Reintegrate the Poor, Reinvigorate America

Social Mobility Summit, Brookings Institution
Remarks as Prepared for Delivery

Hi, everybody. First, I want to thank Ron Haskins and Belle Sawhill. I’m a big fan of their work. I even made it through their report on social mobility—the whole thing. It came out six years ago, and I finished it last week. So I was grateful that they invited me. And I’m happy to be here.

Now, Ron and Belle asked me to talk about two things: First, how do I see the issue of opportunity? And second, what are some ideas to increase opportunity in our country? In other words, what is opportunity, and how do we get more of it?

Well, here’s how I see it: Behind every opportunity is someone who takes a chance. You mentor a child. You advise a student. You hire someone. Two people—strangers, really—they form a bond. And they work together to create value, to spread knowledge, and to help each other.

So I’d say the key to opportunity is trust. And government, when used wisely, can increase that trust. Take one example: the Interstate Highway System. That was something we all could agree on. Of course, the federal government should build an interstate highway system—because that would encourage interstate commerce.

And it did—for a simple reason. It got people to interact. The more people interact, the more they trust each other. And as we all know, where there is trust, there is collaboration. And where there is collaboration, there is economic growth.

So when it comes to judging a particular policy reform, I have a very simple test: Does it bring people together? Or does it pull them apart? Does it increase trust and collaboration? Or does it stifle them?

Government is a very powerful tool—too powerful, you might say. Just as it can build and encourage, it can frustrate and deter. It was Ronald Reagan’s great insight that taxes don’t just take money out of people’s pockets. They take people out of the workforce. They discourage people from putting in that extra hour—from hiring that extra worker. And so, just as government can increase opportunity, government can destroy it as well.

And perhaps there’s no better example of government’s ability to disappoint than Lyndon Johnson’s War on Poverty. This month marks the 50th anniversary of that war. For years, politicians have pointed to the money they’ve spent or the programs they’ve created. But despite our spending trillions of dollars, 47 million Americans live in poverty today. That’s about 15 percent of the population—the highest in a generation.

So we’re spending a lot, and it’s not working. Why? Well, it all goes back to opportunity. Poverty is not just a form of deprivation. It’s a form of isolation.

What do we know about the poor? Ron would say three things: They’re less likely to have graduated from high school. They’re less likely to work full time. And they’re less likely to have gotten married before they had kids. They’re cut off from three crucial sources of support: education, work, and family.

Now, government isn’t solely responsible for these trends. But in other ways, government is deepening the divide. Over the past 50 years, it has built up a hodgepodge of programs in a furious attempt to replace these missing links. But because these programs are so disorganized and dysfunctional, they pull families closer to government and away from society.

Our goal should be to reintegrate the poor into our communities. But Washington is walling them up in a massive quarantine.

As my friend Senator Mike Lee would say, we need to bring in the poor—to expand their access to our economy and civil society. They are not fulfilling their potential. And we all are missing out.

And we have to remember that poverty is not some rare disease from which the rest of us are immune. Poverty is the worst strain of a widespread disease: economic insecurity. Most families worry about making ends meet. All of us have felt isolated at times. That’s why concern for the poor—it isn’t a policy niche. It’s not a box check on a contract for America. It goes to the very heart of the American experiment.

So, how do we bring in the poor? How can the federal government help? I’m afraid I don’t have all the answers—though some humility in Washington would help. But today I’d like to talk about a few ways to improve our anti-poverty efforts. Here are two key ideas: simplicity and standards. I think they’d help with one big problem—it’s called the poverty trap.

You see, it turns out the central planners aren’t very good at planning after all. Washington tackles problems in a haphazard, whack-a-mole approach—and poverty is no exception. It’s just the nature of the beast.

So before Lyndon Johnson even became president, there was Social Security and AFDC. Johnson added Medicaid, Head Start, and Job Corps—among others. And after he left office, Washington kept adding to the alphabet soup: the CSFP, the CCDBG, the SCHIP. The list goes on.

Gene Steuerle at the Urban Institute has done really great work on this. Because the federal government created different programs to solve different problems—at different times—there’s little to no coordination among them.

And because these programs are means-tested—meaning families become ineligible for them as they make more money—poor families effectively face very high marginal tax rates. Government actually discourages them from making more money.
So what does this mean? Well, let’s take a single mom with two kids living in Colorado. If her income jumps from $10,000 to $40,000, she won’t keep much of that extra $30,000. Instead, she’ll lose most of it to higher taxes and benefit cuts.

