Family Feud: Child Allowance Edition
The Niskanen Center’s Samuel Hammond and the American Enterprise Institute’s Scott Winship debate the case for a “child allowance.”
Note: The following is a transcript (lightly edited for clarity) of an event hosted by American Compass for its members on February 10, 2021. Samuel Hammond of the Niskanen Center presented the case for a “child allowance” similar to the Family Security Act recently proposed by Senator Mitt Romney and Scott Winship of the American Enterprise Institute presented the case against. American Compass’s executive director, Oren Cass, moderated.
Samuel Hammond: Before getting into the policy weeds, I want to preface our discussion with a little bit of politics. As a lot of people know, I’m Canadian, and when I first started at Niskanen our first publication was Toward a Universal Child Benefit. In that paper, we talked about the lessons of conservative politics in Canada for conservatives in the United States.
I lived through the Harper administration and he was the first person I ever voted for. And in Canada, we had a populist movement that was very similar to the Tea Party. It was called the Reform Movement. It was a libertarian, anti-establishment thing, as much as it was a regional thing. The Western provinces felt like they weren’t being represented and it really tore the party apart. It led to the Liberal Party having hegemony for over a decade. And it really only was put back together by Stephen Harper when he founded the Conservative Party of Canada.
One of the ways they put that party back together was by trying to innovate on what counts as conservative economic policy. And one of the major things they enacted was a universal child allowance in 2006. The rationale for that was both to respond to this more populist movement, but also to try to reunite the party around an economic agenda rather than a purely grievance-based agenda. People say, “Why does Canada not have this populist movement that seems to be everywhere else in the world?” Because we already had it and we resolved it through economic policy rather than pure culture warfare.
The lessons I take from what Canada did I think also apply here. The Republican Party is going through a lot right now. There’s a big question about where it goes after this. And Trump was by no means a populist in the economic sense. He took a lot of advice from the old stock conservative guard. But what he did do was open up the window for new thinking and new ideas that has been exemplified by American Compass and elsewhere. And what I most value about what Romney put forward a week ago now is both on the policy merits, I think it’s a great idea to enact universal child allowance, but I also think it points a way forward for a more productive, conservative thinking and a 21st-century policy agenda.
One last note on politics: There’s a lot of discussion about trying to build a multi-ethnic, working-class coalition. And we dig into the literature about why the African-American vote swung Democratic, people point to the Civil Rights Act, which is fairly obvious, but the realignment actually began decades earlier with the New Deal. Basically what happened was you have a bunch of low-information voters who looked up one day and said, “Hey, this FDR guy is really making my life better. He’s given my family retirement security. He’s given us unemployment insurance.”
That concept that we want to make the material well-being of people better and use that as a part of our democratic competition, is I think both really healthy for democracy, but also if Republicans are serious about making big inroads with the Hispanic vote or the African-American vote, they can’t just be bailing out ASAP Rocky from Swedish jail. They have to start responding to the economic and material interests of the people whose votes they want.
So, when we turned to a child allowance, I think it checks a lot of the right boxes. First, as I’m sure we’ll get into, I personally think a child allowance will be pro-work relative to the status quo. I’ll save the specifics on that because I think that might be Scott’s biggest point of contention. I also think it’s going to be pro-family. You often hear in DC policy circles, we know the Earned Income Tax Credit has a big marriage penalty, but we’ll never be able to fix it because it’s just too expensive. If you want to fix it, you have to basically double the values for married families, yada, yada, yada. We hear the same thing about old programs that are clearly long past their due—we can’t really abolish it because… think of the children. Well, we have thought of the children. And one of the big opportunities for a universal child allowance, especially one that adds to the value of the existing child credit, is to clean up the existing mess. I think of the consolidations that Romney proposed as not just a vague fiscal conservatism. I think it actually really is a part of good governance to look backwards every now and then and ask what are the programs we have and how can we in a more comprehensive way clean up the system.
