When the president speaks tonight on economic inequality, it will be good to keep 10 things in mind:
1. Inequality has worsened under this president. Arthur Brooks, president of the American Enterprise Institute, writes in this month’s Commentary Magazine, “Economists measure inequality with the Gini coefficient, a number from 0 to 1. Zero denotes complete equality, and 1 would be complete inequality, with all income possessed by one person. Since January 2009, the Gini coefficient has moved from 0.47 to 0.48. In sum, the administration’s ostensibly pro-poor, tough-on-the-wealthy agenda has led us toward a new American Gilded Age. Our putatively progressive president has inadvertently executed a plutocratic tour de force.”
2. By the same token, libertarians and conservatives who think private charity alone can solve this are living in dream land. (“Consider the present total that Americans give annually to human-service organizations that assist the vulnerable,” Brooks writes. “It comes to about $40 billion, according to Giving USA. Now suppose that we could spread that sum across the 48 million Americans receiving food assistance, with zero overhead and complete effectiveness. It would come to just $847 per person per year . . . [Even Katrina philanthropy] raised enough to offset only 3 percent of the costs the storm imposed on the devastated areas of Louisiana and Mississippi.”)
3. We are already engaged in transferring wealth through a progressive tax code and a host of safety-net programs. The questions are, how effective are these programs, and are we transferring too many resources from young to old and from poor to middle class through ballooning entitlements.
4. Over decades, raises in the minimum wage have done nothing to reduce the rate of poverty.
5. Obamacare repeats the error of directing entitlements to the better off (with “generous subsidies to citizens earning up to four times the poverty line and pledge sub-market premiums to millions more” while leaving millions of the poor without access to health-care insurance). Repealing Obamacare and reforming Medicaid would do more for the poor than anything Obama has done or would propose.
6. Republicans who talk merely in terms of government as a protector of rights and not responsible for the needy or sick should understand their pre-New Deal vision is at odds with that of the vast majority of Americans.
7. You can’t talk about poverty without talking about behavior. As a 2008 University of Maryland study put it, “[T]here is overwhelming evidence that children raised in a family with two biological parents fare much better in terms of economic and cognitive outcomes than children raised in single-mother households.”
8. We know how to eliminate more than 90 percent of poverty. A Democratic-majority House Ways and Means Committee report in 2004, “Steep Decline in Teen Birth Rate Significantly Responsible for Reducing Child Poverty and Single-Parent Families,” has been much quoted for good reason. The National Campaign to Prevent Teen Pregnancy summed it up: “What are the chances of a child growing up in poverty if: (1) the mother gave birth as a teen, (2) the parents were unmarried when the child was born, and (3) the mother did not receive a high school diploma or GED? 27% if one of these things happen, 42% if two of these things happen 64%, if three of these things happen Only 7% if none of these things happen. Put another way, if these three things happen, a child’s chance of growing up in poverty is 9 times greater than if none of these things happen.”
9. The programs that best minimize these three poverty-producing behaviors have been devised at the state and local level. New York’s Carrera program, for example, offer I ntense, holistic help for at-risk teens that, among other things, assists with work experience, school tutoring, sex education, self-expression in the arts and individual lifetime sports. (“The program’s message was meant to unambiguously promote avoiding unprotected sex and pregnancy.”)
10. The choice in addressing poverty and inequality framed as between a raft of ineffective federal anti-poverty programs and the free market is false.
In sum, if we think government should try to accelerate upward mobility and make a dent in poverty, the best thing the federal government can do, other than take action to promote job growth, is to direct money to programs that intercept and prevent the behaviors that lead to poverty. It is not cheap or easy, but we really do know how to do this.