#35 --Pssst! They're recreating the old welfare system in the Covid bill
Stealthfare! You can often tell what's really important to Democrats by what they don't like to talk much about. During the Obama years it was "card check," a plan to allow labor unions to dramatically increase their hold on the American work force (by basically ending secret ballots on whether workers wanted to be unionized). Obama didn't campaign by grandly promising Americans card check, but it would nevertheless have transformed the economy. (Still might.)
Currently, there are two issues getting the card check treatment: First, immigration. It was talked about some (not enough--thanks, Jared!) during the 2020 campaign — but now that Biden's big amnesty plan appears to be a loser for Dems (at least in the middle of a pandemic) you won't hear them highlighting it. The second is a new welfare program, buried within the $1.9 trillion Covid relief bill, that would effectively end the Clinton experiment of replacing cash welfare with work by sending no-strings checks to everyone with a child, whether or not they ever work.
I used to worry more about #1 but it's #2 -- the stealth dole-- that's become a clear and present danger. Congress will actually vote on the Covid relief "reconciliation" bill starting this week. Barring a sudden display of Congressional spine the Biden stealth dole will pass and become law for at least a year.
What's so bad about it? Well, if you liked the old AFDC welfare program, you'll like Biden's stealthfare.
Some history that will be familiar to readers of a certain age: AFDC -- Aid to Families with Dependent Children -- was a notoriously unpopular cash aid program dating back to the New Deal. Like Biden's new plan, it was officially intended to help kids -- in AFDC's case, families whose breadwinner was "dead, disabled or absent." In practice -- as with Biden's plan -- the checks went to the parent, not to the kids. Almost always this meant to single mothers, many never-married. On paper, AFDC mothers didn't do much formal work (though many took jobs on the side without telling the authorities). Some conservatives (e.g. Spiro Agnew) contended it was important that these mothers stay home. This argument lost resonance when most mothers not on welfare began enterng the work force.
Meanwhile, AFDC seemed to be subsidizing an "underclass" culture in which young women took it as normal when they had an out-of-wedlock child and got on the dole rather than delaying childbirth until they had jobs or got married. So-called "underclass" communities (defined as neighborhoods with a lot of welfare recipients, broken or unformed families, high-school dropouts and low male labor force participation) were widely considered America's greatest social problem, chronicled in books like Ken Auletta’s The Underclass, Ze’ev Chafets' Devil’s Night, Nicholas Lemann's Promised Land, and wrenching newspaper series like Leon Dash’s for the Washington Post. After the Los Angeles riots of 1992, presidential candidate Bill Clinton pledged to tackle this problem at its root through welfare reform that would "break the culture of poverty and dependence." Whenever Clinton got into trouble in the 1992 campaign, he’d run ads featuring his promise to "end welfare as we know it."
Which he did.
In 1996, a combined Gingrich/Clinton effort killed off AFDC, replacing it with a new program run by the states, with federal rules requiring work and a porous 5-year limit on aid. Senator Moynihan of New York anticipated “children, sleeping on grates, picked up in the morning frozen.” That's not what happened. Helped by the strong pre-2000 Clinton economy, single moms went to work in unprecedented numbers. The welfare caseload fell by half. The poverty rate kept dropping, including for children. Not everything worked: The effect on out-of-wedlock births seemed to fade quickly. States, the alleged "laboratories of democracy," didn't do much creative experimentation at all. (Federalism, schmedralism.) But by 2006, the number of" “underclass” areas had sharply declined.. The now-working moms to a large degree stuck with it, through the ups and downs of the 2000-2016 economy, By 2019, child poverty was at record lows, for all races.
The left wasn't about to take this success lying down. For the new generation of anti-poverty wonks, Clinton's greatest domestic achievement was another neoliberal scam. Hadn't it perpetuated a bureaucracy of caseworker to enforce its work requirements? (Yes, it had.) Even if overall poverty rates had gone down, hadn't the number of people living on less than half a poverty-line income (so called "deep poverty") increased? (Not really.) Work as a goal in itself was less important to these Vox types -- automation might make work obsolete anyway in the not too distant future. Money was what mattered, culture, not so much -- the income charts of the Center on Budget and Policy Priorities, not the empathetic reporting of Jason DeParle's American Dream. The Voxen love their Universal Basic Income (UBI): Cash for everyone. No questions asked.