And then on the fertility front, I just submitted the essay that will be running later this month for American Compass’s family policy symposium. And one of the points I’m going to be making in that essay is we have this whole apparatus of cost-benefit analysis and we use that to assess the value of a statistical life. And [OIRA] will tell you what the value of a life is, but all those statistics are derived from existing sentient human beings. We actually do not in our cost-benefit analysis value the life that can be created. Why? Because neoclassical economics is a subjectivist paradigm. You have to be a sentient human being to matter. And for that reason, unborn humans only matter in so far as they enter into someone’s existing utility function. And I think that’s just based on a mistake. I think if the FDA says the human life is worth $10 million, then I think creating a new life should also produce about $10 million in value. These kinds of utilitarian arguments are unavoidable in a modern administrative state, as much as you might recoil at the utilitarianism of it, but the fact is that the child allowance can plausibly increase the U.S. birth rate and get us back closer to replacement which, I think, is an enormous plus of the program.
In fact, I think looking forward to the next 20, 50 years, it will be important to be acting on this now. Japan is in their 11th year straight of population decline, but their fertility peaked in 1970. So there is an enormous gap between when your fertility peaks and starts disinflating, and when you actually start kicking into true population collapse. So now’s the time to act if we’re serious about avoiding that kind of future, and also using the Romney concept—setting aside the specific policy, but the concept of doing something that big and bold on family—as inspiration for developing new ideas in the same vein.
Oren Cass: Thank you, Sam. There’s been some good beard chatter in the chat window, so I don’t know, Scott, if you wanted to jump on that, or anything else you want to follow up with Sam on, or press him on, before you jump into your own comments.
Scott Winship: Thanks, Oren, for having me. I’m very excited to be here. If folks have criticisms of me, or when reading the transcript later, I’d just encourage you to tweet at me—that’s @M-A-T-T-Y-G-L…
I did have a question for Sam, which is, I’m definitely interested in hearing more about what you think the biggest pro-work aspects of the proposal are. I feel like there’s been a lot of emphasis on your side in terms of talking about marginal tax rates and people who are currently getting benefits, that this policy would be pro-work because now they can work and continue to get the full child allowance. To my mind though, the only thing that changes before and after the Romney proposal is that you get rid of TANF, which had high marginal tax rates, but those marginal tax rates didn’t really matter because TANF had work requirements and time limits. Plus it’s a fairly small program these days versus the rest of the safety net.
You get rid of TANF and you implement a child allowance, you still have the panoply of other safety net benefits each with their own marginal tax rates. That doesn’t change at all with a child allowance. On the income tax side, the credit side, I think there’s been some confusion, at least in the discussion on Twitter, around whether a lot of single-parent families who were working now are actually facing less of an incentive to work because of the consolidation that you do within the Earned Income Tax Credit. So I would just be interested to hear what you think are the most pro-work aspects of the proposal in particular for single mothers.
Samuel Hammond: I’d be happy to answer that. So as you might’ve seen on Twitter, there’s this whole literature on income effects that is now being hotly debated. If you take that literature, it suggests that what we’re talking about is in the realm of an hour lost of work per week, which is really the aggregation of some people staying away from the labor force a little bit longer after childbirth, some people moving a little bit more part-time, and overall that adds up to about an hour.
I am influenced by an event study done in Canada that looked at the before and after of the enactment of their child allowance in 2006. And it was a very analogous situation where they were consolidating a series of non-refundable tax benefits and rolling them into a flat universal child benefit. And what was observed there was a differential labor supply effect. So I think this is actually important, above and beyond what happens in aggregate. The differential effects, I think, are particularly important for your core concern, Scott, which is the labor-force participation of unmarried single moms in particular. And that was what was actually observed in Canadian single moms in particular. And what was actually observed in Canada was that, differentially, never-married mothers and also married mothers increased their work effort and the main group that reduced their work effort were married women of low education or women without a college degree with a young child at home. So that means that on the margin, the child allowance was effective at triaging resources to different kinds of families in a way that let them use those resources in a way that suited their particular circumstances.
