The Poverty Bugaboo

Poverty is the battle, not the war

The new online magazine “The Argument,” dedicated to rejuvenating liberalism (why, you might ask) has launched with a flurry on my favorite subject, income assistance and inequality. The chief antagonists are my friend Matt Bruenig and a lady named Kelsey Piper, whom I do not know.

Part of me just wants to vomit when a text begins, as Piper does, with the question, should we provide cash assistance to the poor, does it really help them? There were studies of experiments in so-called Universal Basic Income (UBI), and before that, Guaranteed Annual Incomes. I’ve been railing against the entire UBI advocacy for years. I’ve said that the studies alluded to above are a toxic research agenda. Of course giving people money helps them. How stupid can you be? There is no mystery. Cash assistance helps people. Shut up.

Such studies seem designed to respond to the canard that the poor would just spend cash aid on liquor and drugs. They also support the notion that the poor’s use of aid needs supervision, that they need to be herded into employment and told to eat vegetables rather than potato chips.

My geezer folk wisdom is that most people aspire to the common ideal of a life absent from the need for explicit outside help: stable employment, home ownership, reliable health care, opportunities for advancement. Nobody ever says, “Hey, $10K a year is just fine for me.”

Piper adopts the mainstream economist’s canards about the best use of the marginal dollar, trade-offs, and limited resources. Systemic change, the real subject at issue, does not hinge on small fixes with marginal dollars. It depends on bigger moves. There is no economic resource limitation. The political obstacles are reinforced by the crap research with which she struggles.

That said, UBI is an entirely different story. My career, for what it’s worth, was devoted to writing about and in favor of cash assistance. No question, folks need cash. Still, an exclusive focus on cash, as opposed to public services and other policies, is a reductionist approach to social needs that would benefit from a taste of Marx. Matt alludes to this a bit, but not enough. It’s not just a question of bankrupt “human capital” preoccupations. It’s a narrow focus on individualized cash aid.

In a nutshell, if the U.S. government provided universal incomes, they would not be basic, and if they were adequate, they would not be universal. As little as a $10,000 UBI would envelop more than half the Federal budget. End of story.

At the Economic Policy Institute, we used to distinguish between redistribution and pre-distribution. The former was asssociated with venerable think tanks like The Brookings Institution and the Urban Institute. They were usually fine with redistribution, as long as the necessary revenues were obtained. The constraint was deficit reduction.

Pre-distribution peels a layer off the onion, speaking to how incomes are determined before the governnment engages in any redistribution, in light of policies supporting trade unionization and higher labor standards (minimum wage, wage and hours legislation, job safety, etc.). Older Brookings types, God love ‘em, tended to look askance at such policies. My old professor Mancur Olson used to say that Sweden was such a successful welfare state because it left markets alone.

More foundational still is the Marxist idea of alienation, that most people labor to produce a world in which they share no ownership, that is not controlled for their benefit, given the fundamental divide between those who own the means of production and those who have nothing upon which to subsist but their own labor. Poverty and inequality flow from this basic reality. Bruenig is a dedicated foe of poverty and sympathetic to UBI proposals, but his outlook is a little too Brookings.

I should get to Piper, who started this debate. She is a step more retrograde than Bruenig, reverting to the hackneyed “human capital” nonsense. Does cash aid augment a family’s human capital, helping it succeed in the labor market? She treats it like a mystery. Why don’t benefits from cash aid show up in the data? Who cares?

The objective of policies that enable families to sustain themselves with labor earnings, first and foremost, is creditable. It also happens to be what is most politically acceptable, not least by the prospective beneficiaries themselves. Many resent the idea of depending on charity. They would reject cash if offered on the terms, we want to help you, poor soul. At the same time, anybody who saw the same cash laying on the ground would pick it up. Of course they would.

Cash aid is a tough lift in politics. That speaks to the relevance of incremental moves in that direction, as well as additional reforms.

For a second, Piper is left of Bruenig. She acknowledges that “Winning the war on poverty will require more than just transfers, it will require building and improving institutions that provide education, health care and housing.” But she just leaves it hanging.

I would not frame all that as an anti-poverty objective. It’s just good social-democratic policy. But people will still need cash. For one reason or another, many will be unable to participate in the labor market. The other motivation for transcending, not eliminating, cash is that public goods provision can be more economical than aid to individuals. There is also the small matter of climate change policy and the survival of the human race, for which cash aid is irrelevant.

Piper raises a point in detailing the trends in what she calls “transfers to the poor” and the failure of the poverty rate to seriously decline over sixty years. She first cites a figure of $3.2 trillion. We spend $3.2 trillion on aid to the poor? Wow! Most of what are classified as transfers are not devoted to poverty reduction. No small component defrays the ballooning cost of health care under Medicare and Medicaid. Payments to health care providers (sic) are transfers too. Most of the rest is for Social Security.

UBI is a reductionist approach to economic inequality. Social Insurance is a better one. But inequality itself is a reductionist approach to social welfare.

As a budget guy who tries to be ambitious but realistic, I have written about politically plausible ways to expand cash assistance. One of them is “Baby Bonds.” Another is a negative income tax. Darrick Hamilton is your go-to guy on these ideas. Another still is to beef up Social Security. All of these in some form would fit into the Federal budget. We don’t need research to figure out whether they would be helpful. Of course they would!

What remains is a panoply of policies in the fields of public services and industrial policy. The Argument’s liberalism takes us backwards. Socialism is the goal, social-democracy is the way.