(00:00:00) It's it's fun to be in Minnesota. I have to say I didn't realize I was going to be right next to the State Fairgrounds talk about, you know, childhood memories and everything (00:00:10) else was just driving through here used to get these unbelievably strong images of cows and the fairgrounds and the Midway and so forth. (00:00:21) I very much appreciate being here. I really am a (00:00:24) Minnesotan and love being such (00:00:27) and part of the reason. I think I (00:00:29) trust people is that I grew up in Minnesota down in Boston, but (00:00:35) what I'd like to talk (00:00:36) about is families in poverty and and what we ought to do about it and hopefully leave a lot of time for questions and hear your thoughts and so forth. (00:00:48) Of course, we have a presidential campaign coming up now. It's a very exciting time for all of us. Of (00:00:52) course, they're being such exciting candidates on both sides (00:00:57) and the The thing about it is of course very soon. It hasn't happened yet. I don't think but very soon they're going to be a lot of visits to the Statue of Liberty. That's of course, it can citing an important (00:01:11) symbol of America and (00:01:14) my prayer is that this year maybe one of the candidates or at least some member of the press while they're there on Liberty Island will stop and look at the (00:01:22) plaque, you know, the old black on the bottom of the old Statue of Liberty. Remember what it says it says give me your tired your poor your actually just as one as I never did understand why we wanted the tired. Okay. (00:01:35) It seemed to be a really bad idea to come here if you're tired. Okay, but the poor may be huddled masses and all that. It talks about the homeless tempest-tossed and so forth. That (00:01:47) was what this country is all about. (00:01:49) And I think what happened is that they did give us their poor because there's now a lot more (00:01:57) poverty in this country. Then there is any of the Western (00:02:01) European countries that were supposed to give us your poor. So maybe this was give us your poor. It's a good place to be there's a lot of people like you, you know, you'll feel right at home in America, but I don't think so. And I think it's truly (00:02:14) extraordinary that here. We are supposedly this Beacon of Liberty and the leading the world in (00:02:20) democracy and so (00:02:22) forth and yet we have more poor than than almost anyone in certainly more poor than anyone adjusted for our level of our standard of living and (00:02:30) so one puzzle of course is why we have and there's a second puzzle and the second puzzle is why is it that our primary way of helping people (00:02:40) welfare is the most unpopular policy one could possibly imagine to design a few people have heard this now two or three times already in the last 24 hours. So my apologies but a little bit (00:02:52) about how I got where I'm (00:02:54) at in terms of the welfare system and so forth. (00:02:57) I had done a fair amount of (00:02:59) work looking at Fear (00:03:01) and the basic conclusion of that work was that welfare was not in fact the chief (00:03:05) cause of the changing family structures in America (00:03:07) that it wasn't the cause of non-work. It wasn't the you know, and so forth, but about four or five years ago, maybe more now, I guess fellow by the name of Charles Murray burst on the scene with a book called (00:03:18) losing ground and (00:03:19) to over simplify a little bit. The point of the book was that welfare was the root of all evil and so I was suddenly my work was suddenly along with Mary Jo beans lifted from Blissful obscurity into the New York Times. And so it was being debated and I was therefore called upon to serve as the defender of the welfare system and (00:03:41) this is something I took undertook (00:03:44) with no great enthusiasm, but nevertheless I'm done the work. I was careful. I was thoughtful had the evidence there in hand. So I went out and I went out to talk about welfare. Well, I think many of you in this room have been in a similar position. There is no Are unpleasant experience in the world than defending welfare in any audience. I don't just mean in front of you know, the young businessmen of America or something. It's it was you know, you can't (00:04:10) pick an audience where you would get a single friendly question. Okay, and the worst thing of (00:04:15) course of all is to go on a talk show or something like that and then people just start screaming at you. And again, it's not some Lunatic Fringe on One Direction or another it was people that really care and thought about these issues and the people that were the most angry of (00:04:29) all the people on welfare themselves. (00:04:31) They are the people that called and said you're drunk Professor hell wouldn't quite say that the basic, you know at best people would dismiss you and as a professor of mine once said when everyone tells you you're drunk lie down (00:04:47) and (00:04:51) so I stopped to try and think I certainly still believed, you know, that was plenty smart enough fellow and all that that the me the evidence that I had was right. I had no doubts about that, (00:05:02) but I wondered why this system (00:05:05) which by the way is our primary and virtually only (00:05:08) means of offering serious economic support to the poor is so unpopular. So universally despised. (00:05:16) Can you imagine a presidential candidate running for president on the basis of welfares? Misunderstood we ought to do more (00:05:22) welfare. You wouldn't you know, you wouldn't even get it. You won't even show up in the (00:05:26) polls. Okay, but you can run for president against welfare Queens you can run for president as an anti welfare (00:05:32) platform. And (00:05:34) so you sort of say, how is it we done this and indeed you can even look internationally at the countries that have the highest (00:05:41) poverty rates. They're also the countries that (00:05:43) use most disproportionately Welfare by that. I mean (00:05:46) income tested means-tested kinds of systems is a predominant way of helping the poor (00:05:50) now, they also tend to be the Anglo-Saxon countries. So it's not clear what you're what you're really seeing but nevertheless there's something there. So I It out on a something of a voyage or trying to figure out why it is that welfare made people so mad and whether there weren't real Alternatives and I came away with some fairly simple (00:06:10) thoughts that I'll share with you and then try and get your reactions