And then the final piece of evidence in this vein comes from a more sophisticated way of modeling this, which is to build a lifecycle model of maternal labor supply across the entire life cycle, because often it’s the same problem with poverty statistics. We talk about this stuff in point in time estimates, and I think it’s important to look across the entire life cycle. What this one paper did is calibrate a model of the U.S. labor market to try to explain why the U.S. has such an unusually large maternal labor force participation gap. Our maternal labor force participation gap is 13%, so mothers have a 13-percentage-point lower labor-force participation than non-mothers. And many of the countries in Europe do not have that gap and so the question was why does the U.S. have this gap? The study calibrated the model, looked at it very carefully, modeled the entire, or most of, benefit system that we have and determined that relative to Denmark, which was kind of the benchmark case (Denmark has not just a no maternal labor force gap, it actually had a positive maternal labor force gap) was mostly explained by the U.S.’s dearth of child benefits. So my, I guess, provocative claim is that income effects are not the same for everybody. An income effect for you and me might be to work a little bit less, but at very low income, income effects can potentially even be positive because of these liquidity and supply constraints where you would go out and hand out resumes but you need to first have the money to hire a babysitter.
Scott Winship: How applicable do you think the Canadian study is to something like the Romney Child Allowance? It was $100—much less generous at the time, it’s more generous these days, but at the time of the study, $100 a month only for kids, zero to six, I think. The study was done less than three years out so of course, you could worry that some of the longer-term effects that folks like me are worried about don’t kick in after three years. How much do you worry that the Canadian population’s a little different? There are fewer younger moms in Canada versus the United States. There’s a whole layer of benefits in Canada that’s not here in the United States, beginning with a very generous paid-leave package. It sounds like you think that it can be applied to the U.S. without too much problem.
Samuel Hammond: I think a lot about questions of external validity. And that’s why I prefer looking to Canada or Australia with similar sorts of Anglo-style economies than to draw lots of lessons from the Nordics or even Japan or the East Asian economies. On a social-policy institutional level, especially in the labor-market level— because the labor market institutions are the things that would have the biggest influence. Like Canada doesn’t have sectoral bargaining. Canada doesn’t have 90% unionization penetration. And those things would definitely throw off comparisons with Northern European countries. But otherwise, is Canada an exact match with the United States? No, absolutely not. But you’d be surprised. We share a lot of cultural and ethnic heritage. And the big question in my mind is not whether to apply 100% credence to the Canadian results, but what is the amount of credence that we should give those results? Is it zero?
Because I don’t think it’s zero. The fact that Canada has universal health care, is that a big influence? I struggle to see how the differences that do exist explain a lot of the socioeconomic differences that we care about, except for a few other margins. So one of the big margins where the U.S. is exceptional relative to Canada is the incarceration rate. And Nick Eberstadt’s work on this has been great, discussing the fact that since 1980 we’ve incarcerated 20 million men in this country, predominantly Black, high-school educated, and that leads to big gender imbalances in the communities that they’re drawn from. Those gender imbalances we know lead to lower marriage rates, higher out of wedlock birth and a variety of other pathologies. And I would definitely be worried about applying a big means-tested welfare program and saying to that population, “You don’t have to work anymore.”
And I understand why that unique fact of American history and demographics colors the way we think about social policy. I know that a mentor of yours, Scott, Christopher Jenks, his work on the urban underclass was very influential to these debates. And the question I have back at you, I suppose, is to what extent are we still trapped in the ’90s? The number of teen moms has hit a record low in 2019. The AIDS epidemic is a thing of the past. There’s a variety of things that influenced the how and why and what that was debated in the ’90s that simply don’t exist today, or at least not to the same degree, and certainly not in my mind as a priority relative to other more contemporary issues, like the decline in working class marriage or the fertility collapse.
Oren Cass: Let’s use that as a jumping off point into Scott’s remarks. Scott, you can say totally unrelated things or smoothly segue from an answer to Sam’s question into other points you want to make. And if you haven’t addressed Sam’s question by the end of it, then we’ll pick it up from there.
