As part of its full-court press to require low-income people who receive nutritional, health or housing support to work, the Trump administration's Council of Economic Advisers has released a new study touting the benefits of such requirements.
Unfortunately, the CEA's study founders on logical inconsistencies, misuse of data and strong assertions that, were this analysis to guide policy, would lead to more, not less poverty and material insecurity for the most economically vulnerable Americans. In fact, when you consider, in tandem with this new report, the Trump administration's terribly regressive tax cut, you cannot escape the conclusion that for these analysts, giving money to the rich is smart policy, but providing nutrition, health care and housing to the poor is reckless.
Trump's CEA arrives at this conclusion through the following illogic: Our anti-poverty programs are highly successful at reducing hardship. Therefore, we must make it harder for people to access them. Success, in terms of expanding health, nutritional and housing coverage gets redefined as failure.
Here is how they walk this crooked analytic path. Instead of the old, false conservative canard that we have lost the War on Poverty, the CEA declares victory. They argue, incorrectly, that properly measured poverty rates are in single digits (far below more reliable measures), and credit anti-poverty programs for this success. But while material hardship is way down, they claim, so is "self-sufficiency."
It is true low-income adults often work less than higher-income ones, but their reduced hours of work are often a function of instability in the low-wage labor market, their weak access to work supports such as affordable child care and steep barriers to work such as discrimination and criminal records.
Contrary to CEA’s claims, health, housing and food support do not discourage work — they complement it. They provide low-income people a more secure base from which they can go into the job market, and, as stressed by poverty expert Heather Hahn: “Medicaid and SNAP help workers maintain health and well-being — for themselves and their children — when the jobs they can find don’t include health insurance and related benefits or pay enough to support themselves and their families.”
CEA's claim of diminished "self-sufficiency," or work effort, is based on a misreading of the data. They look at the number of able-bodied workers in a month (December 2013) wherein they are receiving benefits. But poor people often cycle on and off such benefits as a function of their employment. The reason SNAP receipt, for example, goes up in recessions is because low-income people get SNAP when they lose work.
This means unless you factor such cycling into your analysis, you are sure to find fewer poor people working when they are getting SNAP. In other words, what CEA's picking up here is not anti-poverty programs discouraging work as much as the instability of the low-wage job market, and the poor's appropriate use of the safety net when they need it.
There is a simple test for this bias: Track poor people over time and see whether those who do not work when they receive food support do work at other times, implying they are using SNAP to get through a period of unemployment or some other life upheaval that too frequently besets the poor.
That is precisely what this study finds. Half of SNAP recipients worked in the month they got SNAP, but three-quarters worked in the year before or after that month.
The next big flaw in the CEA study is their use of a biased-down "consumption-based" measure of poverty that claims just 3 percent of Americans were poor in 2016. The flaws in this measure are laid bare in this study by H. Luke Shaefer and Joshua Rivera that finds a significant lack of correlation between CEA's measure and actual trends in food, housing and medical insecurity. Any consumption-based measure of poverty that fails to adequately capture material insecurity among the poor must be wrong. Another sign the CEA measure is off is that fact that shows considerably higher poverty in the strong economy of 2000 than in the deep recession of 2009.
To their credit, both CEA and the academic authors of the consumption-based rate recognize its levels (e.g., 3 percent in 2016) are "arbitrary." Yet CEA still uses that finding to build its case. A much more reliable poverty measure published by the Census Bureau finds a 2016 poverty rate of 14 percent, which amounts to about 45 million poor people, almost five times the number claimed by CEA.
Next, the report argues that certain income-tested poverty programs discourage work, because their benefits fade as labor income rises. But the analysis is misleading, as more careful research of the tax incentives facing the poor finds that it if you are able-bodied and poor, it “... pays to work. In the overwhelming majority of cases ... adults in poverty are significantly better off if they get a job, work more hours, or receive a wage hike.” One reason for this outcome is that as the EITC, a wage subsidy tied to work, has grown over time, our anti-poverty programs have become more, not less, conditioned on work (though note the difference between work conditioning versus requiring; the latter invokes sanctions that risk making the poor worse off).
Even by their own perspective, CEA is off base here. If they are so convinced the current system discourages work, why not fix the flawed incentives? They argue to do so would be too expensive (because it would allow the poor to keep their benefits even as they earn more). But when you consider the $2 trillion, deficit-financed tax cut, one must conclude "too expensive" is an opportunistic excuse for Trump officials. No expense is spared for the donor base, but when it comes to the poor, budget constraints bind.
Work requirements are not necessary and, contrary to CEA’s case, the evidence suggests they will do more harm than good. Though CEA cites earlier government efforts in this space as grounds for optimism, they are looking through rose-colored glasses. Hahn finds these efforts have devolved into a “... counterproductive, highly complex ‘bean counting’ exercise that blocks, rather than enhances, the pursuit of self-sufficiency.”
The simple fact of this case is you cannot raise a family on noncash benefits. Poor people know this, and while they avail themselves, as they should, of critical health, nutritional and housing supports, the vast majority do their best to also bring home paychecks. They do so against high odds, unstable, unremunerative work, and lately, a politics that demonizes them while lavishing endless resources on the wealthy.
I would thus urge my economic colleagues in the White House to stop tweaking the data to elevate the punitive, phony case for work requirements and think about ways to help the poor do what they are trying to do already -- which, for the record, is the same thing we are all trying to do: create a better life for ourselves and our children.
| Courtesy Jared Bernstein, op-ed mug.
Jared Bernstein, a former chief economist to Vice President Joe Biden, is a senior fellow at the Center on Budget and Policy Priorities and author of “The Reconnection Agenda: Reuniting Growth and Prosperity.”