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Improving prospects for the nation’s poor is a goal leaders of both parties claim to support, but there are clear differences on strategy. The $3.9 trillion dollar 2015 budget proposal President Obama unveiled yesterday includes funding for job training, early childhood education and a bump in the minimum wage. The proposals underscore his conviction that federal programs can be a key life line to low income families. Republican Congressman Paul Ryan has broadly criticized the government’s anti-poverty efforts. Although some programs work, he said, others undercut personal efforts to climb out of poverty. Please join us discuss how best to help low income Americans.
- Damian Paletta reporter, The Wall Street Journal.
- Olivia Golden executive director, Center for Law and Social Policy (CLASP); former assistant secretary for children and families, Health and Human Services in the Clinton administration; author of "Reforming Child Welfare."
- Douglas Holtz-Eakin president of the American Action Forum, chief economist and director of the Congressional Budget Office from 2003 to 2006.
MR. TOM GJELTENThanks for joining us. I'm Tom Gjelten, sitting in for Diane Rehm. Diane is on vacation. In his 2015 budget proposal, President Obama backed several programs to help the nation's poor, from job training to early childhood education, but many Republicans, notably Congressman Paul Ryan, say federal assistance is not the answer. As chairman of the House Budget Committee, Ryan, this week released a critique of federal antipoverty programs, saying they're ineffective at fighting poverty.
MR. TOM GJELTENJoining me to talk about federal efforts to reduce poverty, what works and what doesn't, Damian Paletta of the Wall Street Journal, Olivia Golden of the Center for Law and Social Policy, and Douglas Holtz-Eakin of the American Action Forum. You can offer your own thoughts, you can ask your own questions. Call us at 1-800-433-8850. You can email us at firstname.lastname@example.org. You can join us on Facebook, you can send in your comments via Twitter. Good morning, folks.
MR. DAMIAN PALETTAMorning.
MS. OLIVIA GOLDENGood morning.
MR. DOUGLAS HOLTZ-EAKINGood morning.
GJELTENSo this is the 50th anniversary of Lyndon Johnson's war on poverty, but it's fair to say, I think, that results have been disappointing. Ronald Reagan famously said, "We fought a war on poverty and poverty won." Damian Paletta, you had a story this week that put a face on some of those people struggling to get out of poverty, even selling their possessions on Craigslist. Tell us about that.
PALETTAThat's right. One of the big questions we've had since unemployment benefits ended is what happens to these people? What do they do? Do they go take jobs they might be overqualified for just to get back into the workplace, get some income? Or do they fall into sort of a financial spiral? And so I reached out to a number of people, quite simply, who had gone to Craigslist, which is a website kind of customized for every community.
PALETTAAnd they had posted items -- some were family heirlooms, some were simple things like a truck camper -- that they were trying to sell to get some income to replace the income they lost from unemployment benefits. And what I was struck by was how kind of raw these people's lives had become. They were looking -- not for thousands and thousands of dollars. They were looking for a couple hundred bucks to buy groceries. They weren't blaming one party or the other. It wasn't a political decision. It was kind of a life decision.
PALETTAThey need groceries. They need to pay their rent. They don't want to lose their car because if they lose their car something else happens. So I talked to a woman who was selling her wedding ring. She had been married for 30 years and her husband passed away. She didn't want to get rid of her rings, but she had to. Another woman was selling her dishes that she had when times were better. She lost her job managing a restaurant. And quite frankly I picked three of these stories. There's, you know, dozens and dozens of these stories from every corner of the country. People selling watches. People looking for dog food for their animals.
GJELTENNow, you started out by saying you are looking for people who are affected by the termination of unemployment benefits. Did all these people have that in common?
PALETTAThat's right. All these people did. They all collected unemployment for a period, but they're long-term unemployed. These people's benefits -- they've been unemployed for at least more than six months. Some of them had the extended federal benefits that expired. And quite frankly, these people did not have good job prospects. They weren't people that had job interviews they were hoping would come together.
PALETTAThey had had job interviews earlier in their unemployment, but the longer that you're unemployed, the harder and harder it can get to find a job. So that was the situation these people were in.
GJELTENSo, Olivia Golden, give us a sense of the data on the poverty situation in this country. What are the trend lines and what are the percentages we're looking at right now?
GOLDENWell, let me put the stories that you just heard in context. Because to me those are stories that exactly explain why I think that the framework in Paul Ryan's report isn't credible, in terms of the research, that the problem is public programs. The problem is about the labor market and about the fact that public programs have made a very important difference over these 50 years.
GOLDENFor example, poor children. Children are my area of focus. Now, virtually all have health insurance. They have nutrition. The formal poverty measure doesn't include the health insurance, the food stamps, but those are important accomplishments. At the same time, what we have is a very large increase in work, particularly by mothers raising kids, but a low-wage labor market that doesn't allow people to support their family. So some examples of numbers, we have about a quarter of young children, a little more than 20 percent of children living in poverty.
GOLDENAlmost half, if you count those in low-wage work, just above the poverty line. And about two-thirds of those poor children live in a family where someone's working. So the public safety net programs have made an important difference, but, as I think Damian's story illustrates, when people are putting together a really complicated patchwork of ways to keep their lives together, and one of those pieces comes out, then you have a problem. And the President's budget, I think, is sort of a work-based strategy for addressing that.