Scott Winship: Just real quick on the ’90s, I think that is a really interesting theme. There is an interesting generational divide in the way that folks think about some of these things. When you said ’90s, I thought you were talking about the ’90s clip art that was the cover of your report. I’m just kidding, but that was the reaction that I got from the cover, which I liked a lot. Let me see if I can answer some of your questions in passing.
I want to start just by saying I think what the report has revealed is that a lot of people in the conservative world now are becoming convinced that declining fertility and declining marriage are such important problems that we need to subsidize parenthood. I reject that premise, but that’s not what gets me worked up about the Romney proposal. At the end of the day, I’m most concerned that this is a proposal that potentially could have long-term negative consequences on poverty and opportunity for people who have less resources. I’m not concerned about whether middle-class couples with $70,000 decide to become one breadwinner, one worker families. I’m really focused on the bottom. And there I think we have to acknowledge subsidizing parenthood also means subsidizing single parenthood, including families with no workers. And that has the potential to worsen entrenched poverty. I think that is one of the real lessons from the 1990s, where we had policy successes there that have been forgotten.
Single parenthood has soared over the years while poverty has actually declined quite a bit. Maybe we can talk about that later on. Arguably that emerges as a much more pressing problem. In 1970, 5% of kids were living with a single parent. Today, that’s true of a quarter of kids. In 1970, if you look at the bottom fifth of the education distribution among women, the share of births for single mothers in that group went from 20% in 1970 to about two-thirds today. Those trends have gotten a little bit better in the last 10 or 15 years, but they’re still super-elevated even as we’ve reduced poverty quite a bit.
I’ve gotten a lot of questions on Twitter about sort of what evidence I base my fears on. So before I get to that, the one thing I’m not going to do is I’m not going to say like, “The evidence is so clear cut in my favor, that we all ought to know that this proposal is a bad one.” If I could, I would, but the evidence isn’t that clear. And mostly what I want to say is there’s just a lot of ambiguity about the behavioral effects that are involved here. There are good studies on both sides of these questions. And I think only one side is really getting an airing.
I tend to draw my conclusions, first, from evidence from the state and federal welfare reforms of the ’90s. If welfare reform increased work among some single moms, what that means is that had welfare reform been repealed, there is a group of single moms who would’ve gone back to AFDC, the old welfare program, that they would have preferred doing that. The return to AFDC in that sort of hypothetical situation, is sort of like the introduction of a child allowance. It’s not as attractive as a child allowance, but even though it’s not as attractive, there still was a group that would have been induced to move back.
There’ve been a handful of studies on this that have tried to tease out the effects of welfare reform versus the Earned Income Tax Credit expansion and work requirements. The best one I’ve seen is a study by Hanming Fang and Michael Keane in 2004. They found that between 1993 and 2002, work participation increased by 11 points among single mothers and that welfare reform work requirements, time limits was specifically responsible for three points of that increase. Now that may not seem like a lot, but for reference, from 1977 to 1993 labor force participation among single moms rose 3%. You have to go back to 1977 from 1993 to get there. And it never rose that much again from 2002 onward. It also didn’t fall back to its 1996 levels.
Another set of important studies that I think are really relevant are these negative income tax experiments that were done mostly in the 1970s. And negative income tax essentially is this guaranteed benefit. It gets reduced steadily as people work more and it’s taxed away and it has this high tax rate, but it was still lower than the tax rates if you went to work on AFDC, so it was a work incentive. And people hoped that that more people would work as a result of that. What happened instead, single mothers reduced hours by roughly 15%. It would probably be larger had it been a permanent program because all the participants in the experiment knew this thing was going away after three years or after five years. So you can imagine that if it had been a long-term program, the effect might’ve been even bigger. There was some debate about whether those numbers were overstated, but they were compared to unemployment records after and single moms were reporting their hours pretty accurately.
And then the third paper I would just cite is Hilary Hoynes and Diane Schanzenbach in 2012 wrote a paper looking at the impact on work among single moms when the food stamp program was rolled out across the country in the 1960s and the early 1970s. They found that among single mothers, the rollout of food stamps reduced hours of work by 500 hours a year. So that’s like 20 weeks of full-time work. They also found the employment rate fell by 25 percentage points.
