Different Ways of Getting the Wrong Answer on Poverty

The poor, we are told, will always be with us. But those “living in poverty” constitute a large and diverse group of individuals—people struggling with disability or mental illness, people in economic distress due to a recession or other economic shocks, and people not currently able to provide for themselves, but who might be able to if given the right carrots or sticks.

Any anti-poverty policy worth its salt will try to differentiate between those who will need some kind of long-term assistance and those who can be redirected toward greater self-sufficiency. In the 1990s, there was bipartisan agreement that policy had erred too far in the direction of unconditional aid to the poor. Reforms to the nation’s welfare programs were made to encourage or require those able to work to do so in exchange for public assistance—by and large, that playbook was a success.

Today, the problem analysts on both the Right and Left can fall into is treating “the poor” as an undifferentiated mass, all in need of the same solutions. The official poverty rate hit an all-time low just prior to the pandemic and is trending downwards again. And new research underscores how further progress will require not wide-eyed idealism, but targeted approaches. Better anti-poverty policymaking starts with taking the existing status quo seriously, rather than adopting naïve prescriptions of how either no-strings-attached cash or large-scale budget cuts will act as some kind of universal panacea.

One of the trendiest ideas on the Left is that just giving people money will “end poverty, revolutionize work, and remake the world.” But research continues to show that unconditional checks are the equivalent of hoping one 20-minute walk will achieve your weight-loss goal. It might provide a temporary boost, but studies continue to suggest it does very little to change behavior in ways that set individuals up for long-term success.

The most recent example comes from a National Bureau of Economic Research working paper, which studied the impact of a high-profile universal basic income experiment aimed at young adults in Texas and Illinois. The no-strings-attached money led to some short-term benefits, such as the ability to move to presumably better apartments, higher self-reported financial health, and more charitable donations and gifts to family.

But the participants’ long-term picture didn’t improve. In fact, some key measures worsened: employment declined, home and car ownership rates didn’t change, debt increased, and households’ overall net worth declined by about $1,000. The researchers’ summary is fair but unsparing: “Large, but temporary, transfers increase expenditures, consumption, and financial resilience in the short term but do not substantially improve low-income households’ medium-term financial position.”

In a world of unconstrained resources, we could argue about whether fueling short-term consumption at the expense of building long-term assets is a tradeoff worth making. It’s not a clear-cut answer; reducing point-in-time poverty is laudable, while participation in the labor force remains correlated with all sorts of long-term benefits to both low-income adults and their children. But as an anti-poverty strategy at a time of increasing federal debts and deficits, the case for unconditional money lacks a compelling rationale.

Another trap the Left can fall into is a kind of everything-bagel approach to social problems. The Seattle Times recently profiled the struggles of an effort to have Medicaid dollars go toward rent payments, an Obama-era initiative that postulated that keeping people off the streets will reduce medical spending down the road.

Unfortunately, above and beyond the square-peg-in-a-round-hole problems of trying to get the health care bureaucracy to legally pay rent checks to the human services bureaucracy, the premise of the approach is speculative at best. A 2022 meta-analysis in the Journal of the American Medical Association found “mixed and mostly low-certainty evidence that interventions to prevent housing insecurity were associated with improved health outcomes.”

That’s not to say human services programs can’t provide much-needed guidance for those trying to get out of poverty. Evaluations of case-management programs, which provide individualized, tailored approaches to find employment and complete degree programs, have been shown to have meaningful impacts on low-income participants, particularly women. But they engage participants in the hard work of setting goals, building solid habits, and making decisions aimed at the long-term outcomes of achieving greater self-sufficiency. They help low-income individuals make plans and develop the concrete skills required to turn those goals into reality. Yes, that requires more time and energy invested, but that’s because there’s simply no hands-off shortcut to building a pathway out of poverty.

The Left can undoubtedly be utopian about its “just give people money” approach to anti-poverty policy. But that doesn’t mean the small-government Right necessarily offers the right answers, either, as evidenced by a recent Wall Street Journal opinion piece from former Texas Sen. Phil Gramm and Rep. Jodey Arrington, chairman of the powerful House Budget Committee. They claim welfare is “eating” the federal budget, and levying across-the-board work requirements would help solve our culture of dependence and reduce our fiscal pressures in one fell swoop.

The piece distorts the budgetary reality. What is putting pressure on our long-term fiscal picture isn’t welfare spending, but America’s rapidly aging population, the result of declining fertility and increased life expectancy. According to the Congressional Budget Office, the large and growing chunks of the federal budget dedicated to Social Security and Medicare will be driving increases in the federal debt, not spending on other domestic programs. Over a 30-year time horizon, old-age entitlements will account for 11.3% of GDP, up from 8.1% today. Spending on Medicaid, as well as other, discretionary programs, is projected to fall from 9.1% to 7.7% as our population ages.

Beyond the long-range projections, Gramm and Arrington fall for a story about workforce participation which, as previously covered at The Commons, is exaggeratedly declinist. The issue isn’t simply that people aren’t interested in working. Prime-age labor force participation is at an all-time high, with a tight labor market helping draw marginal workers in off the sidelines, particularly pre- and post-pandemic. New work requirements, on their own, aren’t going to fix the problem.

They also estimate that poor families collect over $55,000 in public benefits a year, a number that should send the discerning readers’ B.S. detector into overdrive. That amount can only be arrived at by counting as a “benefit” each dollar spent on public education, by attributing “average” Medicaid spending to each households, and baking in extremely generous assumptions about the prevalence of public housing benefits.

These are all dubious at best. Are we meant to understand public school as a welfare benefit? The bulk of Medicaid expenses go toward the older, disabled, and sicker individuals who can’t be expected to provide for themselves—one reason why work requirements for Medicaid remain a half-baked idea. And most people who are eligible for public housing vouchers don’t actually receive them due to limited funding.

But regardless of your accounting, welfare spending is not driving our budget crunch—as the Manhattan Institute’s Brian Riedl recently posted, “even zeroing out all means-tested programs would not be enough to finance the [coming] Social Security and Medicare shortfalls.” So gutting welfare programs in the name of fiscal necessity can’t justify a tough-love approach to poverty politics.

To the extent either party is interested in helping people out of poverty, policy conversations would benefit from delineating who the population of interest is. Requiring that able-bodied adults without dependents work in order to receive welfare benefits is sensible policy—so sensible, in fact, that most of our current safety net programs already do so (with some loopholes that a host of conservative think tanks are laser focused on).

But even the modifier “able-bodied” raises questions of how definitions should be constructed; as AEI’s Scott Winship wrote after the wake of the Great Recession, reliably defining “disability” in our social insurance programs can sometimes be more art than science. And other changes can affect the ability of disabled individuals to work; a recent research paper estimated that the post-COVID increase in working from home helps account for 80% of the recent rise in employment among the disabled.

If it sounds like a gimmick, it probably is one. One-weird-trick solutions aren’t the ticket to helping further cut the share of our fellow citizens living below the poverty line. Even more crucially, these would-be shortcuts sidestep the difficult and necessary work of building educational and cultural institutions that can help set young adults on paths toward meaningful self-sufficiency—a task more conservatives should spend more time working towards.

Ensuring welfare spending is targeted toward those who truly can’t expect to fully participate in our economy, while amplifying approaches to help those who can do so to get their lives back on track, are not the easy answers of either the free-spending Left nor the starve-the-beast Right. But they would provide a more meaningful vision of what true public assistance could—and should—look like.