We can do better.

* Note: In the original I mistakenly described this as the annual Pentagon spending in that region. I have notified the Post of the error, which I regret.

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Rich budget, poor budget

Now that $250,000 is the official definition of a “rich” family, let’s compare budgets.

The Washington Post reports that “$250,000 is etched in the minds of policymakers and pundits as the number that separates the middle class from the wealthy.”

To see how the other 2.9% of couples live, the Post got an accounting firm to calculate a budget for a two-earner, professional couple with two kids (one toddler, one in school), assuming $250,000 of earned income. (They did it for 8 cities, which I just averaged here.)

Here’s how they might spend their money:

The total is actually about $260,000, but it’s likely a family with that kind of earned income has some investment income coming in, so they’re probably still in the black.

On the other hand, here’s a basic budget, from the Economic Policy Institute, which has a calculator of basic-needs costs for cities across the country. Their estimated necessities for a family of four in Akron, Ohio is about $52,000, broken down like this:

To scale with the “rich” budget, it would look more like this:

 

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Taxing estates, barely

The estate tax may die for a year after all, unless Congress passes an extension tax retroactive to January 1, which would be subject to court challenge. Everyone thought the tax would continue to limp along, after the House voted to extend it another year at the current rate. It was only made to expire so that forecasts for the Bush tax cuts wouldn’t look so bad.

The current federal law exempts the first $3.5 million, making about 1 in 460 deaths taxable, according to the Tax Policy Center of the Urban Institute and Brookings (some states have their own tax). They estimate that, of the $14 billion expected to be raised with the tax this year, 93% would come from the top 5% of people by income.

That $3.5 million exemption is more than 5-times what it was in 2001. Ironically, the tinier the population taxed, the more proponents can champion the tax as “the most progressive” tax we have. On the other hand, the smaller it is, the less efficient it is in terms of the government effort to enforce – an argument used against it by Cato. Or, as a real capitalist might put it, the tax “destroys capital.” The Democrats eeked out a narrow victory, 225-200, to keep it for another year (Senate action is still required).

Of course rich people pass wealth to their children in countless ways while they’re still alive – just as poor people pass on poverty. But inheritance seems especially out of order with respect to the idea of meritocracy or equal opportunity: “No issue gets to the heart of class privilege” quite like it.

Can anyone explain how the idea of equal opportunity can persist in the face of this? Why should children get so much advantage – or disadvantage – they did nothing to earn?

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And in meritocracy news…

From the New York schools, comes this heartwarming story:

If you’re at a hedge fund, this is definitely the hot cause,” said Joe Williams, the executive director of Democrats for Education Reform, a nonprofit group that lobbies for charters and is financed by hedge fund heavies. … That hedge fund multimillionaires have embraced the charter movement may seem odd: their own children are unlikely ever to see the inside of a neighborhood school, and there are more traditional routes to social prominence through philanthropy, like support of hospitals and cultural institutions. But to those who know the sociology of Wall Street, it makes sense. Charter schools appeal to the maverick instincts of many who run hedge funds.

Meanwhile, down the ribbon of highway in Los Angeles…

A showdown between the Los Angeles Unified School District Board and the teachers union was pushed to the limit Tuesday, with passage of a budget plan calling for massive layoffs over the next two years. … Analysts say the average class size in LAUSD schools would jump from 24 to 29 students because of the cuts. The plan that was approved Tuesday would cut 5,000 jobs by 2011. About 1,400 of those jobs would belong to teachers. That follows the layoff of 2,000 teachers during the current school year.

If you’re having trouble reconciling the reality of unequal opportunity – which comes from the patchwork funding system based on local resources and the whims of millionaires – with the ideal of meritocracy, of discovering and nurturing the abilities and interests of every student, regardless of the circumstances of their birth – I recommend developing a mission statement like this one:

It shall be the mission of the District to educate all of its students to the fullest capacity possible of each student. This shall include the opportunity to develop, within a comprehensive curriculum, the ability to think logically, independently, and creatively, and to communicate effectively.

It can’t hurt.

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