So these are three examples. They’re not the final word by any stretch, but to sort of cite the evidence from National Academy of Sciences report that found that it was going to affect work by a week or whatever it was, or a few hours, that’s one study among many. And I think we need to embrace the ambiguity of the evidence here. And so what do we do when we’ve got ambiguous evidence? A lot depends on how we think the current policy regime is doing reducing poverty. And there I think it’s doing really well. And it depends on what the alternatives are to doing something like a child allowance that could have these big negative consequences. And I think there, we’ve got a bunch of other ideas that wouldn’t risk some of those unintended consequences. So I’ll just stop there.
Oren Cass: Perfect, thanks Scott. Sam, I’ll give you a chance to lob one more question Scott’s way, and then we will open it up to the crowd.
Samuel Hammond: A quick rebuttal: So yeah, the negative income tax studies, if I have my history right, the ugly results that came from those were in part responsible for killing Nixon’s family assistance plan. And I really hope that they don’t kill this 40 years later because they’re really not that germane. We can debate whether a universal child allowance enacted in Canada has external validity to the U.S., but the past is also a foreign country. And urban poverty in the 1970s is not the same as looking at the entire United States, nor is a negative income tax that pulls you up to 100% of the poverty line and then phases out at a rate of 50 to 80% comparable to a universal flat allowance that is much, much less than even half the poverty line. The poverty line today for a family of three is about $20,000. So in that NIT program, in real terms, there would have been families being given $20,000 a year, and losing 80% of it with every dollar of earnings. I am fully prepared to accept that that will definitely discourage work, both through income and substitution effects.
On the NAS point, the NAS didn’t really do any novel modeling for their report. They instead did a comprehensive literature review on income effects and then just took the consensus estimate and applied it mechanically to the U.S. population. So when you say that they just had one number, in fact, their number was basically a meta-analysis of what the consensus estimate would be.
One question I do have, though, is you say that promoting childbirth, or parenthood, per se, is not a goal of yours. This does bring in one tension that exists for social conservatives, and pro-life conservatives in particular, which is: I cite a survey in my paper from Guttmacher that shows 28% of women who have an abortion say financial insecurity is a key reason. And for those women who are on the fence, is the trade-off for keeping that child but having that woman, by nature, have an unplanned birth and probably not have a father in the household and so on and so forth, that will produce, as we know, worse outcomes for that child. But I personally think not existing is an even worse outcome. So I just would like you to address that tension.
Scott Winship: The tension about affordability and its impact on the abortion rates? Is that the question?
Samuel Hammond: Yeah. Setting aside “what are the aggregate impacts of this?” We do know, in a narrow set of cases, for this to have pro-life effects, there will be women on the fence who decide to have a child as a never married mom. How do you deal with that tension?
Scott Winship: I may be mushier than a lot of folks here on abortion. But the other thing I guess I would say is if we’re trying to figure out how to rank social problems these days, abortion rates today are actually lower than they were when the Roe v. Wade decision was handed down, which is pretty remarkable. So by historical standards, the abortion story is a great success, I think, for the pro-life movement. Going back to having to value statistical lives and make hard trade-offs, there is no getting around some of these trade offs. And I personally am more focused on poverty and opportunity for the kids who are born. Certainly a policy that produced fewer abortions is to be preferred, but the story on abortion trends is just way more positive than the story on single parenthood trends, for instance.
Oren Cass: I could just let you guys go back and forth for the whole time, but then everyone else who joined would get mad at me. So we’ll open it up now. The floor is now open for comments, questions, angry asides. Really, we will take it all. Scott, you remembered the other thing you wanted to say?
Scott Winship: Just on the point about how applicable the NIT experiments are. So the point isn’t really what the NIT’s phase out is versus the fact that the child allowance doesn’t have a phase out. What you need to do is you need to compare—in the one case, the NIT experiments, you had the phase out for the NIT versus the alternative, which was the phase out for AFDC and anything else they were getting. That really is comparable to today’s situation, where if you have the Romney proposal, you would still have the phase out of the existing social safety net, the panoply of programs that have those phase outs, those don’t go away unless Senator Romney is going to abolish SNAP, versus what all the phase out was before the child allowance was introduced. So I think that Matt Bruenig has done nobody any favors by making silly charts that have kind of obscured that these really are worth comparing.