and so forth. (00:06:15) I think the reason welfare makes people so mad is that (00:06:19) it treats symptoms and that causes (00:06:21) and that sort of thing to say, but the reason people are poor is not that they don't have enough (00:06:25) money. Okay that of course at some level is the reason you're poor definitionally is right, but people don't have enough money for a reason they're working at a job. That doesn't pay enough. They don't (00:06:35) have a job. There are single parent and they can't there be an expected to do the (00:06:38) entire job of to nurture and provider people are poor for a reason and Welfare doesn't treat any of those reasons (00:06:46) instead. It gives you some money at best. It's a temporary help while whatever it (00:06:51) is. That's more fundamentally can be trying corrected. (00:06:54) But in fact, it does nothing to help that and in (00:06:55) fact In doing that it takes some of the things that are some (00:07:00) of our most precious values (00:07:02) and brings them into conflict so I can early this morning, you know conservatives are the ones that have always been said to (00:07:08) talk about American (00:07:09) values and Liberals are shadow of any talk about that is I think that's Bonkers. (00:07:14) There are some values we really do all agree on like in (00:07:17) general we think work is better than none work in general. We think that you know, happy families are good thing. We think Independence and control is a good thing and the trouble is that Welfare by treating symptoms and that causes brings (00:07:31) into conflict some of those very precious values. I don't know welfare commissioner outside the South who when asked this question, should I raise welfare benefits in your state if they were not if they were being thoughtful wouldn't stop and pause on the one hand. The (00:07:47) benefits are outrageously low them. What we're doing to Children is terrible be the indignities and everything else that we visit on people are terrible on the other hand you raised. Offer benefits is going to be that much harder for people to get off welfare. They're going to be that many more people on it and they see everyday the anger the frustration the humiliation of what the welfare system does to people and that kind of ambiguity is not just a (00:08:09) conservative versus liberal or democrat versus Republican (00:08:12) kind of debate that's within us same thing with helping single parents, you know on the one hand single parent families are the poorest families in America on the other hand. If we provide help to those aren't we encouraging their formation doesn't at least have that appearance. By the way, the one thing that I can (00:08:29) guarantee you get yelled at is going to claim that the (00:08:31) evidence doesn't show that welfare (00:08:33) reforms could create single parent families. I'm very much a strong believer that it isn't (00:08:38) the the primary thing. But man there isn't anybody in the world you can find that doesn't believe that (00:08:44) and the point is not in some ways. The reality is (00:08:47) no longer important anymore. It's what people feel it how people thinks and as a result politically you can't do anything with lover. We let welfare benefits Fall by more than 25 or 30. Sent over the last decade by not adjusting it for inflation. And you know, there's very little hope that we're going to do anything anytime soon. (00:09:04) So in Good Times welfare sort of breaks even in bad times, it gets (00:09:08) nailed and that's where we (00:09:09) stand. So what is it? (00:09:12) Where do we go? What do we do? (00:09:14) What are the causes of poverty? One of the first things that that I discovered I started to look at ghetto (00:09:21) poverty because after all that was the image that we all have of who the poor are many people have including the the so-called experts in the field (00:09:30) and looked at some data (00:09:33) that was actually from 1980 and was just been recently published and I was astounded because it turned out that by any measure the ghetto poor we're no more than seven or eight percent of the taupe were population. (00:09:47) Okay. This is a primary image. We see on TV at least and (00:09:51) it's deed. It sets out the most common image that a lot of people who actually work in the area do it (00:09:55) because of course it is the worst party and if you want to go someplace and see something really dramatic and really awful and that really is the failure of America just go to an inner-city (00:10:05) community and find it. But the reality is that it was seven eight nine. Some people have gotten the number up as high as 15% of the poor but it isn't the representative workers (00:10:16) and it's suggested that maybe we ought to understand the other 90% first (00:10:22) before you're going to understand that 10% indeed one of my biggest frustrations with what we do now often in staying probably go to the worst sections. They what's going on here. Well, there are everything's going wrong, but there are some larger forces at work that you don't understand unless you can step back a little bit. (00:10:38) And when you do step back what you find is not so (00:10:42) complicated and indeed. I'm going to suggest that there are two fairly simple propositions that we absolutely have to accept if we're ever going to make progress against poverty. (00:10:53) And if we accept these propositions will make considerable progress. If we don't we will never no matter how clever you are with Social Services no matter (00:11:00) what you do with preschool education. So forth basically poverty will always be with us. These are the two propositions. I realize they're extremely controversial. The first is (00:11:10) if you work you shouldn't be poor. And the second (00:11:14) extremely controversial proposition is one parent shouldn't be expected to do the entire job of to (00:11:22) that's it those that's that's the point (00:11:25) and let me elaborate more on what those things are (00:11:28) later. We can talk more about inner city poverty and what we (00:11:31) might do about it, but those are the basic propositions that I'd like to convince you. Any one time (00:11:40) depending on the state of the economy, maybe 40 to 50 (00:11:42) percent of all the poor children in America are in two-parent families. (00:11:48) And the question is why are they (00:11:49) porn? Let's start with him. Why are those families were (00:11:53) well? Some of them aren't families were somebody's disabled. Well, that's pretty clear