GJELTENWell, I'm going to get to that in a minute.
GJELTENBut, Doug Holtz-Eakin, what conclusion do you draw from these trends? The poverty rate in 2012 was 15 percent of the U.S. populations, in 2007 it was 12.5 percent. Obviously the numbers are going in the wrong direction. You can argue whether the glass is half full, whether poverty programs have alleviated some of this or whether it's half empty and they're actually failing. What's the conclusion that you're drawing?
HOLTZ-EAKINWell, I think the unmistakable fact is that we have very tough conditions. This has been a terrible recovery. People talk a lot about the jobs and the fact that we have comprehensive measures of unemployment that are still nearly 13 percent. But inside that, for those who have had a job, we haven't seen any real wage growth. We haven't seen incomes rising. We haven't seen standards of living rising. So the fact that the American worker and families are feeling stretched and strained is real.
HOLTZ-EAKINAnd so you can't manufacture the politics of this out of thin air. There's a real problem that needs to be addressed. And I think both sides need to acknowledge that and by and large do. The next question becomes what are effective strategies? And number one should be work. The programs that have been most successful have been those that had work focuses, whether it was the earned income tax credit, which has, I think, been a striking bipartisan success over history.
HOLTZ-EAKINThe welfare reforms in the late '90s, which focused heavily on work, I think were very successful. And until the great recession we saw the poverty rates among women with children, single moms, go down. But this recovery has been so bad, we've really gone backwards on a lot of progress.
GJELTENWhy don't you quickly explain for our listeners that may not be familiar with it, how the earned income tax credit works and why you think it works?
HOLTZ-EAKINThe earned income tax credit says you go take work and we check your income and see if you're in poverty. And if you are, we are going to give you a supplement for every hour that you work. You're going to get some extra -- every dollar you earn, you'll get some extra. And that's a big inducement to get people into a job and to stay in a job because we're topping up their regular paycheck with more in the way of this tax credit, which his refunded back to people. They get it in cash and they can go spend it.
HOLTZ-EAKINThere are some minor concerns about the fact that eventually you have to take it away. And as you take it away you're essentially taxing their work. They work more, but you're taking something away. That's not proven to be a big deal in the data. There's a tiny little bit of a problem there. So it's one of our most successful programs because it encourages work. And I think the other thing it has going for it is there's no stigma attached. No one knows you're on the earned income tax credit.
HOLTZ-EAKINYou go to work. You do a job. You go home. And it's very well targeted. It's unlike the minimum wage where we're checking what you make in the workplace. We're checking what your income is. What are the resources you have for yourself and your family? It's a tremendous program from those two perspectives. Well-targeted, no stigma, and it's been very effective.
GJELTENAll right. We'll move on to some of the other programs in a minute. But first, Damian, my understanding is that this is one of the few areas where there actually is some bipartisan consensus around this particular program.
PALETTAThat's right. And the president, in his budget, proposed -- I mean, one of the things the earned income tax credit does well is deliver a lot of money for families. People with kids. You get more money depending on the number of kids you have. For childless workers, single people or married couples, you don't get as much money or it's harder to qualify even. So what the president has done is proposed expanding these benefits for childless workers.
PALETTANow, one of the issues, obviously, with this is that the batting average is in the thousands. They do have a pretty decent error rate, pretty high error rate compared to other programs. So there has been some concern among Republicans that not all the money that's getting spent -- I believe it's about $60 billion a year -- goes directly to the people who need it. And so, like any of these programs, the efficiency might not be optimal.
PALETTABut we have -- Paul Ryan and Marco Rubio have talked about ways to more efficiently deliver aid to the poor. And Marco Rubio has talked about getting rid of the EITC, but replacing it with something that's kind of similar. It would be a wage supplement that you would get. Instead of getting it one time a year, as Doug explained, in every paycheck you would get a little bit spread out. So it's been an area, because of the work focus that's associated with it, that both parties are looking at closely.
GJELTENOkay. Olivia, and then back to you, Doug.
GOLDENWell, I wanted to offer two thoughts to build on the theme about work. In addition to the earned income tax credit, many of the other safety net programs and even more of the initiatives in this president's budget are focused on work. Medicaid supports low-income working people. The nutrition programs support low-income working people. Childcare and early childhood programs -- and that, to me, is another area of very interesting bipartisan consensus to some degree in Washington, even more in the state.
GOLDENSo last year's Congressional budget deal had $1.4 billion for childcare and early childhood programs. And when you go to the states, which I think often are a marker of future federal agenda, you see even more bipartisan.
HOLTZ-EAKINI just want to pick up on what Damian said about the holes in the EITC. It's been a very successful program, but it really has three significant problems that can be addressed. Number one, single males in particular have very, very thin credit. And we have a big problem with young man and detachment from the labor force. I think that's a place to focus. The second is EITC has a big marriage penalty. And we've got some family structure problems that are at the heart of poverty as well, single moms in particular.