Question: I’ve got a question for both Scott and Sam. It’s a normative question of, should we include, in a child allowance payment, the work and other social requirements that are required by TANF, SNAP, and other federal welfare programs? And why or why not?
Scott Winship: I am a big fan of work requirements. I certainly wouldn’t want to abolish TANF and replace it with a child allowance that had work requirements. But what I would do is not have a child allowance. I would boost benefits within the existing safety net, make them more generous, but I would pair it with more work requirements in these existing programs like SNAP and housing subsidies. And then, you’ve reduced poverty by lifting some people who don’t work and who stay on these programs, who have profound challenges themselves, who are new moms, that we don’t want to necessarily push into the workforce. And at the same time, we can promote work through work requirements, through an expanded EITC. I think that’s a great example of a way where there aren’t nearly as many downsides there as you have with the potential of folks moving with a child allowance from work, because it made sense to do before, but under whatever calculation they have now, it no longer makes sense to do.
It’s surprising to me that more people aren’t thinking about that as a serious effect of some of the stuff that Lyman Stone put up this morning, for instance, on marriage or fertility. Some people are going to choose to be in a married family under the current policy. But with a child allowance, there is a group, might be small, but might not, who are going to choose to become single parents instead. And that’s just a fundamental issue, I think, with a child allowance, with the magnitude of the effects being, obviously, very much up in the air.
Samuel Hammond: In the abstract, I do not think you need work requirements with a child allowance for the very reason that they’re flattened and not exorbitant. It’s difficult to live off of $250 a month. But on the normative side, because that’s how you framed the question, I do absolutely agree that reciprocation is an important concept for benefits of all kinds. This notion of contribution and having some level of putting in what you’re getting out. On the technical side, I don’t think they’re necessary, although I understand why there is an intuition to have some level of reciprocation, some kind of work activation requirement.
If you want to do that in a way that modifies the Romney proposal, I think that’s actually quite feasible. Particularly because it would be done through Social Security. Many Social Security benefits are tied to your work history and having sufficient work history, a given number of hours out of the previous year. If you attached receipts of the child allowance to having some minimum number of hours worked in the last 24 months, and you could divide those hours across either, either spouse, I think that could work. Like I said, I don’t personally think it’s necessary, but I think that would be a reasonable compromise and also something that would instill the sense that these benefits are, on some level, contributory.
Why don’t I think we need work requirements? Partly that’s because there are really two ways you can go about removing work disincentives from a program. One is to take a highly means-tested program and attach timelines and work requirements. And the other canonical way is to just extend benefits up the income scale. And we’re kind of taking that latter approach. One of the reasons why I think AFDC led to so much dependency is not just the cash assistance and not just the phase out, but also the extent to which welfare programs can often be a lobster trap, in the sense that there’s something that you can enter quite easily, but much more difficult to get out of. And Scott might have a familiarity with this in the context of SSDI, to the extent that the SSDI serves as an unemployment insurance program of last resort. That’s not good, because these people might be able-bodied, but because of the dearth of other sources of income security, they turn to disability insurance instead.
I think there’s good evidence that states that have more generous unemployment insurance programs also divert people from turning to those alternatives. And one hope would be to have the universal child allowance be a way of diverting parents who have a cashflow problem from being treated, being funneled into a system that treats them as if they are poor, in the richer sense of the term, and in doing so, again, puts them through that lobster trap, that once you enter, it’s more difficult to leave. Because when you get into TANF, if you’re not only get cash benefits, but you might also get expedited access to SNAP, to housing assistance, to CCDF, to a variety of other programs that have even steeper benefit cliffs. And at that point, you’ve become ensconced in an entire bureaucracy that’s difficult to escape.