why that family support and a few and some of them are in families where there are people that are employed but what's interesting is that among the non-disabled the majority are in families where there's (00:12:06) someone working full year full time, (00:12:09) or at least someone working the combined hours of the to (00:12:12) parents is equal to fool your full-time (00:12:15) and in the families were someone's unemployed and working part of the year. (00:12:19) In the overwhelming majority of those if the person worked full year their (00:12:24) wages are so low that they would still be (00:12:26) poor. Indeed. One of the interesting points is that when the economy (00:12:32) improves but wages don't improve at the bottom. (00:12:36) We don't reduce poverty very much (00:12:37) because we convert the unemployed poor and the (00:12:39) Working Poor. Fundamentally the problem of poverty among two-parent families. And of course is very relevant for the single parent family to is not so much lack of jobs all that some of it it slow pain. Okay, it is people (00:12:53) that are working and aren't making (00:12:55) know. How could this be? True? What's not very hard to figure out (00:12:59) poverty line for a family of 4 1992 be (00:13:02) something in the range of 13:5 $14,000. That means you need (00:13:05) seven dollars an hour at a full year full-time (00:13:08) job to support a family for (00:13:12) minimum wage for a long time was 375 you 25 whatever now it's up to what for fifty Seven dollars an hour for 50 pretty easy to figure out the full time job doesn't do it indeed a full-time job and a half-time job barely get you (00:13:26) there. Okay, (00:13:27) and that gets you there assuming you have no other (00:13:29) expenses like childcare for example, like medical care for example course, we don't count those in determining whether you're poor by the way. So (00:13:37) even if you pay a lot of medical and medical (00:13:39) care or child care, we don't deduct that from your income and decide whether you're poor and just for the statistics, but the point is it's very easy to work and be poor in this country. Now what (00:13:51) affects wages for (00:13:52) people at the bottom, why are people working in still for well the first and most important thing is (00:13:59) overall wages in this (00:14:00) country. Okay. This is a group. In (00:14:02) fact where it turns out that the best single predictor of poverty among two-parent families (00:14:09) with children best single predictor is the median earnings of (00:14:14) full year full-time male workers. That's the middle male in America will make them white males if (00:14:20) you want. But by the way female earnings track it pretty closely anybody else (00:14:24) the work what the middle worker in America earns is the best predictor of poverty at the bottom y. (00:14:29) Well. It really is true. The people who talk about trickle-down. There's a lot of Truth to the whole income distribution tends to move together. (00:14:36) Okay in general, that's right, and indeed if you tell me how many people if you tell me the median earnings of a full year full-time worker of a male or in other words what the wages are for any year between In 90 and this year you give me just that one number. I'll be able to tell you what the power Dorado is was among (00:14:54) two-parent families in that year. I'll get it exactly right. (00:14:59) It's not an employment. By the way that does it because lowering unemployment without changing wages. Usually when unemployment goes down wages go up but lately that hasn't been true luring on a point without changing wages just converts (00:15:09) the unemployed for into the Working Poor. It doesn't change the basic party right (00:15:14) now. (00:15:15) Here's the big problem since 1973. Basically. We haven't had any growth in real wages in this country. People now earn Less on average than they did in 1973 full year full-time male workers. We have for the first generation in many situation where son's on average earn less than their fathers did. (00:15:36) Where where families can't afford to buy the house at their parents grew up (00:15:40) in (00:15:42) that's the problem (00:15:43) for Middle America, (00:15:45) but the problem of course is even worse because it's not just real wages for the middle haven't grown at the bottom wages have been falling fairly substantially even relative to the middle, which is Fallen somewhat. (00:15:56) It's only the top one or two percent are depending on how you count of ten percent. We've (00:16:01) had really substantial growth in income at the bottom. You've had declines in earnings. In fact, the only (00:16:07) reason we haven't had more growth in poverty among two-parent families with this decline in in rings is that you have more to worker families. (00:16:15) Okay, and so in fact daughters on average do earn more than their mothers used to not so much because wages went up but because they're working more hours. Okay. So the way families have coped in America it the middle class is (00:16:27) by sending more people in the workforce. So that are kind of breaking even at the bottom. First of all, that's more of a problem. But still that's part of the way families of Coke. (00:16:35) So fundamentally the (00:16:37) issue here is people are working and they're not making it. So what do we do for these families? What do we do for the Working Poor? Well, the answer is we do absolutely nothing. Okay, do we give the medical protection? (00:16:51) No, they're the only group in America. We don't (00:16:53) get medical protection to if (00:16:55) you're poor and on welfare, you get medical care protection get Medicaid (00:16:58) gosh knows there's a lot of problem with Medicaid but it's certainly a lot better than nothing. (00:17:03) If you're working at a decent paying job (00:17:04) you get medical protection through your employer. Although we're cutting back on that all the time too. But if you're working if you're poor if you're working at a crappy job, if you're playing by the rules, you don't get medical protection. These are families indeed. If you talk to working poor families as I'm sure many of you do (00:17:20) the thing they talk about more than anything else is in fact medical protection (00:17:23) because they are literally literally one broken finger away from losing everything. They've worked on a broken finger and cost three or four thousand dollars in medical expenses easily get a day or two in the hospital and they're gone. (00:17:36) And what's even all