HOLTZ-EAKINAnd in that population the EITC gets in the way of people being married and being together. I think that's something that ought to be addressed. And then the third is this compliance issue. The way the EITC works is first we simply reduce your liability to pay taxes. And then if you have any more eligibility above that we send you the cash. The first part works really well.
HOLTZ-EAKINBut when you start sending out cash, the chances for fraud go up. And that's been the concern. Dave Camp, in his tax reform, proposed having the EITC work against both income and payroll taxes, thus expanding the part that works well.
GJELTENWell, President Obama has already signaled and Congressional Democrats have signaled as well, that inequality will be a big theme this year. And Republicans and Democrats alike seem to agree that this is an issue that needs to be worked on, but we have very different approaches for dealing with that problem. And that's going to be our focus here.
GJELTENWe're going to take a short break and then we'll come right back and continue this discussion with Damian Paletta from the Wall Street Journal, Olivia Golden from the Center for Law and Social Policy, and Doug Holtz-Eakin, president of the American Actin Forum. Stay tuned.
GJELTENAnd welcome back. I'm Tom Gjelten and I'm sitting in today for Diane Rehm. And our topic is how to fight poverty, the debate between Republican and Democratic proposals. My guests here in the studio are Damian Paletta who's a reporter for the Wall Street Journal, Olivia Golden, executive director of the Center for Law and Social Policy and the former assistant secretary for children and families in the Health and Human Services Department of the Clinton Administration. She's also the author of "Reforming Child Welfare."
GJELTENAnd finally Douglas Holtz-Eakin, president of the American Action Forum and the chief economist and director of the Congressional Budget Office from 2003 to 2006. Okay. Damian, so the president did include a number of pretty specific proposals in his 2015 budget proposals, proposals to help the nation's poor. Just give us a quick rundown of the president's program for fighting poverty.
PALETTASure. I mean, one of the ones that he's been talking about a lot obviously is raising the minimum wage. They see that as a big way to address poverty. The minimum wage now is -- the federal level's $7.25. A lot of states have a higher level. The president wants to raise it to $10.10 phased in over several years.
PALETTAHe also had some targeted job training programs. One specifically would look -- try to help people who are long term unemployed, help them find a new career path. You know, a lot of times people who are long time unemployed maybe had one skill they were really good at, but that job disappeared. Maybe that job went overseas and they haven't been able to pivot and find something new, you know, to fit in the 21st century economy. So that's another one that he's targeting closer.
PALETTABut I think the minimum wage, the earned income tax credit and some of these job training programs. And also obviously preschool -- expanding preschool and making it available for all four-year-olds, a lot of people feel like when you get -- when you could help kids at that early age get on the track to education that can, you know, really pay dividends later in life.
GJELTENWhat about some of the traditional programs like food stamps?
PALETTAFood stamps is really interesting. So we -- in 2009 when the stock market was below 7,000, there were 33 million people on food stamps. Now the stock market is over 16,000 and there's almost 50 million people on food stamps, right. I mean, that's one of the reasons that there's so much frustration in both parties. Why aren't things working? Why are there so many people on food stamps?
PALETTASo we had -- we just went through a farm bill in congress that made some kind of minor modest changes to the food stamp program. But the president didn't really propose any big reforms. A lot of people -- a lot of Democrats and Republicans feel like once the economy continues to improve, it's just natural that people -- that the food stamp program's going to shrink. But it's amazing that it hasn't shrunk so far.
GJELTENOkay. Let's stick with this program for just a minute, because unlike the earned income tax credit, food stamps are a program in which Republicans and Democrats really do disagree on their effectiveness. Olivia, what's the argument for food stamps as a program that works?
GOLDENI think it's a pretty clear argument. It's an argument that says we want people to be well nourished, we want children to be well nourished. It addresses poverty. It's one of the biggest children's programs in the budget. We used to do a children's budget when I was at the Urban Institute and food stamps is high up on the list. We want children, parents, adults, workers, the elderly to be well nourished.
GOLDENWe've seen the stock market go up, but poverty is stuck at a high level, so for those at the bottom. And many people on food stamps are working. It supports low-wage workers. And there's a -- it's interesting, in Congressman Ryan's report, he looks at research that argues that programs might discourage work. But there's a big body of research, which we synthesized when I was at Urban, that also suggests that benefit programs like food stamps and Medicaid, when they accommodate work, when they're available to low-wage workers, can stabilize people's lives so they can move up.
GOLDENAnd when -- well I was assistant secretary when we implemented welfare reform in the Clinton Administration. And one of the -- what the researchers say contributed to effectiveness at that point was not only the welfare bill, but expansion of food stamps and Medicaid to working families, so you could work and still get some stabilization, tripling of childcare dollars at that point and then the strong economy.
GOLDENSo I think the case for it is both the long term nutrition health payoff for us and in the shorter term stabilize people's lives while they're working. Now if you can get the other parts of the president's budget to work and people can move up the ladder and the economy gets better, then you see it coming down. But you don't want that to happen too soon.
GJELTENDoug Holtz-Eakin, what's your explanation for why the number of people on food stamps has risen, the number of people in poverty has risen, even at a time when the American economy is recovering and the stock market is at all time highs?