Question: I have a poorly formed question for both of you on the point you just raised about what you see as the value of a proposal like this, say, the Romney proposal, of building a sense of commonality, for lack of a better word, among the public? So the commonality is that you are a parent and therefore merit societal support and encouragement, versus you fall above or below some bureaucratically determined level of loser-dom. I don’t have a sense of what the literature says or doesn’t say about the benefits or not of that aspect of this discussion. I’d be curious to hear your thoughts.
Scott Winship: It’s a good question. I think it probably is more inclusive, as a policy, than paternalism, for sure. I don’t think anybody really loves paternalism, even the paternalists. But this is another one of those ’90s differences, I think, where the less paternalistic you get, I think, unfortunately, it opens up more possibilities, that a lot of people are going to not make optimal decisions. I know that’s heresy, probably, for the more economics-minded folks who have been debating this, who are talking in terms of models. But there’s no value judgment there, right? I’ll plug a fantastic program called Ready4K that basically sends text messages to the parents of incoming kindergartners in San Francisco. And it says things like, when you give your kid a bath try to point to all the things in the tub that start with H. Those parents are not doing anything other than signing up for the program because they want to be better parents and this is more useful information for them to do that. So I don’t think it’s any sort of value judgment to say that sometimes we do need to help folks make better decisions. But it is kind of inherently less solidarity-nurturing for sure than something like a child allowance.
Samuel Hammond: The way I think of this might be a little too simplistic, but just as a mental model, I kind of think of there being two broad paradigms. There’s the FDR New Deal: we’re going to construct a set of broad-based social insurance programs that will form the foundation for a robust middle class. And then there’s the Great Society Johnson War on Poverty paradigm, which is about addressing poverty per se, and very focused on the distributional tables and therefore very focused on means testing and done so in a way that’s kind of resigned to the existence of this very bifurcated society. And one of the ulterior motivations for doing something like the Romney Plan in my view is to begin to unwind some of the mistakes we made in the Great Society Era and really that entire paradigm.
That paradigm is both one that sets up sort of parallel sets of institutions for different folks to become acculturated into, and also one that leads to professionalized bureaucracies. So we have a lot of discussion these days on the right about the professional managerial class and all this stuff. Michael Lind will tell you that the Yale law professor and the social worker are in the same social class, well, in some sense they are, and if you really want to go to war with that paradigm, you have to find substitutes because we’ve been trying to clean up these programs for decades, as Scott noted, and the welfare state has hasn’t shrunk very tangibly. What is it about the welfare state that we don’t like? Is it Social Security or Medicare? Because I hear that we want to get our government hands off those things. It’s really the very paternalistic, technocratic, holier-than-thou regime that we dislike, not government as a percent of GDP.
Oren Cass: I want to throw in my question and then we’ll wrap up after this one. Something I’m struck by, in contrasting the focus on all the econometric studies here with a lot of the more fundamental and normative arguments that you make, is that I wonder how much this question of income effect and work effort actually determines your point of view on the policy. So at the risk of you just saying, “I refuse to answer hypotheticals,” I will pose a hypothetical to you, which is: Scott, for you, stipulating that it in fact was clear there were no negative income effects here, like there’s actually a great economic literature that you thought addressed the situation to your satisfaction, would that change your view of the child allowance or are there, and I think you’ve spoken to this some, are there other things that would lead you to still say, no, I’m still opposed? And conversely, Sam: if there were compelling evidence that you found persuasive that there is a strong income effect here, would that change your view or would your perspective still be, that’s a bullet I’m willing to take because I still think the benefits outweigh the costs?
Scott Winship: I guess the first thing I’d say is, without an income effect, there still could potentially be bad substitution effects and I think I’m still a little bit confused about how the change to the EITC would actually affect work. I’m forgetting the person who has been railing on about this, but essentially if you’ve increased the cost of work because of what you’ve done to the EITC, that can also cause an employment effect as well. If we stipulate there aren’t any employment effects, what would I think? Yeah, I think I would be more supportive, although I don’t love the idea of people who make six figures getting $12,000 from the government for their two kids. I think we just live in a world of limited resources, our deficits are really out of control. Everybody thinks it’s not a problem now because interest rates are still low, but it’ll become a problem at some point.