the more striking is? Of course, if they really need emergency care if they need to happen that to me or whatever. It's not that they don't get it occasionally they do and occasionally have these horror stories of moving (00:17:45) from hospital to hospital. (00:17:47) They get it but they get it only after we bankrupted them humiliated them put them through a time when it was already an enormously difficult time emotionally made it the most difficult time financially, you know, if you've been in any major (00:18:01) Hospital you see people there who are just at the end of their rope not only because they're so afraid of what's Happening their family because they're afraid of the money. (00:18:09) So we end up having to pay the bills in the form of uncompensated care (00:18:12) pools in terms of City hospitals in terms of higher premiums, but we only do it after we've made the the lives of these people living hell quite literally, (00:18:21) but of course, it's not just that it's also money to these people qualify for welfare. No, we don't welfare is for people that aren't working not for people who work in do these people qualify for food stamps? Yes as it turns out they do so the one thing we offer them as the opportunity to go and stand in the check. Line and have someone behind them say I sure wish I could afford to get that for my family. And so needless to say I'm virtually none of them accept (00:18:45) food stamps are going to get food stamps. (00:18:47) So the way I put (00:18:49) this is these are people that are playing by the rules and losing the game (00:18:53) and the tragedy of this is not only are (00:18:57) these the people let me just take one other aside here, (00:19:00) you know, there's lots of talk and literature probably a lot of you talk about the deserving versus the undeserving poor about the society's constant preoccupation with only helping the deserving (00:19:09) poor. Well, I think a lot of that literature is just misses some of the boat because I'll tell you something I think for (00:19:16) anybody the most deserving poor of all the people that are working hard that are trying to do it that are doing what that upholds that you Liberty was all (00:19:23) about. And we do nothing for those folks. They are the most deserving of the poor and we do nothing. So the simple analogy that we only help the deserving poor. It doesn't fully work there. (00:19:35) So basically we've got this group of people. They're not making it and (00:19:39) they're stuck and so the question is can't we do something can't we do more? Can't we do better (00:19:44) and (00:19:45) one other point what if we don't? Well, you (00:19:49) know it's sad and it turns out this poverty doesn't last as long as ghetto poverty (00:19:53) does it doesn't last as long as single parent (00:19:55) property eventually. Most of these families are enough to be somewhat above the poverty (00:19:58) line, you know a few hundred dollars, maybe a few thousand. So, you know, why should we worry? I think we ought to worry a lot. I think it goes back again to that Statue of Liberty, which is sort of like, what's (00:20:09) it like to grow up in a family where your parents (00:20:13) are working? They're doing their best and you're not even close to being even like any of the people you see on TV everyday? Okay, what does that tell (00:20:22) you about work? What does it tell you about America? What does it tell you about? The American (00:20:25) dream? It says that if you work you're a chump. (00:20:29) If you want to see what that happened what happens when that is true in the extreme, then go to the inner cities where traditional Roots out don't work. It's true being a drug dealer is better. Okay, even though it's a very very difficult occupation. (00:20:43) Your average time in the occupation is not long. You're going to spend time in prison and so forth if you're lucky if you survive but nevertheless it's a lot better than the McDonald's are whatever the load thing job is in the area. So what do we do? (00:20:58) What do we do about that? Well, the the tragedy of this is it's not so hard to figure out it's not hard to figure out ways to make work pay a starting point is health insurance. Every other industrialized country save South Africa's find a way to do it we can too. I'm not going to preach to you about the way we can (00:21:14) do it, but we (00:21:15) spend more than any other (00:21:17) country and we get less we're already (00:21:20) paying for paying the bills for most of these folks but we're not paying the bills for the preventive care that might have made a cheaper. (00:21:27) We're not paying the bills that might have helped them in a time of great emotional turmoil. (00:21:31) We're taking their houses, you know, if we provided medical care for everybody in America, we would not have more dependency. We would not have more welfare. We would not have more cheats. We would not have anything we would not even have less work. We have a little bit less work because somebody was working a third job to pay off the bill from their cancer ridden children might not work, but the the reality is (00:21:54) that's that's a something-for-nothing policy in the long run. It reduces ultimately the what we're going to spend and it encourages work Family Independence all the things we say we believe in Children, (00:22:07) what else what else? Well, there are other ways to make work pay one thing is to raise the minimum wage. The minimum wage has fallen dramatically adjusted for inflation (00:22:19) since the basically night late 1970s early (00:22:22) 1980s minimum wage, then was the equivalent enough essentially the equivalent in today's dollars of about 5:15 (00:22:30) our close to $6 now five fifty six dollars and ninety two (00:22:35) it then fell to 335 an hour. We raised it big fight raise it up to (00:22:42) 450 an hour. Okay. (00:22:44) Well, the minimum wage now is lower adjusted for inflation than it was in (00:22:48) 1956. Okay a lot. Not a lot of jobs pay what they used to pay in 1956 but (00:22:55) that's what it pays. And by the way, just one other thing George Bush remember finally in his campaign said, okay. I'm for a higher minimum wage came out in favor of a fireman was that's why we got higher minimum wage in part. Well the minimum wage when it's now that it's fully implemented 450 is exactly (00:23:11) where it was adjusted for inflation when George Bush said, he was in favor of a higher minimum wage. We (00:23:16) managed to capture the inflation between that time and when it