HOLTZ-EAKINBecause if you look at the stock market, we've recovered. If you look at measures like GDP, we are growing although not very impressively. If you look at the labor market, we're still in recession. And that's an unmistakable fact of life. And from that come all sorts of ills. And the rise in participation of public programs is a natural consequence of that.
HOLTZ-EAKINI think that the concern on the conservative side and what motivated Paul Ryan to look at these programs, whether we agree with the particulars of his conclusions or not, is we are in fact spending $800 billion on 90 odd antipoverty programs. That's about $17,000 for everyone in poverty, which is about the poverty line. So we're not doing very well in the effectiveness of those programs. And we have, for example, something like 21 training programs that spent $90 million.
HOLTZ-EAKINAnd so before we create another one, as the president was suggesting in his budget, maybe we ought to find out what does and does not work within these and get our monies worth because it's not as if we're not in deep financial problems. As a nation we are. So I think that's a key thing. And something that Olivia mentioned is very important. Sometimes the structure of these programs does in fact hurt people's chances to work.
HOLTZ-EAKINThe CBO recently put out a report that got a lot of attention about the Affordable Care Act in which they basically said, look we're going to effectively tax young low-wage workers when they try to, you know, earn more through the Affordable Care Act. We're going to take away their subsidies. That implicit tax has disincentives and people are going to stop working.
HOLTZ-EAKINThat's true of many of our antipoverty programs. And so thinking hard about whether we've layered too much on this low end -- you know, some of the estimates of effective tax rates on the poorest Americans are in the 60 and 70 percent. That's too high. We have to rethink these programs to make them work better, not just, you know, beef them up.
GJELTENLet's clarify something. Is the Paul Ryan critique or the Republican critique that these programs do not work or that we don't know if they work?
HOLTZ-EAKINI think that the -- there are some we know work. We know the EITC worked. We know that temporary assistance for needy families, the welfare reform worked. We have a lot more that we are skeptical about as antipoverty programs. And so go back to food stamps for example. One of the things that food stamps used to be, it used to be just a nutrition program. As it's morphed into a broad-based antipoverty program, it raises the question, do we want to have it structured as we do with TANIF with work requirements?
HOLTZ-EAKINHow much should be available just to people who may be working and how much should be contingent on work? I think that's a core issue given the importance of work and avoiding long term poverty.
GJELTENDamian, have the Republicans moved yet from critiquing the existing programs and the Obama Administration proposals to offering creative positive programs of their own to reduce poverty?
PALETTAThat's a great question. It was, you know, a small bit of that. You know, the chairman of the House Ways and Means Committee Dave Camp has a proposal, like Doug mentioned, that would get rid of the earned income tax credit. I have to say this, it didn't go over super well with liberal groups. Marco Rubio's been talking about these issues. Paul Ryan obviously put out a big report that kind of tried to lay bare his concerns about a lot of the poverty programs. But we haven't seen concrete proposals that Republicans can unify around. And this is kind of a weak spot for them.
PALETTAYou know, we had the recent election with Mitt Romney and his comments about the 47 percent. They've got some catching up to do with a lot of kind of middle class and poor Americans who feel like the Republicans aren't looking out for their best interests. So there's a big opening here for a Republican leader like Marco Rubio or Paul Ryan to come forward with some concrete ideas that they can sell. But they're kind of playing from behind right now. And the president, you know, his whole budget is focused around things like raising the minimum wage, expanding the earned income tax credit, things that he can try to sell to Americans as ways to address the poor.
GJELTENOlivia, what are the programs that you think -- is this going to just be a -- sort of a stalemate all year long? I mean, is there -- is the opposition to full funding or increased funding or not cutting food stamps for example, is that -- I mean, that was in the farm bill obviously. Are we looking at a stalemate basically here this year in terms of these rival ideas for fighting poverty?
GOLDENI want to broaden the conversation out just a little bit to answer that, because I've -- as you read my resume, I've been doing this work for a lot of decades about low-income kids in families. And I'm not a believer that terrific things happen or even bad things -- well, they sometimes do -- but they don't necessarily happen overnight. So to me the power of the president's budget is that it lays out a multipart agenda. It's not stuck on a single silver bullet, right. It's education and early education and training and jobs.
GOLDENAnd some of that could -- I mean, maybe something will happen this year. Last year unexpectedly the budget agreement and the congress had $1.5 billion for early childhood programs, which was -- the president had asked for. But it's more likely that the effect is longer term and in the states. And I just want to put that piece in, because we haven't talked about it yet. Our system for addressing poverty, particularly for families and kids, less for the elderly, is a federal state system. And one of its -- it's a strength because it means an ovation and it's a weakness because it means that where you're born has a huge effect on your life chances.
GOLDENIf you're born in Texas or the Southwest or the South where many poor children are, and where there's not as much of a financial capacity to invest in things like early education and education. So to me a lot of the progress over the next year or two may also be in some of the progress in states that are intrigued by these ideas. It's very evident in early childhood. Paid family leave is an area where the president has a modest incentive for states to try to offer, you know, workers who have babies the ability to stay home. The work training programs, many of those are structured as incentives for states. So I think we can see some movement but it may not be congressional movement.