Samuel Hammond: It’s hard to say without putting numbers on it. My view is that there is this genuine market failure that capitalist economies don’t pay a parenting wage, and on some level poverty at first blush is sort of this arithmetic of having dependents with a fixed income. That being said, regardless of what negative employment effects there are—and I think this about employment policy more broadly—if we really care about maximizing labor-force participation, and I’m not really sure that even should be a goal, but if that is the goal, the way to do that is through active labor market policies that subsidize people into work, that provide things like free or reduced-price childcare. That’s one reason why you look abroad to other countries that have far and away more generous programs than the U.S. for the low end and they often have significantly higher labor-force participation.
It’s not because they didn’t have $600 UI, it’s because they had other programs that push people into work. So on a counterfactual level, I already sort of accept your challenge, Oren, because I’m very much opposed to this massive industrial policy for childcare that’s coming down the pipeline in part because again, I think it is sort of empowering this professional managerial infrastructure. But if all you care about is single moms working, then we’re in for a treat because there’s going to be an awful lot of subsidies to get those parents into work.
Oren Cass: We have exactly two minutes left for each of your summations. I’m trying to remember who it would be fair to say goes first, but it would probably be fairly arbitrary. So one of you jump in and wrap up your thoughts or quietly sit back and make the other go first.
Scott Winship: I guess I’ll go ahead. I think there’s been this weird quality of the debate so far since the proposal was released, which was either you support Senator Romney’s idea or you don’t think it’s important to reduce poverty among kids or care about kids at all. And I just think we need to be cognizant of all the ambiguity around what could happen. We need to not mess up an anti-poverty policy that’s worked pretty well for the last 25 years. I think we also need to acknowledge that we are doing not so badly. The National Academy of Sciences report said that in 2013, 12-and-a-half percent of kids were poor in the United States. That was lower than the 13.5% in the UK, a little bit higher than the 10.3% in Canada.
Poverty was lower in Australia and Ireland although the share of kids living under 150% of the poverty line is lower in the United States than it is in Ireland. Poverty among kids of single moms has declined pretty steadily since the early 1980s. And what’s more, it’s been a triumph of work. There was a Congressional Research Service study that found that if you calculate the poverty rate for single mothers in 2013, and you only include unemployment insurance as the only transfer that you count as income, poverty was lower for single moms in 2013 than it was in 1996 if you count every cash transfer program then as income. So you don’t even need to get into the SNAP expansions or the EITC or any of that, it’s been a real success that I think is unacknowledged. And that the ’90s that the Gen X-ers need to remember and start talking about it more.
Samuel Hammond: For my concluding thoughts, anyone who is interested in this Romney proposal, please reach out. It’s not the final iteration by any means, there’s going to be future chances to change the specifics. But also I think over the next year, this Biden credit is going to pass one way or the other. And as Scott mentioned, it’s only for one year and it’s going to be setting up a very ugly annual battle that’s going to put Republicans on the side of voting against money for families. And so we have a year both to figure out the alternative and also to think through once we’ve crossed this Rubicon and are giving fully refundable credits to low-income families, if we see in a year’s time that the sky didn’t fall, and we didn’t have a new crisis, illegitimacy and just dis-employment, I think we have to pause and start to reflect on our prior assumptions and try and update our priors a little bit that maybe something has changed or maybe things that we thought were true, were true for different reasons than we realized and update our beliefs accordingly. So with that, I just want to say, thank you for hosting this to Oren, this was a lot of fun, and to Scott for being such a good sport with the tsunami of liberal Twitter blue check mark people coming at you.
Scott Winship: It’s been a week, but yeah thanks for the debate, Sam, and thanks for hosting, Oren.
Oren Cass: Thank you guys so much, we really appreciate you making the time to join the group and thank you to everyone else for joining. Hopefully it’s been enlightening and I imagine the debate continues from here.See more from this series
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