actually unimplemented that's where it stands. Now, there are reasons not (00:23:23) to do a higher minimum wage. (00:23:24) However, I'm an economist as many of you probably know. If you are an economist. There are (00:23:30) this is probably something I should review those of you who are not Economist, but (00:23:34) the there are certain Rites of Passage. I'm sure that all other disciplines and professions have (00:23:39) And adjust before you get your PhD they take you into a dark room. There's candles. There's an unusual devil (00:23:44) worship symbols on the wall elasticities and stuff and it's supply and demand curves and things like that. And then you chant the certain (00:23:54) Mantra. Okay, and the Mantra is I am against a minimum wage. I am against rent control. (00:24:02) I'm against certain time against a you know, a certain taxes. They're just certain things that (00:24:07) you have to do if you're an economist, (00:24:10) but there's some reality this it is not fair. It is not true to say raising. The minimum wage does not have any effect on jobs. It does. It's not very big. It's mostly for teenagers. It may be reduces teenage employment by one or two percent, but that's still 50,000 (00:24:25) jobs to raise it up for I'd like to do so it is not the case that (00:24:29) there's no impact as a little bit of an inflationary impact and so (00:24:33) forth. So (00:24:34) people look around for other Alternatives and there is another alternative that that in fact a partly has gotten a lot of impetus because people are looking for alternative (00:24:42) minimum wage and next tax credits to The Working Poor. (00:24:46) This seems like a real something for nothing course, it costs money, but it's what it is is there are something called the earned income tax credit right now. (00:24:55) And in fact, it was recently expanded fairly dramatically in the last budget Summit agreement. (00:24:59) But until that time the way it worked is for every dollar you (00:25:01) earned. You got 14 cents in tax credits. (00:25:06) And there were refundable even if you owed no taxes, you got this tax credit you got this money at the end of the year and a check so that it's like a 14 percent pay raise (00:25:14) for the poor (00:25:16) indeed. It was like a 50 Cent per hour pay raise for the poor and we substantially increase (00:25:23) that in the last budget some agreement (00:25:27) indeed the last budget Summit agreement which got almost no attention didn't far more for poor (00:25:31) people by the way there in any legislation last 10 or 15 years, (00:25:34) but nobody got not very much attention in part. It happened because the first summit agreement was so bad when they look at the distributional tables really embarrassing the New York Times to see all the money going to the rich and so they had to do (00:25:45) some stuff for the poor and that was a big help (00:25:48) in any case though. It doubled it added (00:25:51) another 50 cents per hour (00:25:53) now. I caught that the only real problem with this. Okay, so it encourages work. (00:25:57) It doesn't it doesn't get in the way of business business like this. It's a little bit higher taxes, but it's trivial compared to other things. (00:26:05) The only (00:26:05) problem is it costs a lot of money. It was like six or eight billion dollars for every 50 cents an hour you (00:26:10) doing and second of all there is problems as you try and phase it (00:26:13) out in the middle of the income distribution. You don't want to give this to millionaires. It creates higher tax rates in that part of the distribution as your phasing it out. (00:26:20) So it turns out you can't realistically do much more than do double that yet again. So let's suppose we really got it all got just unbelievable and got a dollar fifty (00:26:31) and earned income tax credits. Remember I said minimum wage for $50 50 brings you up to six we (00:26:38) got to get up to seven (00:26:39) at least okay for a famine for (00:26:42) if you want to ensure that if you work you shouldn't be poor tax credits alone just (00:26:46) can't do it just can't be done by any reasonable stretch. So my own view is what you need is a combination higher minimum wage and the tax credits a dollar fifty plus the five fifteen hour together that 7 (00:26:58) so we can with a combination (00:27:00) make it happen. (00:27:02) Should we endure some of the cost of a higher (00:27:03) minimum wage in my own view? The answer is the costs the (00:27:07) benefits far exceed the cost. There is no debate in economics Community by the way higher minimum wage does lead to there being more net income (00:27:14) among the poor but there is you know, some of the people that will be hurt are definitely our teenagers. I'm African-American teenager somewhat disproportionately, so it's not great. (00:27:24) But I think still the far more of the (00:27:27) principle here is critical if you work you shouldn't be poor (00:27:31) and in the end I decided that principle that idea that fundamental premise for (00:27:35) America is more important than in fact some legitimate economic dislocation from the other things. (00:27:41) There are the ways by the way, you could get there the national Commission on children came up with a truly outstanding idea from it by American terms. They suggest a children's (00:27:49) allowance good heavens. They suggested a children's allowance where (00:27:53) we'd actually give every child in America thousand dollars (00:27:57) this of course was immediately recognized for what it for what it was total lunacy. And why would anyone think of such an outrageous (00:28:03) idea? But in fact, it's not so hard and you get rid of the standard deduction. It does cost some money. But the way they should have sold it and tried to sell a little bit. (00:28:14) I (00:28:14) think what you do is you have a children's allowance a refundable tax credit $1,000. And what you do is you make it part of a large tax bill and you call it pro-family tax reform budget neutral pro-family tax reform. We're going to tax the berry topping comes a little more. We're taught tax the childless in order to be pro-family tax reform by the way this commission love this idea. It was pushed by the conservatives. Okay, very strongly pushed by conservatives (00:28:41) on this group because they hate the welfare system. And this is an alternative. (00:28:44) If you do that, then you don't have to raise (00:28:45) minimum wage costs sixty (00:28:47) billion dollars, but you don't have to raise the minimum wage and of course you