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One (Or Two) Cheers For The War On Poverty

January 28, 2014

By Scott Winship

The State of the Union address provided an occasion to reflect on federal policies to promote opportunity and economic mobility. There are ways to build on the progress we have made while improving on those features of policy that have not served us well.

Over the past 50 years, we have made progress in reducing poverty. However, the New Deal and Great Society programs we associate with the war on poverty turn out to play a more limited role than we might have guessed, specifically when it comes to child poverty.

Another reason the war on poverty deserves only one or two cheers is because it failed to increase upward mobility. The research consensus from a dozen studies is that mobility has not changed much over the past fifty years. Only thirty percent of today’s adults who were raised in the bottom fifth of household incomes managed to make it into the middle fifth or higher.

What can we learn from the war on poverty and trends in poverty and mobility over the past fifty years? The experience of the 1990s demonstrates the importance of economic growth to create a rising tide that lifts all boats. Economic growth ensures that even if we fail to raise more children in the lower ranks to higher ranks by the time they are adults, they nevertheless end up better off than their parents in absolute terms. It also allows for considerable movement across income ranks without anyone ending up worse off absolutely.

Policies to promote growth might include cuts in corporate and individual investment taxes, increases in federal research-and-development spending (both of which might be expected to pay for themselves), greater high-skilled immigration, reform of senior entitlements to bring down future deficits, and health care reform, both as part of deficit reduction and to prevent the excessive health care inflation that Obamacare’s subsidies and mandated benefits are likely to create.

The experience of the 1990s offers another lesson for a successful opportunity agenda. Safety-net reforms that encourage work can reduce poverty by fostering initiative and lowering marginal tax rates. Two features should be incorporated into any overhaul of safety net policies. First, a credit or supplement for married parents could affect thinking at the margins when young men and women contemplate their birth timing. Second, we will always need a safety net to catch those who cannot secure stable employment. One easy way to minimize the number of people who fall through the cracks is to build a counter-cyclical element into any block-grant or consolidated credit program, so that the system can respond appropriately in downturns as unemployment worsens.

A modern opportunity agenda should include a third component alongside growth-promoting policies and safety net reforms. Encouraging economic growth will not help those parents with the worst jobs keep their kids from filling those bad jobs someday themselves. Welfare reforms may expand child opportunity, but only indirectly.

Winning the war on immobility will also require that we empower poor parents to invest in the skills of their children. But soft-hearted policies must also be hard-headed ones. Given the dearth of successfully scaled-up models, we will have to discover how to increase the school readiness of poor children and keep them on track. A system of opportunity grants for low-income parents would make markets for child investment services, uncover successful models, facilitate the dismantling of ineffective ones, and potentially raise parental aspirations in communities with deficits of hope for their children.

We can do better than a limited win against poverty with stagnant upward mobility. We can and should wage a war against immobility that builds on the lessons of the past fifty years, embraces fundamentally modern policy approaches, and achieves something that the Great Society could not—a restoration of faith in the American Dream.

Original Source: http://www.economics21.org/commentary/one-or-two-cheers-war-poverty

 

 
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