June 10, 2016
Feature: Paul Ryan’s Anti-Poverty Plan Would Increase Poverty
This week, House Speaker Paul Ryan (R-WI) introduced his “A Better Way” plan, a set of proposals outlining the House GOP’s vision for fighting poverty if given the opportunity to fully govern. The proposal includes a panoply of bread and butter Republican policies, including increased work requirements and state block grants, in addition to measures aimed at gutting the Labor Department’s proposed fiduciary rule and dismantling the Consumer Financial Protection Bureau.
Reid Cramer, Director of the Asset Building program at New America, issued a statement detailing how Ryan’s plan would be a “massive rollback of consumer protections” and “make the process of saving and asset building harder for low-income Americans.” Instead, effective anti-poverty legislation should be centered on “supporting real consumer protection, cutting red tape that keeps the poor from saving, using TANF to support financial inclusion, reforming the tax code to support emergency savings, and instituting retirement reforms that would automatically cover all workers.”
Some argue that many of the recommendations are simply a nod to business interests, cloaked as anti-poverty rhetoric. Patrick Caldwell wrote a piece for Mother Jones highlighting Elizabeth Warren’s response to Ryan’s plan—Warren called the new proposal “a shiny repackaging of Paul Ryan's old plan: Keep huge tax breaks and special loopholes open for billionaires and giant corporations, gut the rules on Wall Street, then say there's no money for Social Security, for Medicare, for education, or anything else that will help struggling working families." Similarly, Slate’s Jordan Weissman notes that “the basic consumer protections offered by the fiduciary rule aren't going to deprive anybody of essential financial advice, and fighting it is an obvious sop to a powerful industry.”
Others see the plan’s stringent work requirements as misguided. As Dylan Matthews with Vox writes, “the bootstrap narrative of a plucky poor person escaping poverty through hard work and perseverance has a lot of purchase in the US,” which Ryan’s plan channels through its promotion of work requirements and business tax credits. But “there need[s] to be jobs to gain [and] those jobs need to pay a decent amount.”
Such criticism of the conservative anti-poverty agenda has contributed to the creation of opposing policy plans. The Center for American Progress recently released “A Progressive Agenda to Cut Poverty and Expand Opportunity,” which recommends policies that would “level the playing field for those who have been historically left behind.” Melissa Boteach, Rebecca Vallas, and Eliza Schultz point to creating better jobs and improving wages, among many other policy recommendations that stand in direct contrast to Ryan’s plan.
News Highlights: Inclusive Economies, Consumption Inequality, Retirement Security, and More
The Roosevelt Institute released a report examining our society’s “racial rules” and how they affect six different dimensions of well-being: income, wealth, education, criminal justice, health, and democratic participation. The authors contend that past and present discrimination toward black Americans has been codified through implicit and explicit racial biases that have had an adverse effect on the well-being of black communities. After illustrating the evolution of “racial rules” over the past several centuries, researchers suggest that ameliorating their detriment will require an agenda of positive rules and targeted universalism, which identifies a social problem, proposes a solution, and broadens that solution’s scope to cover as many people as possible. “The key policy point is that we have a choice,” the authors write. “It is possible to rewrite the rules that shape unequal opportunities and produce unequal outcomes.”
“[R]ich white families spend more on entertainment and groceries than rich black families. And black families at all income levels spend more on things that require a long-term contract, such as electricity and heating services, than white families at corresponding income levels,” reports The Atlantic’s Gillian White. The reason, according to a recently released paper, is access. Many black communities exist within retail deserts, which are areas that lack amenities such as grocery stores, pharmacies, banks, etcetera. So even among black families with moderate incomes, if they live in an area that lacks resources it “can make it harder for [them] to consume the same type of goods their white peers do.”
The JPMorgan Chase Institute released the results of a similar analysis, which focused on consumption differences across income quartiles rather than between black and white households. Spending on goods such as fuel varied vary little between quintiles, whereas spending on nondurable goods like groceries and clothing differed by 10 percentage points. The greatest difference was in spending on durable goods like televisions and home improvements, where spending between the lowest and highest quintiles differed by almost 28 percent. White writes: “Many consumers must use a fixed quantity of gas to travel to work, and consumers must allocate a share of their budgets to food—either as groceries or restaurants. Discretionary spending is left at the wayside, which contributes to higher inequality in durables, restaurants, and other services.” In other words, tighter households budgets within low-income households leaves less money available for discretionary spending, which causes an increase in consumption inequality.
This week, the Bipartisan Policy Center released “Securing Our Financial Future”, a report by the Commission on Retirement Security and Personal Savings, which took a holistic look at how to ensure more workers are financially secure in retirement. The paper centered on six major themes: improving access to workplace retirement savings plans; promoting emergency savings; managing increased longevity; maximizing home equity in retirement; improving financial capability; and strengthening social security. It admirably elevated the relationship between short-term savings and retirement savings, noting that “insufficient short-term savings can lead workers to draw down their retirement accounts, incurring taxes and (often) penalties.” Nevertheless, not all members of the commission supported it’s final recommendations. Urban Institute’s Kilolo Kijakazi writes that she could not endorse the report because it relied too heavily on benefits cuts.
News In Brief: Longevity, Redlining, Universal Basic Income and More
- Ellen Seidman and Diana Elliott of the Urban Institute explore how longer life spans could compound the ever-increasing financial volatility of older Americans.
- Writing for The Atlantic, Dennis C. Rasmussen provides a different perspective on the problem of wealth inequality by citing the work of economist Adam Smith, “purported founding father of laissez-faire capitalism.”
- The New York Times’s Raphael Minder reports on the outcome of the Swiss referendum on universal basic income and the growing popularity of referendums in Europe to bring attention to social issues.
- Preliminary results show that Obamacare has contributed to a decrease in both medical debt and income inequality, reports Nancy LeTourneau in the Washington Monthly.
- Vox’s Alvin Chang explores the history of redlining and “why it matters that black Americans have continued to be stuck in the poorest neighborhoods, even decades after the civil rights movement.”
- Daniel Dudis and Bartlett Naylor of Public Citizen write in The New York Times about their discovery that the US Chamber of Commerce’s “grassroots campaign” to oppose the Department of Labor’s so-called “Fiduciary Rule” is anything but.
- Thomas Edsall writes up a new report from the Russell Sage Foundation on “Opportunity, Mobility, and Increased Inequality” in The New York Times.
- The White House Council of Economic Advisors released a new issue brief on “Financial Inclusion in the United States.” The report looks at the prevalence of bank accounts and other financial services across the country, including thoughts on the potential impact of increased service adoption through new financial technologies and the challenges of digital exclusion alongside financial exclusion.
Building Effective Retirement Savings Programs: International Lessons from Australia, Canada, and the UK | Center for Retirement Initiatives | June 15, 2016
Connecting Communities to Build Financial Well-Being | Federal Reserve System | June 14, 2016
Rethinking the Future: The Opportunities of Longevity | Urban Institute | June 14, 2016
Economic Mobility in Rural America: A Discussion of Education, Access, and Opportunity| Pew Charitable Trusts | June 17, 2016