GJELTENDoug Holtz-Eakin, what about Olivia's point that it shouldn't really hurt people which state they're in, that if there are uneven prospects for people, depending on what state they're in, that's not really a very American value.
HOLTZ-EAKINBut a comparably powerful American value is the ability of the states to run their own lives and innovate, try things out. So for example, I think there are lots of defects with raising the minimum wage. And it's harmed the teenagers right now. We raised it during the great recession. We have teen unemployment over 20 percent. That critique notwithstanding, states have the right to go do it and see how it turns out for them.
HOLTZ-EAKINAnd that's been a powerful way for us to learn what is and isn't effective in social policy in the United States. It carries the downside that not everyone's treated the same. And that's a tradeoff we have lived with and that tension we have felt since the inception.
GJELTENWell, let's stick on that issue for a minute because you recently had a column in which you laid out your argument, the argument for why raising the minimum wage actually does hurt employment.
HOLTZ-EAKINYeah, I think that any careful reading of the research literature says that if you look at studies that more carefully target the at-risk population, those who are near the minimum wage, those who have low skills, that if you raise the minimum wage, especially abruptly in weak labor markets, you are going to harm employment. People get tossed off their jobs. I think that's a red herring. It hurts hiring and I don't think we should do anything to hurt hiring in this recovery.
HOLTZ-EAKINAnd if you think about the sort of fairness aspects of that, what it says is we're going to raise the minimum wage and we're going to take away the job someone who's unemployed might've gotten, so they lose the income. And it goes to the people who have a job. That's exactly the wrong redistribution to have in this economy at this point in time. And it will be fine if somehow you paid that price and got big benefits on antipoverty, but you don't. It's not well targeted. Only, you know, 2 percent of people in poverty are working at the federal minimum wage.
HOLTZ-EAKINAnd so if the CBO, when they did their study they said, well we got this $31 billion that goes to low-wage workers. Only 19 percent of it goes to people in poverty so it's not helpful as a targeted antipoverty program.
GJELTENDoug Holtz Eakin is president of the American Action Forum. I'm Tom Gjelten. You're listening to "The Diane Rehm Show." Damian Paletta, you wanted to jump in here.
PALETTAYeah, sure. I mean, the biggest antipoverty program the federal government has, we haven't talked about yet, is Social Security. And, you know, it's one thing to focus on early childhood education, raise the minimum wage, job training programs but for a lot of seniors, you know, there's been a lot of research that shows that seniors have not saved nearly what they need to save to prepared for retirement. And we're not talking millions of dollars. We're talking $10,000 or less without having saved anything.
PALETTAAnd so Social Security is one of those programs obviously created, you know, during -- in the 1930s but that has -- it's the biggest part of the federal budget. We have 10,000 Americans turning 65 every day. A lot of members of both political parties know that something's going to eventually have to be done to the program to put it in a long term path where it's fiscally sustainable. But it's very politically dicey to do that obviously.
PALETTAAnd so that's a program I think that we're going to be hearing more and more about as more and more Americans rely on those benefits for any income.
GOLDENWell, I was just going to add that Social Security is a huge success of the war on poverty in terms of its goal of cutting poverty. So it illustrates that is an approach that works when you do it. We haven't done it for kids and families. But the other point I wanted to just pursue, that question about how do you think about innovation and creativity in the states balanced against equity. And I just want to note, there are a lot of in-between points.
GOLDENAnd so for example, the welfare program, which when we enacted it we put a lot of money into it and into surrounding programs. Now because of bad federal incentives and capped federal dollars, it really barely exists. No work training, no benefits in a large chunk of the states. So if the federal government does the wrong things in terms of incentives and resources to the states, then I think you get the worst of both worlds.
GJELTENGoing back to Social Security, last year President Obama signaled that he was ready to talk about entitlement reform in Social Security. This year that disappeared. Does that -- do you think that represents of you by the White House that the situation with poverty and retirement is so serious that it is now a greater need than the need to get the fiscal house in order? Or does it just reflect a kind of political calculation that this is what his -- the Democrats base wants to hear right now?
GOLDENWell, I don't know enough about people's thinking to answer the question about intention. I guess I would say what the proposal is from my perspective is a very thoughtful way of addressing a lot of different dimensions of poverty, of work, low wage work especially and of families. I mean, I -- part of why I keep returning to both the early childhood programs and the child care investment is that the face of being poor today is a parent trying to raise their kids while working. And so it's crucial to have that piece in there.
GJELTENDoug Holtz-Eakin, what is your view of the need to balance sort of fiscal realities with this clear need to alleviate people living in poverty?
HOLTZ-EAKINIt's not a trade off. If you look at the fiscal problem, it is the large growing health programs in particular, but entitlements in general that is unmistakably what the CBO puts out every year and warns people about. And in the process, because those programs are crushing everything else out of the budget, it's making it harder and harder for the kinds of investments that Olivia's interested in to get funded.
HOLTZ-EAKINAnd the only way to get a balance between investments in the future, whether it's early childhood or infrastructure or research and these old-age programs is to actually reform them. And we should, for their own sake. It is a disgrace, in my view, that Social Security's plan, the current law is to cut benefits 25 percent across the board in 20 years. People making retirement plans right now, that's their promise. That is no way to run a pension program. And it should be fixed for its own sake. Social Security deserves a better program.
