Tuesday morning, President Obama put the final piece of his inequality agenda on the table. In releasing his 2015 budget, he calls for an additional $60 billion dollars in anti-poverty spending by expanding the earned income tax credit (EITC) for those without children, as well as making it eligible to younger and older workers. The earned income tax credit is a program that boosts the wages of low-income workers, particularly those with children, through the tax code. This expansion will benefit 7.7 million workers already getting the EITC, and allow an additional 5.8 million workers to take advantage of the program.
With this proposal, President Obama has a full anti-inequality agenda. In turning to inequality as the generational challenge of our times, President Obama has emphasized three sets of problems. The first is runaway incomes at the top, which he has used to justify the need for financial regulations as well as higher taxes on the rich. The second is stagnating incomes in the middle, which health care reform is meant to challenge. And the last is economic insecurity at the bottom, which he’s focused on with a higher minimum wage, expanded Medicaid access, and now an expanded earned income tax credit.
How have Republicans responded to the inequality challenge? They’ve really only put markers on the third challenge of poverty and low-wage work. However, a quick glance at their thinking shows that their current agenda is a mix of the impractical, inhumane, and incoherent compared to what liberals have on offer.
It’s difficult to pin down exactly what Republicans think of inequality. There are many reasons why: Their party has broken down in exhaustive infighting. They’d rather criticize the President’s policies than put forth their own. And until the 2012 elections, celebrating inequality was a central part of their agenda. That campaign, with its blustering rhetoric of job creators building things and 47 percent of the population being leeches—as well as its wonkish diagnosis that economic weakness was a result of the 1 percent suffering from so much regulation, taxes and uncertainty that they’ve gone on strike—showed that conservatives were perfectly comfortable with high levels of inequality.
Republicans have pushed back on the issue of poverty by focusing on family breakdown. What’s wrong with this diagnosis? The first issue is that it’s impractical to think that government policy, especially in the current iteration of thinking, is capable of boosting marriage rates among poor households. There’s little evidence that the wave of government spending on marriage promotion has boosted marriage rates. The more interesting proposals are indirect ways to boost labor force participation and incomes. But if that’s the case, why don’t we just boost those things directly through government action?
The EITC proposal, much like the minimum wage one, builds on the liberal diagnosis that marriage instability is in large part a function of economic instability. Non-custodial parents will comprise 1.5 million of those who will benefit from the increased EITC expansion. The administration emphasizes it will also boost labor force participation rates, particularly for vulnerable groups like men without an education. This will benefit their children as well, in direct ways through child support but also indirectly too. It also will make the background conditions for marriage much more stable.
Some on the right do, in fact, support increasing the EITC. What makes their ideas particularly inhumane, however, is that these conservatives believe increasing something like the EITC means that we must cut other programs the same amount. So, Marco Rubio, for instance, believes we should increase the EITC for people without children, but in turn reduce it for those with children, as he explicitly doesn’t want to spend more money on the program. This will put more children into poverty by design.
Other policies focus on reducing the minimum wage, which would likely increase poverty and lead to higher turnover and weaker employee power in the workplace. Others potentially turn the EITC over to employers in the form of wage subsidies, adding a dangerous middle-man in the delivery of government benefits to workers. In other words, instead of seeing these policies as things that work together and amplify each other, there is a consistent emphasis to cut and minimize.
The last thing that stands out on the poverty and inequality front is that President Obama is seeking to expand programs with a track record of succeeding. As Jason Furman documents in the newest issue of Democracy, the EITC has a long history of reducing poverty and increasing work participation. And even the debate over the minimum wage, as contentious as it is, is pretty clearly in a cost-benefits framework, where researchers believe it will reduce jobs somewhat but also boost wages and reduce poverty a significant amount. The debate then becomes how to estimate and weigh each part.
However, there’s a certain level of incoherence in how conservatives approach this same policy, something on display in Paul Ryan’s poverty blueprint. Forget the immediate disqualifers, like the fact that the economists Ryan cites claim he is misrepresenting their research. Ideologically, Ryan complains that we don’t trust “civil society” enough to combat poverty. He then turns around and argues that there are too many small, overlapping, disconnected programs supported by the government. This confuses the way civil society relies on government funding of these small programs to carry out public policy goals.
Beyond that, Ryan also displays an odd understanding of what it means to be conservative. Rather than building out from what we do already that works well, there’s an impulsive character in Ryan’s vision to overturn everything, with radical steps to privatize, roll to the states, or otherwise dismantle every government program in one climatic move. The hope is that the resulting Year One of the Welfare State will fundamentally transform society and people into the ideological vision of conservatism, something more revolutionary than what we colloquially think of as “conservative.”
President Obama’s inequality agenda is open to criticism from its left, of course. It’s a disappointment to see the White House rely on the EITC as their mechanism to deal with collapsing labor force participation, when mass unemployment is the major culprit. Full employment is still lacking from the overall agenda. Though better spending power by curbing health-care costs is a major boom for the middle-class, wages and productivity are still fundamentally broken. Financial reform aside, there’s still a lot of government policy that directs wealth towards the top 1 percent. Wealth inequality is still a major problem, though removing Social Security cuts from the budget is a smart move in this direction.
But a plan beats no plan. And right now President Obama has a full plan to tackle the diversity of problems with economic inequality. Republicans, for all the minor gestures, are still failing here.