The American Way of Poverty: How the Other Half Still Lives (31 page)

It would also involve using networks of state banks and micro-lending institutions to make credit more affordable to the poor and to bolster vital environmental and other infrastructure projects. These
could form the backbone for a series of investments in a national industrial policy that, as with those in Germany and Japan, would stimulate well-paid blue-collar employment.

The renewed social compact would protect already-negotiated pensions from being reneged on and shore up other retirement systems that, for a generation, have shifted the risks onto retirees. It would change how and when we use the criminal justice system, what services we provide drug addicts, and how we fund treatment centers for the mentally ill. And it would require passage of a number of state and federal laws aimed at boosting minimum wages and ensuring that large-scale employers don’t abuse systems like the Earned Income Tax Credit (EITC) by underpaying workers.

It would involve promoting worker-owned companies as an alternative to bankruptcy and mass layoffs, increasing access to affordable healthcare and housing, and providing energy subsidies for the working poor when gas prices spike.

In addition, Washington should create regional development funds modeled on the New Deal’s Tennessee Valley Authority or the Great Society’s Appalachian Regional Development Act. One good candidate for such a fund might be the Sun Belt states peculiarly hard-hit by the mortgage foreclosure crisis. Recognizing that this crisis threatens to sink the residents of large areas of the country in decades-long debt, the federal government could create a housing development agency with the mandate to channel targeted relief to individual homeowners. In addition, the federal government could target relief to the local governments reliant on their property taxes in areas within the Sun Belt such as California’s Central Valley; Phoenix, Arizona; and Las Vegas, Nevada. Another candidate for targeted relief might be the Rust Belt, and in particular the cities left destitute by the loss of millions of American manufacturing jobs in recent decades. Partly, the relief might take the form of localized boosts to welfare programs. Partly it could involve additional tax credits, job training money, and direct subsidies to cash-strapped
city and county governments. Partly, in areas where entire industries have vanished, it ought to take the form of public works. Partly, it could take the form of region-specific mortgage mitigation packages for areas with critical masses of underwater homeowners. In some cases, the money would be distributed in block grants to states. In other cases it would be more regionally specific.

The latter, said the University of Kentucky’s Jim Ziliak, was a necessary approach in states such as his, where there were huge economic disparities between wealthy urban hubs and desperately poor rural counties—especially in the Appalachian east of the state. If extra resources only became available when the entire state’s unemployment or poverty rate exceeded national averages, a whole lot of poor people ended up missing out on benefits, even though they lived in counties that even in the good times experienced levels of poverty and unemployment far higher than average.

In the Appalachian region, the professor noted, “it’s pretty common the poverty rate is 25 percent in any given year. We have a large population who are poor; economic opportunities are few and far between. On a year-to-year basis they’re going to have a lot of uncertainty trying to make long-term plans. Employment in Eastern Kentucky for men 25 to 60: about 65 percent are employed; nationally it’s about 85.”

MARKETS RUN AMOK, SHIVERING IN THE RAINFOREST, AND THE END OF HISTORY

Regional development alone, however, won’t be enough. After all, some problems, such as the massive growth in unemployment seen in the post-2008 years, have national implications. To tackle them, we need to marshal energies at a federal level. There will have to be an expansion in the resources available to meet the needs of the long-term unemployed and jobless, as well as resources to keep the short-term unemployed out of poverty and to preserve the assets of
the working and middle classes during particularly acute economic downturns.

On one level, an anti-poverty program suited to meet the needs of America in the twenty-first century has to be about a better-built welfare system and a more finely woven safety net. But on another level it is about creating more flexible systems to respond both to downturns and to regional discrepancies in wealth, education, poverty, and unemployment. More generally, it must be about tackling conditions of inequality that lead to poverty not only for those without jobs but also for an increasing number of people who
have
employment but work for unlivable wages.

Ziliak believed that to effectively grapple with poverty we first had to understand its true scale. “I would change the way we measure poverty in the country,” he argued.

Let’s get a better count of who is poor and who isn’t. That’s really important. We’ve been measuring poverty the same way for about fifty years. It’s a useful measure. But most people agree that it’s not really capturing what’s going on in America today amongst the poor population. For one thing, the poverty line is based on food spending patterns in the mid-1950s. And in the mid-1950s a typical American spent one-third of their budget on food. The way we draw the line, we design a food budget for a given family size and then multiply that dollar amount by three. Today, though, the typical family spends [only] one-eighth of their budget on food; so technically the line should be two and a half times higher than what it is; if you took that standard measure and adjusted for the fact we only spend one eighth on food, the poverty line for a family of four should be closer to $50,000 than $22,000.

