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Dialogue on "Emancipating the Underclass"
Originally appeared in Commonsense.
Summer, 1994 (Volume 1, number 3)
Doing so, Magnet argued, will require cultural change both for Haves and Have-Nots and a redefinition of issues, like welfare reform, to refocus them less on the employment needs
of adults and more on the welfare of children. Among other things, he proposed "group homes for
needy kids -- and their mothers."
In the spring issue, Wisconsin Governor Tommy Thompson used Magnet's analysis as a
starting point for a discussion of major welfare reforms in his state. Below, Bret Schundler and
Wade Horn continue the dialogue with observations of their own about Magnet's prescription.
The classic Weber versus Marx argument is whether culture determines
social conditions or social conditions determine culture. I've always thought the
argument a little forced, since in experience each has an impact on the other -- and neither is all cause nor all effect.
I was a high school football player. It would be another forced question
to ask which is important to winning football games -- raw desire or practiced
skills. The truth is that both are important. A winning team must possess both
desire and discipline.
This goes to the heart of both the strength and weakness of Myron
Magnet's article, "Emancipating the Underclass." His analysis of the
destructiveness of our current entitlement culture is right on target. But relevant to solving the crisis of the underclass, he attributes a little too much
determinative significance to changing culture, and not enough to changing
social and tax policy.
The result is that once Magnet is done with his brilliant cultural
analysis, he focuses his social policy recommendations largely on punitive
responses for destructive actions (e.g., eliminating income support for welfare
mothers), but does not also properly provide incentives for constructive actions
(e.g., reforming our tax code' to reward people for working).
If you believe that work is motivated only by cultural norms,
(Magnet's thesis) this makes sense. But if you
acknowledge that many people are motivated to
work chiefly because money is offered in exchange,
then changing cultural norms is only part of the
solution. Creating incentives for work, and not just
penalty for sloth, is equally important.
In Jersey City, the average family on Aid to
Families with Dependent Children welfare consists of
a mother and two children and receives benefits --
including food stamps, Medicaid, housing
assistance, and income support -- with a value of
approximately $20,000. When this mother applies for
these welfare benefits, she is asked to check a box
which affirms that she is looking for work. Should
she actually take a job, however -- even a first tier $12,000 a year job without benefits --
she will immediately lose almost all welfare support and instead be taxed, and
her family income will be cut in half.
What a perverse system it is that mandates virtue but pays for vice, that
demands a woman confirm she will look for a job, but then penalizes her if she
takes one!
In my view, Magnet's policy recommendations make a similar error. He
wants to eliminate income support for unemployed adults and to target benefits
only to children. Adults get no benefits. Only children get benefits. He does not
intend it, but the practical impact of such a policy would be to communicate: "If
you are too poor to take care of children, we will pay you to have some."
This also is a perverse incentive and is exactly what we are already
doing largely today; which is one reason, together with our cultural confusion,
that so many poor, young women think nothing of having numerous children.
Several decades ago, Milton Friedman suggested a more constructive
Solution (See Milton Friedman: "Negative Income Tax," Newsweek, September 15, October 7,
1968; Capitalism and Freedom, Chicago: University of Chicago Press (1962)). Instead of tying benefits to having children, he suggested what he
called a negative income tax, or income support program, targeted to adults.
With the exception of vouchers for child day care and education, these benefits
would not increase if a woman had children. Having children would become a net
expense voluntarily incurred out of love for children -- as it is for most of us --
instead of being, as is the case for some of the poor today, a: way to increase
governmental assistance.
I would make Friedman's income, support non-means tested (in other
words, the rich would get it as well as the poor), and give it in the form of a refundable tax credit. The rich would
get a $2,500 tax credit for food, a $2,500 tax
credit for medical insurance, and a $2,500 tax
credit for housing, so that they could buy their
own food, health care, and housing with their
own money. This tax credit would be refundable in the sense that those without sufficient
income to benefit fully from tax credits would
get vouchers to make up the difference. A welfare mother earning no income would get
$7,500 in vouchers. If she took a job, the voucher amount she received would only decrease gradually as her income increased. For example, if we established a 33 percent flat tax rate
in America, and this woman took that $12,000 job we described earlier,
she would lose $4,000 worth of voucher support while gaining $4,000
worth of food, health care, and housing tax credits. In addition, she would
still get $3,500 worth of vouchers to help pay for these three essentials.
This would give her a total family income of $15,500 with the job, versus
an income of $7,500 without the job. Wow, what a novel idea, having
someone gain by taking a job instead of being penalized for it!
Some will respond that if this woman cannot find a job, $7,500 in
vouchers would hardly be enough to live on. I agree. But that is the point; this
would provide a significant disincentive against having extra children one cannot
afford, and it would also provide a significant positive incentive for this woman,
whether she had children, to live with at least one other adult -- a parent, a friend,
or say, if she had children, the Father. A family of two unemployed adults with a
combined voucher income of $15,000 would be able
to make it if they shared the rent for an apartment
and the cost of a family health insurance policy.
They would not live well, but living together, they
could make it. And if one of the adults did find a job
that brought in extra
income, that individual's voucher support would decrease only gradually as his
or her income increased. In short, the family would gain by, not be penalized for,
having one of its adult members working.
Along with straightening out our perverse incentive system, we also
need to create jobs for the unemployed. This proposal would do that. It would
remove health care from being a business cost and would make universal access
to health coverage a federal tax expense. It would make business no longer liable
to pay unemployment benefits and would allow for a reduction in the minimum
wage, because income support would be provided directly by government to the
unemployed and to low paid workers. The result would be that business would be
given the incentives to create as many new jobs as there are Americans willing
to work in them.
Creating new jobs, and properly providing incentives for the poor to
take these new jobs, is only half of the solution to the underclass problem.
The other half, as Myron Magnet correctly points out, is reaffirming our
traditional cultural values of faith, personal responsibility, hard work, and
perseverance. That is why when I am done being a politician and working to
improve social and tax policies, the next thing I envision for myself is being a
preacher (which, when I was a kid, is what I always thought I would become).
But I do take it as an article of faith that Jesus was fully man as well as
fully God, and that all of us, as human beings, are body as well as spirit. The key
to emancipating the underclass, therefore, is not just to change our cultural
norms, but also, equally important, to change our social and tax policies such
that beyond punishing vice, we begin materially to reward virtue!
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