Rep. Paul Ryan unveiled the latest stage in his personal evolution on poverty and welfare Wednesday in a speech at the American Enterprise Institute. Like Sen. Marco Rubio, Ryan is part of a small Republican minority still trying to engage on substantive policy issues. Ryan is also like Rubio in that the pursuit is dragging him deeper and deeper into ideologically uncomfortable ground on which he is reluctant to plant a flag.
In his speech he endorsed the same extension of earned income tax credits that President Obama has been advocating without making overt reference to He Who Must Not Be Named. Ryan’s proposal is in some respects even more aggressive than Obama’s. Instead of providing the EITC subsidy in the annual tax return process, Ryan is endorsing Milton Friedman’s old idea of using the EITC as a monthly income floor. The proposal would only affect people who are working and would be relatively small, but this represents the first solid Republican minimum income plan to emerge since the Sixties.
Ryan’s approach to poverty relief offers the benefit of reducing the bureaucratic burden of our social welfare system. In an age of rising complexity, anything that streamlines government without sacrificing essential services should be welcome.
Its flaw is that it is too small to make a difference and only offers relief to people who have a job. That’s a bigger problem than it might sound like and it reflects an ideological misconception common all over the political spectrum.
Our economy is changing at a faster pace than ever, destroying an older category of entry-level jobs that used to be the gateway to a career. The disappearance of these jobs is feeding structural unemployment, which is driving down wages, but that’s not all.
New business models are emerging in this climate to feed off declining wages and rising unemployment. Those business models actually depend for their survival on government subsidies to working families in order to perpetuate a cycle of downward pressure on wages.
The idea that any job no matter how menial or dead-end is a gateway to independence is an almost universally accepted fallacy. No one actually believes it enough to try it on their own kids.
Affluent kids are not competing with each other for positions driving a forklift at Home Depot. They are, however, competing for unpaid internships. They are traveling. They are spending time at summer camps. They are taking the time they need to prepare for careers that might take them somewhere. They can do this because they have the money it takes to sustain these pursuits into their twenties.
Kids in nice neighborhoods might take a job to make some extra money, but their parents are working very hard to make sure that they never have to take a menial job to support themselves or their family. Why? Because taking a job too early will cut them off from opportunities to develop the complex skills and connections required to access to fulfilling careers. Research is starting to back them up, demonstrating that those who fall into these jobs tend to underperform economically for a lifetime.
For those who cannot afford these opportunities, new predatory business models await. The real winners from our assumption that a low-wage job is the cure for what ails the poor are companies like WalMart, McDonalds and Dollar General.
A solid majority of the families on food stamps are working. That statistic is the key to understanding what’s wrong with our approach to poverty, mobility, and the social safety net. The EITC, as currently structured, takes money from taxpayers to subsidize business models that depend on declining wages and desperate workers.
Our welfare system is evolving into a gigantic public subsidy to low-wage employers. WalMart employees alone cost taxpayers more than $6bn a year. McDonalds accounts for $1.2bn. Our belief that that poor people need a job more than they need anything else is leading us to block off avenues to improve their lives. Meanwhile we are spending tax money in an effort to keep them stuck in pointless jobs that will never lift them out of poverty.
For Ryan to embrace the idea of extending the EITC and converting it into a wage floor is a healthy step toward something that might someday matter. In the meantime it doubles down on a system that traps low income families in a cycle of futility while subsidizing business plans built on American desperation. Ryan’s sincere interests in improving opportunity for low income Americans and trimming our bloated bureaucracy are dragging, slowly and irrevocably toward the solution that would accomplish those goals. Let’s hope he someday makes peace with the idea of a minimum income.