Unfortunately, these economistic liberal policy types were joined by thougtful conservatives searching for a way their party might move beyond tax cuting and become champions of the working class — conservatives who often also feared declining U.S. birth rates and population loss. (You don’t want to be Japan, do you?) What bettter way to solve both problems than to send people who have kids helpful checks?
The result has been a bipartisan gang-bang around plans -- from Matt Bruenig and Sherrod Brown and Matt Yglesias on the left and Ross Douthat and Yuval Levin and Ramesh Ponnuru on the right plus the Niskanen Center (Hammond and Orr) -- and Mitt Romney and Biden -- that simply dispense dolllars on a per child basis to all married or unmarried parents except those at relatively high income levels. Biden calls his scheme an"Expanded Child Tax Credit," leading naive voters to think it's something you’ll get only if you pay taxes or earn some income (as in the current Child Tax Credit). But it isn't. It's fully "refundable," meaning if you don't work, and don't pay taxes, you still get a check from the government, just like AFDC welfare. The check is $300 a month per kid under 6, $250 a month for kids 6-17. For a single mom with two kids under 6, that's $7,200 a year -- more than the maximum that the old AFDC paid in 21 states.
Why wouldn't this just recreate the old arrangement, at least at the bottom of the income scale -- subsidizing homes without fathers or workers? Today’s dole-wonks have an answer ready: They argue the problem with the old AFDC program wasn't that it paid you to stay at home. Oh no. It was that when you did go out and earn some income, you also lost some of your benefits. In effect, you were "taxed" for working. This is the so-called "welfare trap." In some cases -- especially if you also got food stamps and housing aid — you actually lost more in benefits than you gained in income for a while as you moved up the wage ladder. These "cliffs" and traps, we're told, were the real objection to welfare (see Krugman, Yglesias). They’re what “conservatives .. care deeply about.” Here's Hammond, pwning me on Twitter: "‘The dole’ is what it is because of the non-work engendered by benefit cliffs...." ** The Biden-style plans don’t have a “cliff” problem, because they only phase out a very high income level. So they can’t have AFDC’s flaws!
This is a crazy, tendentious perspective on the ‘90s Clinton-Gingrich campaign against AFDC. It wasn't about the cliffs! It wasn’t about “marginal tax rates.” I just reread the preamble to the 1996 reform law: There's a lot of talk about "single parent families,” "out of wedlock births," intergenerational welfare dependence, absent fathers, and how "areas with higher percentages of single parent households have higher rates of violent crime." The underclass, in short. That echoed Gingrich's pitch for welfare reform in his ‘94 “Contract with America” — as a way to stop "twelve-year-olds having babies, fifteen year-olds killing each other."
Would eliminating "cliffs" solve that kind of problem? Hammond/Krugman/Yglesias all seem to assume that as long as the income path out of welfare is smooth, people will naturally leave. But surely the biggest disincentive to going to work isn't that the "phase out" of benefits will reduce your income by 20%. The biggest disincentive to going to work is that you have to go to work, sometimes in a crappy job, often with an annoying boss. In this view, people will stay on the dole without working if it is possible to stay on the dole without working. (This is a phenomenon observed in trust fund kids as well as welfare moms. But trust fund kids have a cushion.)
In his Substack defense of per-child-checks, Yglesias sneers at "the right's evidence-free work argument." But of course there is evidence: For example, experiments with a “negative income tax” in the 1970s suggested a significant work reduction for single mothers. But we don't have to rely on isolated experiments. Remember that after the ‘96 reform, single moms without a high school degree -- the least advantaged group on welfare -- dramatically increased their participation in the labor force. It went from around 45 percent to around 60 percent -- a startling 17.16 percentage point increase. Was that because of the hot economy? In part, But more than half (almost 10 percentage points) was due to work requirements, according to one careful assessment. People went to work because they had to go to work to support themselves (the reason people usually go to work!). It's logical to conclude that if you reverse the process, and send them no-strings money that enables them to not work, they'll reverse the post-1996 success story and not work. A 10 percentage point decline in labor force participation by poor single moms would be a big (bad) deal.
Since he wrote his Substack piece, even Yglesias seems, admirably, to have had some doubts: "[W]e also shouldn’t discount the idea that it would be bad for kids to grow up in whole communities where nobody is doing formal work." Now they tell us. He adds:
I don’t see any reason to believe that either the Biden tax credit proposal or the Romney child allowance proposal would have that effect. But what if the benefit was $10,000 a year? Well, then maybe it would.