can get that from the (00:28:51) rich who themselves have have had astounding increases just want to side what's been happening income distribution lately boggles the mind (00:29:00) even an economist learn that nothing ever (00:29:02) changes. It's one of the other things that we Earning any kind of scheduling. The one thing especially never changes is the income distribution (00:29:10) it never ever ever changed. So it kind of (00:29:12) us will really really reluctant to believe that anything had changed in income distribution. (00:29:17) Well, finally in the last two or three years is the F evidence has become irrefutable. I myself five years ago. If you'd asked me I was that's (00:29:24) just a blip in not too worried summer session. (00:29:25) Whatever it is. No question. Now that something very (00:29:29) strange is going on and the most outrageous part of all is what's happening at the top 1% as far as I'm concerned the growth in the income of the top 1% I'm sorry for this so many statistics, but the growth in income for people the top 1% is greater than the total income of the people at the bottom forty percent over the last 10 or 15 years the growth is more than 40 percent of Americans (00:29:54) get Okay, so our response to that of course has been very sound and very thoughtful we've cut their taxes. All right. Well, it's only fair. I mean, why do you think the country is going? So well, (00:30:09) it's because we've cut their (00:30:10) taxes. All right. So let me move on to the second part then so if your work you shouldn't be poor we can do a lot more with tax credits with children's allowance as with I didn't mention daycare and I should have obviously anything you can do provide quality childcare helps in this generation helps with the next all of those things the thing about the every single (00:30:32) one of these reinforces work reinforces Community (00:30:35) instead of isolating the (00:30:36) poor integrates the for these are all things that reinforce the values we all believe in and by the way, they will disproportionately benefit two-parent (00:30:43) families. It'll also help single-parent families. Okay is helps kids and helps families. It (00:30:49) helps The American Dream. All right (00:30:53) at a second proposition (00:30:55) one parent shouldn't be expected to do the entire job of to (00:30:59) And let me elaborate (00:31:01) briefly on that. The typical child born in the u.s. Today will spend time in a single parent home. Paris rates in those homes aren't average 50% (00:31:14) What's going to happen what happens when you become a single parent (00:31:16) in u.s. Well, we put single parents in the virtually impossible position. We are expecting single parents to be nurturers and providers (00:31:28) now all parents have to be nurtures and (00:31:29) providers but that's hard enough nowadays with two parents. We've been talking about the problem (00:31:33) for two-parent families. And by the way, those are mostly male earners. We're talking about who on average earn a lot more than the women do (00:31:38) okay. It's hard enough for them. (00:31:41) And how do they do it? Well, they (00:31:42) often have two people working and they often have the (00:31:45) married mothers now mostly (00:31:46) work, but you know that they mostly don't work for your full-time (00:31:51) only about a third of married mothers work full year full (00:31:54) time. Why don't they work more while there are a hundred reasons some of which involve discrimination of things but some of which (00:32:00) involved the difficult problems of trying to (00:32:02) raise your kids and nurture kids in a difficult world and so forth people are making choices. Well, this (00:32:07) part time work idea is just a true non-starter for the single parent for single parents. There are two (00:32:12) choices work all the time and by that I mean work in the labor market obviously working with staying home with your kids as work to work in the labor market all the time or be on (00:32:23) welfare. That's it. Those are the only (00:32:24) options if you choose work (00:32:27) you're going to have to deal with all the (00:32:28) problems of when your child is sick. You're going to have to solve the daycare problem when the half days, it's cool. You're going to have to solve the crises when your car doesn't start. You're going to have to deal (00:32:36) with all those sorts of things by yourself (00:32:38) with no other source of income (00:32:41) people do it every day. It's not impossible task, but it's (00:32:44) hard. It's hard work. Even for well educated well paid women for people that don't have any extra income that are trying to raise kids in a dangerous neighborhood and so forth. It can be virtually impossible again. It can be done. But remember if our goal if what we're thinking is I think what we ought to have a single parents taking care and supporting themselves the hey, that's great goal Independence off welfare. We're asking them to do more than Two-thirds of what married mothers do with a whole lot more resources the married mothers have kilometers. (00:33:12) So that's one option for them. The other option is welfare, which is where we started this whole discussion. Well for isolates, it stigmatizes it humiliates. It challenges. It does a variety (00:33:24) of things, but it does pay the (00:33:26) bills. And the reality is that the way that the system currently works is if you can't earn at least six seven eight dollars an hour, if you can't get a full-time job that has medical benefits. If (00:33:40) you can't get very inexpensive daycare, you are better off on welfare. That's the way it is. (00:33:46) And you know, you can use a welfare system in any way you want but the reality is you're better off and so who's better off on welfare young never married mothers poorly educated people people without with young children for them welfare makes economic sense in spite of all the (00:34:01) hassles. Okay. And so what you see in this world is in (00:34:05) fact two kinds of people (00:34:07) you have a group of people that are on welfare in a group of people are (00:34:10) working the people that are working at tend to be highly educated without young children previous (00:34:14) work experience and so forth the people on welfare tend to be poor less well-educated and without previous work experience with young children and (00:34:25) you know, the thing about welfare, that's so frustrating (00:34:27) is the The way it treats you, it's not just the money. It's the way it treats