HOLTZ-EAKINMedicare deserves a better foundation than $300 billion a year in a gap between what comes in in payroll taxes and premiums and what goes out. That's a program that will fall under some financial weight. We have 10,000 new participants every day. Seniors deserve a sustainable Medicare program. So it isn't a choice of, you know, we got to go harm seniors so that we can fund the kids. That's all wrong. We need to take care of the seniors and give them real safety net programs and open up room in the budget to fund these other issues.
GJELTENDoug Holtz-Eakin is president of the American Action Forum. We're talking about rival Republican and Democratic ideas to fight poverty. We're going to take a short break here. When we come back, we'll go to your phones. Remember our number's 1-800-433-8850. And we'll be sure to get you on the air when we come back. Stay tuned.
GJELTENWelcome back. I'm Tom Gjelten. I'm sitting in for Diane Rehm today for this discussion on antipoverty programs with Damien Paletta from the Wall Street Journal, Olivia Golden from the Center for Law and Social Policy and Douglas Holtz-Eakin, president of the American Action Forum. Now Damien, just during the break you were talking about -- well, right before the break we were talking about the growth of these various social programs and the fiscal challenges that it's presenting to the nation. And you had some important figures that you were citing.
PALETTAThat's right. There's over 50 million people now on Medicare and I think even more than that in Social Security when you combine Social Security disability benefits and the Social Security old age -- the benefits. And so obviously the Medicare you qualify when you turn 65, Social Security now it's a little bit older, you know, because of the reform set they made back in the '80s.
PALETTABut we have 47 million people on food stamps. And so, you know, a lot of these programs have grown. Now obviously the food stamp program is more tied to the economic recovery. But as we age, you know, there's no doubt about it, this country's getting older. There's going to be more and more pressure on Social Security and Medicare.
PALETTANow the Social Security is more paid out per dollar every year but the growth of Medicare is expected to surpass Social Security because of the costs of health care.
GJELTENOlivia Golden, clearly this means that we have to be creative in thinking going forward about how to fund these programs.
GOLDENWell, I just wanted to offer a couple of things. I mean, one is that one of the things the president does deliberately, and this budget is -- offers -- shows you how he's going to pay for these particular initiatives through a range of closing tax loopholes. So in part what he's doing is saying, it actually wouldn't be that difficult to have the pieces that Americans want in terms of investment in the economy and in work and in jobs. And so it may be that, as you were suggesting before, those specific proposals aren't going to be enacted. But again, it's a roadmap that helps reshape the conversation.
GOLDENIn terms of the creativity, I guess what I would highlight is that a lot of what's in the budget and a lot of the child and family side -- as you've heard, the elderly side of what we do in our budget is primarily federal, the child and family side is actually about two-thirds state and local. And so there are a lot of partnerships and incentives that draw on the fact that many of those issues are more bipartisan in the states than in congress.
GJELTENDouglas Holtz-Eakin, part of the Republican program obviously is to emphasize job creation, and part of that is tax cuts. Now you laid out your view on what the minimum wage has done to employment. What are your thoughts or what's your research or knowledge on the effect of tax cuts on job creation because that goes to the heart of the Republican philosophy?
HOLTZ-EAKINSo I don't hear anyone calling for tax cuts. I think there's a very important need for tax reform and I thought ways and means Chairman Dave Camp putting out a draft of tax reform in an election year...
HOLTZ-EAKIN...knowing the kind of grief he would get was actually a courageous personal step. I'm not a fan of everything in it. No one will be. If we actually do tax reform there'll be lots of things people don't like. But we know that what a tax reform can do is broaden the base and treat things equally so that decisions are made on the basis of the fundamentals. Is this a good worker and can they provide some productivity and product? Or are we going to have them driven by taxes?
HOLTZ-EAKINSo get rid of the taxes, do things on business fundamentals. That raises the productive capacity of a nation that generates the growth as you move to that new capacity. Tax reform's a big opportunity and, you know, I think the president deserves all the criticism he gets for the structure of the budget he put out. Because what he said is, I'm going to take some opportunistic moments, grab the low-hanging fruit, fund this spending, get out of office and not fix the deep problems. I'm not going to fix the spending side with the entitlements. I'm not going to fix the tax code. It doesn't show the leadership we need.
GJELTENOkay. We've covered most of the big issues here. I think it's time that we bring our listeners into the conversation. First we've got Benny on the line from Norfolk, Va. Hello, Benny. Thanks for calling "The Diane Rehm Show."
BENNYGood morning, thanks for having me.
GJELTENYou bet. What's your question or comment?
BENNYWell, my comment is regarding the job training. I am a former employee of educational system in 23 years with the school system doing job training. And during my tenure there I have experienced it be a very successful program. And for the life of me I don't understand how something that would be beneficial to the economy, beneficial to individuals as a whole to be blighted by the means of cutting programs like that.
BENNYBecause in particular during my 23-year tenure, my team of which I worked in job training and even today over the past and present, you hear and see people who come to me, not that -- you know, trying to glamify (sp?) myself, but the fact of how that program was so beneficial to them. And during the whole tenure for 23 years -- or the 19 years that I worked there, we had over 75 percent of job placement which then came to be a very successful program...
