It’s been 50 years since the War on Poverty was launched and after all that time and trillions of dollars spent about one of every seven people in the country is still living below the poverty line. Everyone on the right and the left seems to agree: in the war on poverty, poverty is clearly winning.
So what should be done?
You may have noticed that Paul Ryan and the Republican presidential candidates were guests of the Jack Kemp Center in North Carolina the other day, trotting out their ideas on how to combat poverty.
But what about the Democrats? Unfortunately, there is no Democratic Jack Kemp. There is no national Democrat who is at all visible who appears to give a hoot about anyone who is poor. The last exception was John Edwards and he is long gone. As for Hillary Clinton and Bernie Sanders and various also-rans, the word “poverty” doesn’t seem to be in their vocabulary. All they seem to care about is pandering to the middle class and demonizing the rich. Not only do they appear to have no ideas on what to do about poverty, they are not talking about the problem, they are not thinking about the problem and they appear not to even care about the problem.
That’s too bad. Because the public policies that are most harmful to those at the bottom of the income ladder are policies that Democrats everywhere seem to favor. Here are seven of them.
Regressive taxes. In case you haven’t noticed, the most popular sources of new revenue these days for Democratic mayors, governors and state legislators are not taxes on the rich. They’re taxes on the poor.
Take the lottery. Americans spent $70.15 billion on lottery tickets in 2014 -- about $630 for every household in the country. Lotteries in 11 states bring in more revenue than the corporate income tax.
Yet who plays the lottery? Judd Legum and Bryce Covert write:
[I]t’s those who can least afford to lose any money who are most likely to be buying tickets. Low-income people account for the majority of lottery sales, while sales are highest in the poorest areas. One study found that the poorest third of households buy more than half of the tickets sold in any given week.
Nationwide, people who make less than $10,000 spend on average $597 on lottery tickets — about 6 percent of their income. African Americans spend five times more on lottery tickets than white people. People in very wealthy neighborhoods rarely touch the lottery.
Excise taxes on such items as tobacco, alcohol and gasoline are also regressive, with cigarette taxes being the most regressive by far. (See Taxing the Poor.)
Failing Schools. As I pointed out in a previous Town Hall post, letting poor children escape from failing schools is the most divisive issue in American politics. The teachers unions like things just as they are and public sector unions are the base of the Democratic Party. When it comes to allowing poor children to escape bad schools and go to better ones Bernie Sanders is virtually silent. He opposes public money going to private schools and has few encouraging things to say about public school choice. Yet the state he represents (Vermont) has the oldest and most extensive system of school choice found anywhere in the country.
There are some very wealthy Democrats who support reform but very few Democratic candidates. Although Hillary Clinton has supported student testing and charter schools in the past, her recent cozying up to the teachers unions is making wealthy school reform Democrats close their checkbooks to her presidential campaign.
Unaffordable Housing. In the American public school system, the price of a better school is almost always a more expensive house. But in places where liberal Democrats dominate city politics, housing prices are the highest in the nation. (See How Liberals Live.) And the unavailability of affordable housing doesn’t just affect children’s educational opportunities. It is a major cause of homelessness.
Closing Off Job Opportunities. Amazingly, 29 percent of all the workers in the country are laboring in a job that requires a government license in order for them to do whatever they are doing. Licensing is required for such diverse activities as interior design, barbering, massage therapy and much more. Why is that? There is overwhelming evidence that these regulations were not requested by the consumers who they are supposed to protect, but by the members of the occupations themselves, who want to restrict entry into their professions. As a report from the Institute for Justice concludes:
On average, these licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees. One third of the licenses take more than a year to earn. At least one exam is required for 79 of the occupations.
Barriers like these make it harder for people to find jobs and build new businesses that create jobs, particularly minorities, those of lesser means and those with less education.
Closing Off Consumption Opportunities. Just as low-income individuals in their role as producers are increasing regulated out of income earning opportunities, in their role as consumers they are increasingly regulated out of the market for essential services. In addition to education and housing, they have been regulated out of the market for medical care, transportation and even police protection. For all these essential services, the wealthy turn to the private marketplace. They even employ police officers as off-duty, private guards for their gated communities. The poor are left with public housing, public schools, public transportation, government-provided health care, etc. (See this NCPA Task Force Report.)
The well-off get all the benefits of capitalism. The poor are left with socialism.
Take transportation. Because of less access to private automobiles, low-income families use taxi cabs more than the middle class. Yet, even with Uber making radical inroads, this industry remains highly regulated. In almost every city in the country, for example, it is illegal for a van owner to pick up people in a low-income community and take them to a job site for a rate that is negotiated on the spot.
Pricing the Least Skilled Workers Completely Out Of the Labor Market. No one can climb up the income ladder unless they manage to first get on one of the rungs. Minority teenagers from low-income households won’t be able to do that if we forbid them the opportunity to work unless they can produce $15 worth of goods and services in an hour.
President Obama says “there is no solid evidence that a higher minimum wage costs jobs.” In fact there is a lot of evidence. The latest studies are reviewed in the Wall Street Journal by David Neumark, who writes:
Economists have written scores of papers on the topic dating back 100 years, and the vast majority of these studies point to job losses for the least-skilled. They are based on fundamental economic reasoning—that when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired.
Penalizing Work and Subsidizing Not Working. Take a look at this graph. It shows two very different labor market responses to the Great Recession. In Britain, the labor force participation rate for prime age workers is now greater than it was before the recession began, whereas the US rate is far short of full recovery. What explains the difference? A new study by University of Chicago economist Casey Mulligan concludes that the Americans reduced the incentives to work, whereas the British did the opposite.
As Robert Doar explains in the Wall Street Journal, under the Obama administration:
Unemployment insurance … was made more generous in multiple ways. Eligibility rules for food stamps were reduced, waivers from work requirements were granted, and the monthly benefit amount was increased.
By contrast, the Conservative Party in Britain increased the reward for work by cutting taxes on income and consumption. It reformed the disability system to more accurately and more frequently assess the beneficiary’s ability to work. It reformed the unemployment system to help the unemployed find work faster, stay in their jobs longer and earn more.