Jan | Feb 2014


 

States are the New Front in the War on Poverty

By Jennifer Ginn, CSG Associate Editor
In 1973, the average, full-time male worker was earning about $42,000 a year. Today, that same average worker is still earning about $42,000 a year.
That is a big problem, said Gordon Berlin, president of MDRC, a nonprofit, nonpartisan research group based in New York that develops and scientifically evaluates new approaches to social problems.
Berlin said America came out of the Great Depression and World War II with a set of policies and laws—such as minimum wage and collective bargaining—that tied increases in productivity and the gross domestic product to increases in wages and earnings for workers. A big portion of those increases in wealth went to workers in the lower and middle classes, he said.
“For 30 years, it was as if the whole country was on an up escalator,” Berlin said. “The economy and productivity was growing 2.5 percent to 3 percent a year and wages, income and earnings were all growing 2.5, 3 percent, moving up in lockstep. After the mid-1970s, that historic 30-year relationship just began to fall apart.
“This economic growth continued, not as fast as we might have liked, but it continued, but the wages and earnings and incomes just stagnated,” he said.
If economic growth and wages had continued to grow together in tandem from the 1970s to today, the average male worker’s annual salary would be in the $90,000s in real dollars.
“If that relationship had continued, we would not have a substantial poverty problem in America today,” Berlin said.
With more than 46 million Americans living in poverty in 2011, the latest year for which data was available from the U.S. Census Bureau, it’s clear that poverty is still a problem.

The Federal War on Poverty

Next year will mark the 50th anniversary of President Lyndon Johnson declaring a war on poverty in his first State of the Union speech. What followed was the creation of many major anti-poverty programs still in existence today: Medicare, Medicaid, Head Start, food stamps and an expansion of Social Security benefits.
Sheldon Danziger, director of the National Poverty Center at the Gerald R. Ford School of Public Policy at the University of Michigan, said the federal government did what states couldn’t do at the time. Danziger is co-author of a new book, "The Legacies of the War on Poverty."
“We didn’t get Medicare and Medicaid without the federal government,” he said. “The whole purpose of the war on poverty was to override the discrimination in most Southern states that kept African-Americans from getting the benefits to which they were entitled.”
The federal government still does most of the heavy lifting in anti-poverty programs, said Michael Leachman, director of state fiscal research at the Center on Budget and Policy Priorities.
“It’s still true that, by far, the biggest anti-poverty programs are federal programs,” Leachman said.
“Food stamps, Medicaid/CHIP (Children’s Health Insurance Program) and Temporary Assistance to Needy Families—those three are the biggest public programs that we have.”
But just like the country has changed over the past three decades, so have some of the federal anti-poverty programs. Leachman thinks the big story is when the former Aid to Families with Dependent Children program, now known as Temporary Assistance to Needy Families—or TANF, was turned into a block grant during welfare reform in the 1990s.
“In addition to that, there were lots of changes in how the program operated, much more a focus on work, work requirements,” Leachman said. “In the ’90s when the economy was strong, a lot of people moved out of TANF and into the workforce. But when the recession hit in the early part of the 2000s, … it didn’t work so well when the economy wasn’t in such good shape.”
The change sent significantly less money to the states to help poor families with kids get into the workforce and move up because of the block grant structure.
“Inflation eats that (federal block grant funding) away and it doesn’t readjust when recession hits,” said Leachman.
Leachman said states also began scaling back or eliminating state-funded general assistance programs, which only intensified once the Great Recession hit. That has left the very poor, particularly if they are single, in a bad spot.
“The general assistance programs have been really important,” he said. “They’re really the only major public assistance, cash assistance support for low-income people with no kids. … With states eliminating these programs or scaling them back, there’s really not much else.”
Although federal programs remain important anti-poverty tools, states and localities now are leading the innovation to help the country’s most vulnerable.