According to Steuerle’s calculations, if she’s enrolled in programs like food stamps, Medicaid, and SCHIP, her implicit marginal tax rate will be as high as 55 percent. And if she’s enrolled in other programs—like housing assistance and welfare—the rate will reach above 80 percent. In other words, go to work, and you’ll keep less than 20 cents of every extra dollar you earn.

Now, she’s not going to take out a calculator and ask herself, “What’s my effective marginal tax rate?” But she gets it: She’s trying to get ahead—and government is holding her back.

The good news is, there’s a better way. Policymakers are working on a solution to this problem: simplicity. In 2012, Britain approved a far-reaching reform—something they call the Universal Credit. The government is now putting this idea into practice. And it’s going through a rough patch. But the basic concept is very sound.

We should learn from Britain’s experience. It took six means-tested programs—ranging from housing benefits to income support—and collapsed them into one, overall payment. The old programs abruptly cut off once a family made a certain amount of money. On the other hand, the universal credit tapers off gradually.

We have some experience with this idea: We have the Earned Income Tax Credit. The minimum wage makes it more expensive for employers to hire low-skilled workers. The EITC, on the other hand, gives workers a boost—without hurting their prospects.

Many economists have found the EITC increases employment among low-skilled workers. Like the universal credit, it gives families more flexibility. It helps them take ownership of their lives.

Now there’s certainly room for improvement. Just last week, my friend Senator Marco Rubio proposed that workers get assistance once a month instead of once a year—so it’s easier for them to plan ahead. That makes a lot of sense.

But whatever form this assistance takes, we have to encourage work. In other words, there should be standards. This is not a novel concept. In 1996, Congress began to require people on welfare to work. And welfare rolls dropped dramatically. Child poverty fell by double digits. The problem is, we haven’t applied this principle far enough. We need to do more. As Ron likes to say, what works is work.

And we need to change the way we think about work. It is not a penalty. It’s the shortest, surest route back into society. If you’re working, you’re meeting people. You’re learning new skills. You’re contributing to society. That’s the best way to get a raise or even a better job. We want people back in the workforce, so they can share their talents and ideas with the rest of us. We’re losing out just as much as they are.

In short, federal assistance should not be a way station. It should be an onramp—a quick drive back into the hustle and bustle of life.

Now, we have a lot more work to do. We have to tackle a whole host of issues like education, criminal justice, and health care. But reformers at the state and local level—they’re already hard at work. The federal government should let them take the lead—and then learn from their example.

I’d like to think I haven’t said anything radical. But you can already hear the howls of protest from certain corners. All I would say to the critics is I want to hear their ideas too. Good intentions are not enough. And concern for the poor does not demand a commitment to the status quo. It demands a commitment to results. We shouldn’t measure our success by how much we spend on welfare. We should measure it by how many people we help get off of welfare.

Later this year, I’ll have much more to say on the subject. But before I roll out any policy prescriptions for poor families, I need to hear more from the real experts—the families themselves. If there’s one thing I’ve learned from 15 years in Congress, it’s that Washington doesn’t have all the answers. In fact, sometimes they’re right under our noses—right in our own neighborhoods. My mom used to tell me, “Son, you have two ears and one mouth. Use them in that proportion.” I think that’s pretty good advice.

Just as we need to run the numbers and study up on the issues, we need to listen to the people we’re trying to help—because they’re the people on the frontlines. Only the people in the community can solve the problems facing their community. Trust is the bedrock of opportunity. And the federal government—it has to trust them. With all due respect to the brilliant minds at Brookings—and to the lesser lights on the Hill—we need all hands on deck. We need to enlist community leaders and working families in the real War on Poverty.

There’s only one way to beat poverty—and that’s face to face. Look, for too long, too many people have watched this effort from a distance. They’ve said to themselves, “I’m working hard. I’m paying my taxes. Government is going to take care of this.” And in so many ways, government is encouraging this view. Well, that’s not going to cut it anymore. We need everyone to get in the game. We need everyone to get involved—person to person. And the truth is, when you’re helping people in need, you’re also helping yourself.

If we reintegrate the poor into our communities, we will reinvigorate our country overall—because a country with healthy, growing families will have a healthy, growing economy. We all will benefit from the economic and personal growth. At its best, collaboration doesn’t just build an economy—it builds character. It makes us a better people—and a better country.

So thank you once again for the invitation and for your work on this issue—because I think it’s so important. In fact, I think it’s vital that we make every citizen—every single one of them—a full participant in the American experiment.