But of course in many cases the Biden benefits will be over $10,000 — under the Dems’ plan a mother with two children over 6 would get $6,000 a year in welfare … sorry, in refundable tax credits. Plus she qualifies for $6,400 in SNAP food stamps, for a total of $12,400.*** Plus Medicaid! Is that enough to survive on without working? In many low-cost-of-living states, I think the answer is yes.
Maybe even in more-expensive urban areas. One of the lessons I had drummed into me after the '96 act was that AFDC payments were less important in recipients’ lives than I’d thought they were. That’s also a theme of DeParle’s book: Very poor people have other ways to get by, including sources of off-the books income -- side hustles, relatives, boyfriends who could give them money. They survive (very precariously) on less than you'd think. DeParle, who tracks poor Milwaukee mothers confronting the post-AFDC welfare system -- gives a vivid picture of the sort of drama and uncertainty this can involve. (At one point, if I remember right, there is a gun. Which goes off.)
The concern here is not that people making $35,000 a year will reduce their hours. That isn't a major social problem. The concern is not that families with two workers will become families with one worker. The concern is that a large subset of recipients will go from one worker to zero workers. The 1996 numbers suggest this is quite likely. We’ll have millions of kids growing up in fatherless homes, where nobody goes into the labor force, where the mainstream world of employment is a foreign country, and we’ll have this perhaps for generation after generation.
You might expect money-oriented liberals to take that risk. But it's stunning how the best and brightest conservative minds have talked themselves into recreating the horrible social dynamics that led Ronald Reagan and Newt Gingrich to lead the campaign against AFDC in the first place.
P.S. Senators Marco Rubio and Mike Lee have come out against fully refundable child allowances, including Romney’s. But Democrats don't need Republican votes to pass the Covid-themed “reconciliation” bill which launches the Biden Dole and funds it for a year. They need pretty much every Democrat, though. Given welfare's history as a campaign issue, you'd think pressure could be applied to those Dems from relatively conservative districts,. Does Sen. Joe Manchin want to face ads in West Virginia attacking him for sending checks to non-workers?
Even if President Manchin accedes and the Covid bill passes, there’s another chance to avert disaster when the Dems press to make the program permanent, as they say they will, perhaps later this year. Indeed, the strategy of GOP “stealthfare” opponents seems to be to make their stand then, not now. By then, of course, Democrats hope the checks will be so popular Congress won't dare take them away.
It's not that there's no room for compromise. The checks could be made smaller (even I don't think $100 a month is going to make the difference between underclass and no underclass). The range of recipients could be more limited -- Rubio and Lee would keep the current structure which requires either tax liability or at least some income. Oren Cass and Wells King at the American Compass think tank propose an innovative work test based on past work, perhaps as recorded in Social Security databases (which could be checked easily by computer). Their plan wouldn't reach as far down the income scale as Democrats would like, of course. That's why it would be a compromise. But there’s no reason you’d have to require work in the prior year, as Cass and King do. You might require only 3 years of work in the prior 5 years—giving young parents a potential two-year break. There are lots of possibilities.
P.P.S: Why don't established GOP consultants immediately push to launch anti-welfare attacks on Dem incumbents? There's a populist, paranoid explanation! Maybe it's for the same reason they’re reluctant to propose anti-amnesty attacks (on the immigration issue) or anti-China attacks (on the trade issue). If you are CEO of a giant globalist corporation, after all, do you really care that much if there's a bigger or smaller "underclass?" You just tell your driver to avoid bigger parts of the city. On the other hand, a universal dole—preferably a UBI, but if necessary a mini-UBI-for-Parents-- is your friend. It relieves you, and those governing the country in your interest, of pressure to actually provide jobs for Americans. You can source your production overseas -- hey, the Americans who lose manufacturing jobs will have the UBI to fall back on. You can hire inexpensive immigrants, legal or illegal, to take the jobs that are left; — and the Americans who are displaced or never hired won't starve. They've got the UBI! Support for a check-sending dole isn't a laudable reaction to the mindless free trade/free movement global “neoliberalism” of recent years. It's an essential part of it.
** — The remainder of Hammond’s tweet is “and in-kind benefits that enable subsistence.” He explains that “in-kind programs like housing benefits, CCDF, and Medicaid” have “the largest benefit cliffs.”
***— You’d get $1,200 a year more, in the Biden plan, if both kids were under 6.
Not sure why i subscribed to this but this is stupid post advocating for child poverty.
Great well thought out post Mickey! I was initially sympathetic to it and you have turned me into a skeptic, or atleast a fan of much compromise. Please do more substacks, they are all great.