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How to Cut Poverty Now

September 25, 2018
In The News

Low-income workers haven’t received anything close to their fair economic share over the last few decades. The American economy has almost tripled in size since 1980, yet the average inflation-adjusted wage for low-income workers has risen only about 10 percent.

The most effective policy for fighting this trend — and making sure working people aren’t mired in poverty — has been the Earned Income Tax Credit. Established during the Ford administration and later expanded by both parties, the E.I.T.C. pays a stipend to low-income workers. It avoids the problematic incentives of welfare because it encourages people to work.

The E.I.T.C. hasn’t come close to making up for soaring pretax inequality, but it has made a meaningful difference. Unfortunately, though, the program is quite narrow: Workers who don’t have dependent children under the age of 18 qualify for only a small fraction of the tax credit.

That doesn’t make sense. People should not languish in poverty because they aren’t raising children or because their children are grown. In recent years, the gaps in the E.I.T.C. have started to get more attention, with everyone from Barack Obama to Paul Ryan calling for them to be fixed. Several member of Congress have specific proposals, including an ambitious one from Representative Ro Khanna and Senator Sherrod Brown.

Today, MDRC — a highly regarded research group — is releasing a new study on an E.I.T.C. experiment in which New York City increased the benefit for workers without dependent children. And it offers yet more reason to favor an expansion.

New York’s program, called Paycheck Plus, not only lifted the incomes of the low-wage workers but also increased employment, by drawing people into the work force. And the effects were largest for the most vulnerable demographic groups, including the previously incarcerated, Lawrence Katz, a Harvard economist and one of the researchers, told me.

Katz points out that a full national expansion would probably have even larger effects, because more people would come to understand its benefits — and enter the labor force. A full expansion would affect something on the order of 15 million workers, other studies suggest, and would likely cost in the range of $30 billion to $40 billion a year — a fraction of what the Trump tax cuts cost.

“If you could do one thing to really go after poverty, what would it be?” Gordon Berlin, MDRC’s president, said to me yesterday. “To me, it would be to make work pay at the low end again.”

I agree. I realize that the Trump administration shows no interest in policies to reduce poverty. It’s instead expending a lot of effort to make the rich richer. But this is precisely the time for other experts to be studying and designing the policies that can make a difference in the long term. The Trump administration won’t be here forever.

Rod Rosenstein’s fate. The apparent importance of Rod Rosenstein — the deputy attorney general clinging to his job — shows how much President Trump has eroded the checks and balances meant to constrain the presidency. “The president’s blatant hostility to the separation of powers has created a situation in which the nation’s trust in the rule of law, already seriously damaged, depends on the job of one single individual,” writes the political scientist Yascha Mounk in Slate

It doesn’t have to be that way. “There’s plenty of legislation that would protect Mueller’s investigation sitting in Congress,” tweeted Vox’s Ezra Klein. “This is only a crisis for the rule of law if Mitch McConnell and Paul Ryan abdicate their responsibilities and let it become one.”

But as The Atlantic’s Natasha Bertrand notes, McConnell has already “rejected attempts to protect the Russia investigation and restrict Trump’s ability to fire Mueller; they largely dismissed a bipartisan bill, proposed by the Senate Judiciary Committee, that would have prevented Trump from firing Rosenstein for any reason other than misconduct or ‘good cause.’”

“One of the signal features of the Trump presidency has been the abject surrender of the Republican Party, especially in Congress, to all of Trump’s demands,” writes The New Yorker’s Jeffrey Toobin. “Mueller’s fate has never looked more precarious than it does today, and he would be foolish to think that the Republicans in Congress would do anything to protect him.”

If Republicans keep control of Congress, there is good reason to fear that the Russia investigation will be over.