Balancing the Budget on the Backs of the Poor
In recent weeks, Rep. Paul Ryan (R-Wis.) has suggested severe cuts to safety net programs like food stamps and housing assistance, in the spirit of the 1996 welfare reform that moved millions of struggling families off the dole and into poverty. Comparing the safety net to “a hammock that lulls able-bodied people to lives of dependency and complacency,” Ryan has proposed ”welfare reform round two,” which would similarly replace federal funding with fixed grants to states, allowing local politicians to slash poverty assistance programs when the budget is tight and spend the funds elsewhere. “Yes, we divert [welfare funds],” State Representative John Kavanagh, a Republican, told the New York Times, in a recent article about welfare reform in Arizona. ”Divert’s a bad word. It helps the state.” It’s certainly easier than raising taxes.
The practice of diverting welfare funds, and the human tragedy that invariably results, is hardly unique to Arizona. The percentage of families with children living in poverty who received cash assistance declined sharply throughout the United States after the 1996 welfare reform law, which transformed the New Deal-era Aid to Families with Dependent Children (AFDC) into the Temporary Assistance for Needy Families program. TANF, unlike AFDC, was designed to be a transitional program, relying on block grants and lifetime caps on aid to push recipients quickly out of the program. For a few years, the reform seemed to work. The late-1990s economic boom and an unemployment rate below 4 percent helped to reduce welfare caseloads while allowing states to use their TANF funding to plug unrelated holes in the state budget, guilt-free. But when the economy slowed down in 2001, and crashed in 2007, states were unwilling or unable to redirect TANF benefits back to families in need.
“Reformed” welfare—unlike the Supplemental Nutrition Assistance Program (SNAP), or food stamps—had lost its critical counter-cyclical function. From 1995 to 2010, the number of families with children living in poverty rose by 17 percent, from 6.2 million to 7.3 million. But instead of expanding to meet the increased need, as SNAP did, TANF continued to shrink. While food stamps reduced the depth of child poverty by an average 15.5% and its severity by 21.3% from 2000 to 2009, the percentage of families with children living in poverty who received welfare actually declined, from 68% in 1996 to just 27% today. Inflation has further eroded the value of TANF block grants by nearly 30 percent.
Researchers Luke Shaefer of the University of Michigan and Kathryn Edin of Harvard report similar findings: at the same time that the average number of welfare recipients declined from 12.3 million per month in 1996 to 4.4 million today (of whom just 1.1 million are adults), the number of households with children living on less than $2 per day per person has more than doubled, from 600,000 to over 1.4 million.
But for state legislators like the above-quoted Mr. Kavanagh of Arizona, cutting safety net funding has been a no-brainer. “We have reduced our caseload, and we don’t have people dying in the street. There were an awful lot of people who didn’t need it.” Republicans like Paul Ryan and Mitt Romney are likewise on the record in favor of extending the block grant structure for means-tested programs like Medicaid, housing subsidies, job training and food stamps. “Welfare reform showed us how well a state-led approach can work,” Romney told a crowd in Detroit. “Let’s extend that conservative, small-government philosophy across the entire social safety net.”
We already know how that story ends. For the millions of Americans who struggle every day with hunger and poverty, Romney’s “small-government philosophy” is just another way of saying “you are on your own.”
What Happened to the American Dream?
By Benjamin Landy
“I don’t try and define who’s rich and who’s not rich; I want everybody in America to be rich,” GOP frontrunner Mitt Romney explained in a recent presidential debate. “I want people in America to recognize that the future will be brighter for their kids than it was for them.”
The line received enthusiastic applause from the audience even as there was a collective eye-rolling on the Left. Romney had not answered the question of what constitutes being rich—but his dodge on income inequality was more noteworthy for the change in tact that it anticipated. As populist anger has focused on the inequities of the one percent, Republicans have adapted their messaging to emphasize that anyone can become rich, a strategy they believe places the party on surer footing. “[We want to] promote income mobility and not excoriate some who have been successful,” Representative Eric Cantor recently told Fox News host Chris Wallace. “We want success for everybody.”
Unfortunately, the latest research on social mobility suggests that few middle class Americans or their children can expect to be as successful as Mr. Romney or Mr. Cantor. According to a new report by the Federal Reserve Bank of Boston, “the evidence indicates that over the 1969-to-2006 time span, family income mobility across the distribution decreased, families’ later-year incomes increasingly depended on their starting place, and the distribution of families’ lifetime incomes became less equal.”
That is significant.The “American dream” is predicated on the possibility of economic mobility, and we rely on such mobility to offset longer-term inequalies. Less mobility actually amplifies the problem of income inequality, invalidating Romney and Cantor’s argument that inequality is irrelevant so long as anyone can become rich. And economic mobility is indeed slowing, as the latest evidence shows.
In fact, according to the Center for American Progress, children from low-income families in the United States now have only a 1 percent chance of reaching the top 5 percent of the income distribution, while the children of the rich have about a 22 percent chance. Children born into families in the middle quintile of the income distribution (the 40th-60th percentile) actually have a higher chance of ending up in a lower income bracket (39.5 percent) than a higher one (36.5 percent), while their chance of reaching the top fifth percentile remains under 2 percent. Such class rigidity both accelerates and deepens existing inequalities, reinforcing a positive feedback loop of unequal opportunity for the middle and lower class.
As Economist Jared Bernstein observes,
This notion that where you start is an increasing determinant of where you end up poses a fundamental challenge to a basic American value. Most of us don’t seek policies to ensure equal outcomes, but we do seek equal opportunities. The combination of increased inequality and decreased mobility suggests the violation of both: less equal outcomes and diminished opportunities.
If you want to find the American dream today, you might be better off looking in Denmark or Australia, where the average child’s future income is far less dependent on that of his or her parents. Internationally, the United States ranks among the least socially mobile countries in the OECD, and has the highest income inequality of them all. To argue that our unique national character allows us to ignore such inequality, as Mr. Romney and Mr. Cantor suggest, is not borne out by the evidence.