GJELTENYeah, which particular program are you talking about, Benny?
BENNYJob training with the JTPA and it goes all the way back to (unintelligible) programs and just job training in general. You know, it's skilled training. They have programs in the brick masonry, the welding, building management...
BENNY...clerical, computer training. And these...
GJELTENOkay. Let's get some discussion on that. Doug Holtz-Eakin, as I recall JTPA was a program promoted by Dan Quail some -- almost 30 years ago.
HOLTZ-EAKINYeah, I think that there's increasing recognition that we have a shortage of skilled trades and the tracks leading people to skilled trades in the United States. And so when people talk about job training, there are a lot of different aspects to this. One is growing up. Finding people who may not be on a college track giving them an effective career by building those skills.
HOLTZ-EAKINThen there's training for people who've been out of work for a long time, cannot find -- make the transition. There I think the states are the key, and the localities even. This is not something the federal government does well. We've had some community college-based programs that have been effective. We've had some that haven't. And I think that's a place where it's not just a matter of we need to do more. We need to figure out how some manage to connect the skills people need to the jobs that are available in local labor markets and how some have not been successful. It's a complicated mix.
GJELTENOlivia, has job training been underfunded in recent years? I mean, that certainly seems to be Benny's concern.
GOLDENYes. I mean, I agree with Doug that it's an area where a lot of what's important is doing it well, building on the research and having enough funding to reach the people who need it. And my organization actually does a lot of work with states as well as with the federal government in terms of advising. And I would say among the initiatives that are most appealing in this budget, there's both the fact that more money's proposed but also that it's very thoughtful about picking based on the evidence.
GOLDENSo for example, how do you think about the kinds of community college programs that might partner with apprenticeship programs? One of my favorites -- we haven't gone through all the fine print yet, there's a lot in the proposal -- but there's an incentive program proposed for states that would use job training work to meet employer's needs, but also reach the most needy. Because one of the big challenges is there can be a big gap between the skill level and education level of someone who really needs the help and the need for the job. So how do you bridge that gap in the most effective way possible?
PALETTAWe are hearing more and more about these sort of public private partnerships where businesses in the community -- let's say, you know, Benny mentioned welders. You'd be amazed at how many times I'm hearing about the welder shortage in this country. I guess they're all retired or something. But the business communities come together and say, well we need more people that have certification and this sort of mechanical engineering.
PALETTAAnd so the -- you know, the local organization or the county government will put together some sort of group to help -- which is funded in part by the businesses that trains intensively. There are people that are looking for jobs to do the exact skills that are needed in the community. And too often we see this mismatch between people that are really good at one thing and a new, you know, rising industry in some area that needs something else.
PALETTAAnd so I think because we've had this persistent long term unemployment, businesses and county governments and states are getting more creative about trying to, you know, match the people up with the jobs. But it's quite frankly taking too long to get those things set up.
GJELTENLet's go now to Susan who's on the line from Penryn, Penn. Hello, Susan. Thanks for calling "The Diane Rehm Show."
SUSANHi. Thank you very much for taking my call. I am wondering here, am I right or am I wrong that the earned income tax credit is funded by the taxpayers? And doesn't that subsidize employers who don't have to pay their employees a decent wage? Thank you for taking my question.
GJELTENWell, I guess you could say that the earned income tax credit, Doug Holtz-Eakin, actually is a challenge to the federal budget, the minimum wage would in fact challenge the employers. So there's a trade off there which -- who do you want to pay for the burden of these incentives?
HOLTZ-EAKINI think the focus should be on the recipient and what is the most effective way to target assistance to those who need it, those who are in poverty. And what is the way that gets them to get in a labor force, acquire and maintain skills? Because, again, if you back up to the big problems we face, the difference between poverty and non poverty is having a job. And the difference between success and more success in the labor force is skills and education.
HOLTZ-EAKINAnd so we shouldn't think about it as subsidizing anyone other than the person who's the object of American's generosity which is Americans in poverty. And the earned income tax credit is funded by American taxpayer dollars but it does meet those program objectives.
GJELTENIt is a cost to the treasury...
HOLTZ-EAKINThere no question about that, yes.
GJELTEN...just like food stamps and any other program is.
HOLTZ-EAKINYes. And I don't think if you polled the Americans that they'd have any problem with that. Americans have a genuine and longstanding need in and interest in progressive policies in helping the poor. They always have.
GOLDENSee I think both the ITC and the minimum wage are an investment in our future as a country. And I would argue you need a combination for exactly the reason that the caller says, that you need to invest from our taxes. And you also need employers to step up. But the way I think of it, Doug said the difference between poverty and non poverty is having a job. Two thirds of the kids in poverty have somebody working in their household. So the difference is having both a full time full year job and a job that pays decent wages, and probably a job that has decent working conditions so you don't lose it when you lose your child care or scheduling.
GOLDENSo to me it's about our future, that we're going to have the workers that move up and are able to lead to economic growth, are going to raise kids who can succeed. And I think a combination is the right way to do it.