Earned Income Tax Credits

Poverty experts say the federal earned income tax credit, known as EITC, is one of the most effective tools for lifting people out of poverty. The credit is available for the working poor to help offset payroll taxes and is particularly valuable for parents. A family with three children making less than $50,270 in 2012 could qualify for almost $6,000 in credits.
“(It) is a fantastic anti-poverty policy that has been shown to reduce poverty, increase work ethic, benefit children’s educational attainment and is a bipartisan federal success,” said Danziger. “It was supported by Ronald Reagan, the first President Bush and greatly expanded by President Clinton and expanded again in the stimulus act (in 2009).”
Twenty-four states and the District of Columbia have enacted their own earned income tax credits, according to the Center on Budget and Policy Priorities. But both the federal and state credits favor people with children. A childless single person may not earn more $14,000 a year to qualify for the $475 federal credit. Most states also stipulate a single person without children can earn no more than $14,000 annually to qualify.
New York City is starting a first-of-its-kind research project to see how expanding the earned income tax credit for childless people affects poverty.
“Over the years, we kind of continued to come back to the EITC as a real important solution,” said Kristin Morse, executive director of the New York Center for Economic Opportunity. The center, part of the mayor’s office, is charged with identifying and evaluating effective solutions to poverty.
“But when we look at the employment data for single adults, particularly low-skilled men, the EITC feels like a tool that’s largely missing from our tool box,” Morse said.
The $11 million research project will be designed and evaluated by the New York-based MDRC. A group of 3,000 residents who make less than $26,800 annually will receive up to $2,000 a year for three years, while a control group will not receive the tax credit. Both groups will be compared to see the credit’s effect on employment, earnings and whether the credit helps improve compliance with child support requirements for noncustodial parents.
“What we’re trying to do here is begin to think about the EITC as a labor market policy designed to make work pay at the low end,” Berlin said, “as opposed to just sort of an income maintenance policy that’s targeted to families with children.”

Childhood Poverty

Another tack many states have used is creating special poverty commissions. West Virginia created its own Senate Select Committee on Children and Poverty during the first day of the legislative session in February.
The committee is comprised of leadership from both sides of the aisle as well as chairs of the Education, Finance, Judiciary, Health and Agriculture committees, said Senate Majority Leader John Unger, who chairs the committee. It is conducting meetings across the state to see how poverty is affecting the children of West Virginia.
“The whole concept is not just to make policy,” Unger said, “but to change a culture.”
Unger said lawmakers should consider all legislation based on how it will impact children.
One of the first pieces of legislation to be passed as a result of the committee was Senate Bill 663, the West Virginia Feed to Achieve Act. The bill aims to provide a breakfast and lunch for every student in the state regardless of his or her ability to pay. It encourages school districts to maximize student participation in the federal free and reduced price school lunch program and authorizes districts to enter into public-private partnerships to help pay for food for children.
“It allows for the community to come in and donate money, be it an individual … or the private sector, to the Feed to Achieve Foundation in each county or the state,” Unger said. “Some counties may not have as much economic activity as others, so they can go to the state to get some help. Every penny goes toward buying food for the children.”

Poverty Impact Statements

Minnesota Rep. Carlos Mariani agrees that legislators need to reframe discussions about poverty. He co-authored House File 1278, which would have allowed legislators to call for a poverty impact statement on any piece of legislation. First introduced in 2009, a poverty impact statement is much like the more traditional budget impact statement. The bill has not passed yet.
Mariani said the idea came to him as he was traveling the state as co-chair of the Minnesota Legislative Commission to End Poverty during the 2007-08 legislative session. During one meeting, he heard from a person who said he had to go on public assistance when legislators defunded a rural transportation program and he could no longer get to his job.
“In this case of rural public transit, how often do we think about it in terms of either contributing to dependency on public assistance and/or increasing poverty,” Mariani said. “The idea here then was to be very intentional and conscious about that. (The bill would) create some kind of trigger that would compel us to look at policy decisions, no matter what it was, and filter it through an exploration of what its impact would be relative to increasing or decreasing poverty.”
Although ideology and passion have their place in politics, Mariani said, so do data and objectivity.
“I’m not naïve; we’re not going to do away with ideological approaches,” he said. “I hope we don’t. (We need) to be able to have something that provides a base where people can all commonly agree. We have this number of people in poverty; we have this level of income, etc. You can interpret it anyway you want, but at least have this base here as central to deliberation.
“Antipoverty work, unfortunately, tends to suffer, I think, from some of the most ideological clashes exclusively, as opposed to good, solid empirical evidence and trying to do objective analysis as to the way the numbers are coming out.”