The proposal put forward by Ziliak might sound outlandish—after all, it would have the effect of dramatically raising the number of Americans who qualify as poor simply by changing the definition of poverty; but it has influential proponents. In 1995, the National
Academy of Sciences proposed a new poverty measure, similar in its design to that used by most European countries, based on consumption patterns of food, clothing, shelter, and utilities. Ziliak would add transportation to the list, but otherwise he thinks it’s pretty realistic. It would factor into income measures the government cash aid and food benefits received by people and would subtract out taxes and work-related expenses.

Simulations of this more sophisticated poverty measure, along with others like it, usually find that the American poverty rate would go up slightly overall, but fairly dramatically amongst older Americans once their out-of-pocket medical expenses are deducted from their income. Because older people tend to spend much more on medications, such a change is far from being superficial.

And then, concluded Ziliak, once we had a more accurate measure of what the real scale of poverty in America is, and which parts of the population are most impacted, we would be better able to tailor our responses accordingly. We could, for example, quickly expand the Earned Income Tax Credit and food stamp eligibility to meet the new poverty measures; we could redesign TANF so that enrollment expands during times of recession.

That we have been slow in calibrating the true extent of poverty and remiss in crafting ambitious, big-picture solutions to that poverty is, I believe, manifested in three main ways.

First, existing programs, both for the unemployed or jobless, and also for the working poor, have withered, either through benign neglect or through active political opposition—an assault on the Keynesian project, launched by think tanks such as the Heritage Foundation, policy-crafting entities such as the American Legislative Exchange Council, and business organizations such as the U.S. Chamber of Commerce. In 1996, 45.7 percent of poor kids were getting some form of cash assistance from the government. Thirteen years later, only
18.7 percent received such aid. “The Great Recession,” Randy Albelda wrote in a report for
Dollars and Sense
, “pushed 800,000 additional families into poverty between 2007 and 2009, yet the TANF rolls rose by only 110,000 over this period.”
¹
And, she might have added, most of those receiving TANF benefits were getting far smaller monthly checks than they had been a few years earlier. The value of TANF in Mississippi stood at 11 percent of the poverty line, and while Mississippi was the bottom of the barrel, several other states all clustered below 15 percent of that line. Even in California, historically among the most generous of states, TANF alone did not bring a family to even half of the poverty line.

Second, new programs, needed to meet the new demands of a twenty-first-century populace and a twenty-first-century workforce, haven’t been developed with nearly enough rapidity or ambition. Or when they have been developed, we have sidled into them while ignoring the looming presence of poverty in the background. Hence the fact that we have, for example, invested a huge amount of effort, money, and talent into school reforms in recent decades, while largely ignoring the fact that most underperforming schools are being daily undermined by the conditions of poverty in which so many of their students live.

“In seeking to close the achievement gap for low-income and minority students,” wrote the economist Richard Rothstein in his 2004 book
Class and Schools
, “policy makers focus inordinate attention on the improvement of instruction, because they apparently believe that social class differences are immutable, and that only schools can improve the destinies of lower-class children.”
²
But, he continued, in all likelihood “establishing an optometric clinic in a school to improve the vision of low-income children would probably have a bigger impact on their test scores than spending the same money on instructional improvement.”

Raising the minimum wage so that the parents of these children were earning enough money to adequately feed, clothe, and house
these same kids would work even bigger wonders. In fact, argued Rothstein, increasing the minimum wage or boosting the EITC “should be considered education policies as well as economic ones, for they would likely result in higher academic performance from children whose families are more secure.”
³

Rothstein calculated the cost of a series of big-picture reforms that would use schools as epicenters in a broader communal effort against poverty and its consequences. How much would it cost to create a set of conditions that would allow kids from impoverished backgrounds to approximate the experiences, both educational and life, of more affluent children? His answer: $156 billion per year.

Now that’s a huge sum of money and one that clearly isn’t going to be freed up by federal and state governments anytime soon. But, as Rothstein points out, it’s about equal to the amount of money redistributed back to the super-wealthy as a result of the tax cuts enacted during the early years of George W. Bush’s presidency. That’s not a nebulous comparison: In a world of finite resources, tax cuts have consequences. One of them is that less money is available for government to promote what we might call “the commons,” a set of public goods that benefit everyone and that can be used as tools to tamp down broader societal inequities. Yes, in the current political moment any politician who proposes raising taxes to fund a $156 billion per year increase in education spending would be printing themselves a one-way ticket to political oblivion. But, in another moment, defined by a different set of priorities, a country as wealthy and dynamic as is America could, clearly, fund some extremely ambitious anti-poverty, and pro-education, measures.

Rothstein’s yardstick is, though not politically realistic, at the very least a wakeup call. Even if massive
infusions
of funds are off the table, surely states oughtn’t to be
slashing
ever more money from already-stressed schools. For when they do, when states such as California remove billions of dollars from being spent on K-12 classrooms, year upon year upon year, and reduce the length of the school
year to further trim costs, inevitably the poor get hurt the most. And, as inevitably, when that happens, inequality increases, and the long-term life prospects for large groups of Americans deteriorate.