GJELTENDoug, I want to read to you an email from Naomi who says, "The thing these conservatives" -- I hope you don't mind being thrown in that big category -- "the thing these conservatives seem to willfully ignore is the current." She's actually got a point. I mean, we're not in an ideal situation right now. We're in sort of a desperate situation and yet unemployment benefits are being terminated, food stamps have been cut. She is saying that conservatives are not dealing with the dire economic situation right now.
HOLTZ-EAKINI think there are three things that are important there. Number one, yes, as I've tried -- I'm sorry, things are really bad and no one should be confused to the contrary. Number two, you want to have programs that are very effective using taxpayer dollars in these circumstances because the need's so great. You can't be wasting the money.
HOLTZ-EAKINSo if you look at some of the food stamp reforms, you know, a game that states played was to notice that if you were eligible for low income heating assistance, you'll automatically qualify for food stamps. So then they would send a $1 check to somebody for (unintelligible) and that automatically qualified them for food stamps. That was never the intent of the program. If you've got a population you want to help and you have eligibility, stick to it. So reforms of that type are really just program integrity and efficiency reforms.
HOLTZ-EAKINAnd then the third thing, which I think you just really have to focus on is getting faster economic growth. That's going to be the answer that none of these programs by themselves can solve.
GJELTENDoug Holtz-Eakin is president of the American Action Forum. I'm Tom Gjelten. You're listening to "The Diane Rehm Show." And let's go back to the phones. Rachel is on the line. She's been waiting a long time from Chapel Hill, N.C. Welcome to "The Diane Rehm Show," Rachel.
RACHELYes. I just wanted to mention the association between disability and poverty. I lived in a country that had a disability savings program that did not count against the disabled person. In fact, the government matched whatever the person will put in. They cash in at 65 so that when the parents and caretakers die they could take care of themselves.
RACHELBut here in this country it's exactly the opposite. When people age with disabilities and they are scrambling to try to continue to be eligible for certain programs, they keep getting pushed further and further into poverty. And their caretakers are no longer around. And I'm just trying to find out, wouldn't it make more sense if we had, you know, similar disability savings programs so that disabled people could have hope toward the end of their life instead of just less hope and less hope and more poverty?
GJELTENSo Rachel, what was the country that had this disability savings program that you're referring to?
RACHELIt was in Canada and it was called the Registered Disability Savings Plan. And it's open for people who are disabled to prevent them from being in poverty when they're older and alone.
GJELTENDamien Paletta, is there any debate around programs like this in congress right now?
PALETTAWell, they're starting to talk more about disability. I mean, one of the big tragedies -- one of the many tragedies of the financial crisis was that a lot of working Americans with disabilities were sort of shaken out of the workforce. And when they went back to try to get jobs, they were competing against people that didn't have disabilities. And we just saw this big growth, for example, in the Social Security Disability Insurance Program in part because so many people who had jobs are no longer able to find jobs that work.
PALETTAAnd so that program is under a lot of financial pressure. And there's a big discussion in congress right now about, you know, what needs to be done about it. But the -- this is one of those areas that's really sensitive I think, because neither party wants to be seen as doing anything to turn their back on people with disabilities. Obviously we have a lot of troops who are coming home now that have their own physical and mental disabilities as well. So this is going to be something that's going to get more discussion really thorny issue for politicians.
GJELTENOlivia Golden, a larger issue here is whether people get trapped in these programs and basically have to remain poor or disabled or whatever in order to get the benefits. I mean, that there's no real exit from these programs.
GOLDENSo I think that that is a challenge about disability programs in the United States. We have a much sharper distinction than many countries do. You can be disabled and not work or you can not be disabled and work. But the wide range of chronic illness that makes it hard for you to work full time is a feature of poverty. And so to me the Affordable Care Act is a really important piece of getting out of that trap. Because one of the reasons people try to get disability benefits is not only the cash but that for so long it's been impossible to even get health coverage.
GOLDENAnd so for the families that I study and that I work with, it's very frequent to have chronic illness of both a mother and a child. That is associated with poverty, as the caller said. And it really doesn't make it impossible to work but it certainly makes it impossible to work steadily if you're not going to get any health coverage at your job and you're going to make just a little too much for Medicaid. And what the Affordable Care Act does is say, you can get that health coverage and you can work. So I think structuring the programs in a thoughtful way is a really important piece of making them work.
GJELTENWell Olivia, thanks for bringing up the Affordable Care Act. That's something that we have not talked about this hour. And it really deserves a lot more than just a passing comment at the end of the program. We have had a number of programs here at "The Diane Rehm Show" looking at Obamacare, and we'll have more. But thanks at least for making one reference to it. We are running out of time now.
GJELTENI'd like to thank our panelists Damien Paletta from the Wall Street Journal, Olivia Golden, executive director of the Center for Law and Social Policy and the author of "Reforming Child Welfare." And Douglas Holtz-Eakin, president of the American Action Forum and formerly the chief economist and director of the Congressional Budget Office from 2003 to 2006. We've been discussing federal antipoverty programs and various solutions for improving them. I'd like to thank our listeners. Thanks to all of our callers. I'm Tom Gjelten. Thanks for listening.
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