Mathew Desmond in his new book Poverty By America does not stake out specific policy recommendations but lists numerous ideas for actions, not to reduce but to eliminate poverty. I have taken a shot at identifying some actions myself though I am not under any illusion that any of them will happen in the short time left on the planet Earth allotted to people my age. In fact, at this moment while there are signs of hope that the equity and social justice movement may be reawakening, at the same time Republicans in Congress are proposing massive cuts to the social safety net. The budget that Kevin McCarthy says the Republicans will not budge one inch on–even if it means defaulting on the national debt, causing massive disruptions to financial markets–is draconian. According to an op ed essay on April 24 by E.J. Dionne in the Washington Post, if it became law, the Republican budget would result in 30 million fewer veteran outpatient visits, layoffs of 108,000 public school teachers in schools serving the poor, 200,000 fewer kids in Head Start, 180,000 children losing access to childcare, and 1.7 million people losing access to supplemental food assistance (SNAP), and this is just the beginning. The Forces of Light and the Forces of Darkness are indeed engaged in a Fight to the Finish. The stakes could not be higher.
Here is my take on what needs to happen:
- Go first for the low hanging fruit and patch the social safety net.
Desmond recommends this and it makes sense.
Contrary to what some may think, we have a broad safety net in this country. We have Social Security, Medicaid, Medicare, Supplemental Security Income (SSI), food stamps (SNAP), public housing, Section 8 housing, Housing Choice Vouchers, Low Income Housing Tax Credits, temporary assistance to needy families (TANF), nutritional aid for women, infants, and children (WIC), the Earned Income Tax Credit, subsidies under the Affordable Care Act, and unemployment compensation.
Republicans, of course, complain that the safety net is too broad and too expensive.The real problem, however, is that too few who are eligible take advantage of these programs. According to the US Census, in 2020, except for Medicaid (62%) and SNAP (49%), fewer than a fourth of those in poverty—the poorest of the poor—used these safety net programs. There are several reasons for this, the most important being that many who are eligible are not aware that these programs exist; or if they are aware, they find the programs confusing and very hard to access due to the paperwork and the documentation requirements. Desmond states that in 2020, there was $142 billion of unused aid in these programs.
Most programs are administered by states, which have different requirements and do not allow the subsidies to continue if a person or family moves to another state. Blue states generally have stronger safety net programs than red states. The good news is that the programs are already in place, can be reformed, expanded, and improved; and if “marketed” aggressively, they can reach many more people. With a career that was in the affordable housing world, I will put in a special plea to expand the Housing Choice Voucher program, to provide the funding for rehabbing and upgrading public housing, to expand the Low Income Housing Tax Credit program, and to provide funding for gap financing in order expand the supply of mixed income housing.
- Increase the minimum wage to a living wage, indexed annually for inflation.
It is a disgrace that so many full time jobs in the United States do not pay workers enough for them to escape poverty. The current federal minimum wage is $7.25/hour. That translates to an annual income of $14,700. Try living on that for a year. Fortunately, most states also have a minimum wage, which for most states is considerably higher than the federal minimum wage, typically in the $10-$12/hour range. It is still not enough for a family with only one minimum wage earner to make ends meet in most areas of the country. Many states now also post a “living wage,” which in my view should be the minimum wage, but sadly it is not. The top states in 2023 are these:
- Washington: $15.74. Living wage: $19.58.
- California: $15.50. Living wage: $21.24.
- Massachusetts: $15.00. Living wage: $21.35.
- New York: $14.20. Living wage: $21.46.
- New Jersey: $14.13. Living wage: $18.71.
In DC the minimum wage is now $16.10 and indexed for inflation, the highest in the country. In Maryland it is $13.25 and Virginia $12.00. Federal legislation should require all states to pay living wages, not minimum wages. The living wage should also be adjusted for family size, and the Earned Income Tax Credit should be used to bring all families up to the true living wage target when taking into account family size. Note that living wages should also be adjusted depending on the state and location. I acknowledge this could be a bit tricky and that employers will push back but believe that until this happens, we will not be able to successfully address the poverty question.
- Provide and subsidize childcare support so that both parents in a family can hold full time jobs.
Even with a living wage in many areas of the country it will be difficult to get by if there is only one wage earner, especially for large families. Subsidies should be available for childcare so that both parents can work.
- Pass laws that limit lenders from taking advantage of poor people.
Banks and other lenders charge extra fees for accounts that do not keep minimum balances. Credit card companies charge exorbitant interest to people who are not able to pay the full amount and penalize late payers. Payday lenders and similar informal lenders charge excessive fees and impose huge penalties for missing a payment. These practices need to be reined in.
- Strengthen labor unions.
Unions are what kept working people from falling behind during the first half of the Twentieth Century but have been hurt by globalism with factories moving overseas, right- to-work laws in red states, and technology which eliminates jobs. There are signs that Unions may be starting to make a comeback though they will never be quite the same. The focus now is to organize workers and focus on industry sectors not on single companies.
These five actions are a start. You may be able to think of other things, and I invite you to post ideas on the blog. Of course, there will be some who will say that these ideas may sound great but ask who is going to pay for all this. Where will the dollars come from? Desmond does a good job in identifying where the money could come from and how this should not significantly upset the economy. How much additional revenue that needs to be raised depends on how many initiatives to strengthen the safety net happen. It could total in the hundreds of billions of dollars annually. A lot of the cost would be borne by employers since they will be paying employees more, but since all businesses and employers in a market area will be paying the same living wage, few businesses should be disadvantaged. Perhaps some goods and services will cost more, but consumers should have higher incomes permitting them to pay more. Desmond suggested an annual price tag of just under $200 billion annually, chump change in a federal budget of almost $4 trillion, but still money that must be raised. This provides an opportunity to reduce the huge gap between the income and wealth of the top 20% and the bottom 20%. The big hitters are the ones who should have to pay.
Closing tax loopholes, nailing high income tax cheats, and increasing the marginal rate from 37% to 45-50% (where it was in the 1970s) all should be considered possibilities. Lowering the estate limit from $12 million to $8 million would also add revenues. Capping the mortgage interest deduction rate at a reduced home value would also help. No large corporations should get off scot free from having to pay their fair share. These are all possibilities which would not impact most taxpayers. Only the top 20% should be affected with the top 1% targeted especially. Of course, more work needs to be done to figure this out, but Desmond makes the point that money is not the main issue. The main issue is having the will to do it. Our future depends on it.
Perhaps the most important part of the book is Desmond’s call to action for people who care about the income disparities, who are concerned about the poor, and who want to become “poverty abolitionists.” Maybe this will catch on. I am ready to sign up.