you. But again, it's these inherent contradictions I was talking about before I let me tell you one quick story others have heard this before from you, but I was not (00:34:41) long ago. I had some I teach poverty at Harvard. I hope you understand the irony of that. But you know, it's a dirty job. Somebody has to do it. And as part of that I try and bring in some welfare clients to come talk to the (00:34:59) class about what it's like (00:35:01) in and of itself was somewhat ambiguous session, but it's very powerful experience for everyone involved and a few years ago. This is all this little true story a couple of women one woman talked about I guess it was a friend of hers who had a child (00:35:19) that was snatched by the absent father terrible thing happens (00:35:23) every day, but she was just beside herself out of control didn't know where to turn. What do I do call the welfare department in the welfare department said in (00:35:31) Massachusetts the liberal state in the country most liberal state in the country. We vote for George McGovern. We won't for Walter Mondale. (00:35:39) They said thank you very much for calling will adjust your chick accordingly another story. They told the kid. I don't know where these are true or not, but the kind of stories that every welfare recipient can tell you somebody's house burned down. (00:35:54) Okay, (00:35:55) and or their apartment whatever they called up and the welfare reforms that thank you very much for calling. We'll send someone out to verify that next (00:36:01) week (00:36:03) the very same day. (00:36:04) We were talking to someone who is a potential donor. If you know anything about universities, you know, that donors are treated with great respect and admiration (00:36:15) and this donor was actually interested in issues of welfare. And so forth and talked (00:36:19) about I sort of said he had a friend of his that was on general assistance. He knew him from they go to the same Beach or something weird in New York. So, how do you survive? (00:36:28) How do you survive on (00:36:29) welfare? How can you do it (00:36:30) on general assistance in New York? And he said (00:36:35) well every three years I move out all my furniture and say I've been dropped. And I get $3,000 emergency assistance that size me over. (00:36:43) Group of people Sandy Jenks (00:36:45) and even (00:36:46) looked at a group of welfare recipients is small non random sample in what in Chicago. How do people survive on welfare? How can it be done? They discovered virtually every one of those people supplemented their welfare check in some way shape or form and mostly didn't report the (00:37:01) welfare office. Why do they do that in order to survive? (00:37:05) So we have a welfare system that teaches people the way to get ahead is to cheat And of course then we read in the newspaper that welfare recipients cheat. So this cell radius we are hard earned hours. We are the people out there working paying for these welfare cheats, so we have got to be better about verification. So we go after these cheats. So some people decide they're not going to (00:37:29) work other people. (00:37:30) Do they save any money you're off welfare until you've got your savings down to a reasonable level. (00:37:39) That's the welfare system. Those are the choices work all the time or be in this system that teaches you that the to work is (00:37:44) bad two cheetahs is bad, but (00:37:47) it's good. It's the only way to survive (00:37:50) and by the way, they're doing studies now across the country of how this works and it's interesting different areas of the country. When I place people are looking (00:37:56) at is rural (00:37:56) Minnesota and other places in Boston and other (00:37:59) places in San Antonio (00:38:01) and people do different ways to survive in different places or so. It appears in rural Minnesota. It's kind of hard to work and your neighbors know. Okay, so you can't do it that way. So it's more commonly their first just your abject leap or that's (00:38:13) more common you all probably a much more expert than I and maybe there's friend help from friends and relatives. That doesn't sound I'll get (00:38:18) reported in San Antonio people don't typically (00:38:24) have there aren't any jobs that they can that they can typically get at least in the place. (00:38:28) But instead what they do is find ways to go to the (00:38:30) food bank two and three times and lie that they don't get food stamps because normally if you get food stamps, you can go to the food bank. So and they (00:38:37) there's these elaborate scenarios where the people that are actually in the system. Learn to talk in codes for people when they call up and say I'm really in trouble. What can I do? You could say they say things like well you could go to the food bank. But of course if you got food stamps, you wouldn't be able to collect money there. You wouldn't be able to get anything there at the (00:38:54) food at the food bank and they'll ask you whether you get food stamps. You know, that's sending (00:38:58) six dip the system the (00:39:00) people that care are teaching people who lie (00:39:03) well enough said, what are going to do? I think there's an obvious place to (00:39:07) begin looking for answers here. (00:39:09) Let's step back and ask why is it that (00:39:11) single parents are in such an impossible position? What's so different about them? Why are they (00:39:15) pour in the rate of 50% (00:39:16) and to parents the rate of 12% and the answer is one income versus to (00:39:22) and it turns out that even though it's the typical child. We're talking (00:39:25) about only one-third of absent of single parents receive any court-ordered child support at all 1/3 (00:39:32) The average amount they get is two thousand (00:39:34) dollars a year. It's nothing (00:39:37) the average married man earns 37 thousand dollars a year. The average single parent receives (00:39:43) nothing from the absent and it's usually a father but in case that's the mother absent parent. No wonder you can't make it. Okay, (00:39:53) the natural and (00:39:54) obvious place to start is child support child support enforcement to parents. (00:40:00) Now when people some people react by saying oh, but wait a minute, you know, you can't take money from you can't suck blood from a stone or something. I think I'm mixing metaphors here. But in any case how you going to do that? Well a variety of studies been done. If we really had the sort of pie-in-the-sky Ideal system where you got every father and (00:40:16) mother in the case of when it's the other way (00:40:18) around every absent parent in the system had a fairly straightforward set of guidelines lower than the Minnesota guidelines by the way automatic wage withholding where you really got everybody to pay what they owed and so forth an extra 25 to (00:40:31) 30 billion dollars a year would go to single parents. Okay, that's much more than we spend on both. (00:40:37) Of course most of the beneficiaries, that would be the middle class. (00:40:40) It would (00:40:40) be some for the bottom but the middle class. But let's stop and think for a moment suppose a child support system really worked well and it turned out we managed to collect (00:40:49) for single parents. (00:40:50) Just $2,000 per child per year. (00:40:53) Okay supposing women and they could count on that. They really could count on that and for the middle class that certainly very feasible. (00:41:01) Well, then that's $4,000 you start with the poverty line for a family of three is a lot right nine or ten thousand dollars that plus a half-time job at a minimum wage, especially we make work pay a little better could get (00:41:15) you certainly much better off than welfare and out of poverty halftime work. That's maybe more feasible at (00:41:20) halftime working a minimum-wage job as opposed to full-time work at three times (00:41:22) the minimum wage or twice a minimum wage that may be feasible. So if mothers could count on (00:41:27) some child support, then it could work. Well, that's a great idea except Professor Elwood. (00:41:32) Don't you understand that? There are some fathers in fact (00:41:34) can't pay child support. What you going to do about them your system is going to help middle-class people and leave the people that are most vulnerable behind and that's where I think a second component is (00:41:43) Be there. I think we ought to have a system of Child Support Enforcement and insurance. (00:41:49) And the insurance idea is much like unemployment insurance when someone is unemployed and intact (00:41:53) family that person gets unemployment (00:41:55) insurance. Why not when someone the absent parent unemployed and you can't collect money from (00:41:59) them a kind of Child Support Insurance minimum. Let's just say guaranteed (00:42:04) $2,000 a kid and this is money how would the system work every child would be identified at Birth. I mean the parents of there would be identified at Birth if a single parent family was formed in a very as minted (00:42:16) with as little use of the court system is (00:42:17) possible you begin automatic wage withholding from the absent parent just like Social Security taxes and you do it according to a very simple (00:42:25) formula. (00:42:27) And then if collections from that (00:42:28) absent parent fell below some minimum level the government would step in and provide that additional money so that you would always get that mail and child support payment. (00:42:37) Now, you could deduct these shots for museums dollar for dollar from welfare. So if you're on welfare, you'd be no better off with this system. Okay, you get more child support and less (00:42:43) welfare. So you say well big deal, but the difference is if you decide to go to work go to work right now you earn a dollar you lose a dollar go to work right now you go to where you keep your child support because that's not your obligation. That's the Father the absent parents obligation that's money that they have to be (00:43:00) and it is a kind of income tested program the more he learns the less we have to chip in we the government are we the (00:43:04) people have to chip in for child support? So it is income tested was nine contest on the mother and contestant on the on the father in the more he learns (00:43:12) well with such a system. There are some choices for a change if you make work pay if you insist if you do child support enforcement and insurance (00:43:20) people have a real opportunity. To get ahead. More importantly you have a system not unlike Social Security should be a system that predominantly benefited the middle class. Everybody would be in the same system this child support enforcement Insurance system upper class middle class lower class women. They would all be in the system money would get withheld automatically collected and given over to the custodial parent and then but for people at the bottom, there'd be some protection. (00:43:47) Now the interesting thing is the three of these four steps are already in (00:43:50) place or at least mandate mandate the Family Support act 88 (00:43:54) required automatic wage withholding according to a formula identify both parents birth. There's very little teeth in these (00:44:00) things, but nevertheless it was a start the insurance part is the part however would changes from being a middle class enforcement program to being an income security program. (00:44:09) If we got it (00:44:11) a number of things would change (00:44:13) what would happen when the public notice that we were spending money on child support insurance this outrage and wouldn't actually be spending much more than we're spending now because we have lower welfare costs (00:44:22) and higher child support Insurance costs. So it doesn't seem doesn't (00:44:25) turn out to cost you much at all. Nevertheless. There would be this outrage isn't this terrible? We're spending all this money on child support Insurance those (00:44:32) darn. fathers You know all of a sudden we would have these big debates about (00:44:39) training for fathers versus workfare forefathers. (00:44:42) Okay, and we would have (00:44:45) then there'd be debates about child visitation (00:44:47) and maybe the point is they wouldn't be easy to Bates (00:44:51) and they would always go the way some of us would want them to go but the point was Father's to would be part of this equation fundamentally the society would take seriously the role of the father and notice by the way when the father is (00:45:02) not fulfilling his responsibility because it would be costing us (00:45:06) money. Very visibly cost us money now anyway, but we don't notice (00:45:09) it so much (00:45:11) the second thing about such a system is what about this minimum insured (00:45:14) benefit who's going to protect it? Well, what's going to happen is they're going to be some middle class women that get this insured benefit when the father is unemployed or something happens to him whatever else they are going to March into the capital and in very (00:45:26) articulate terms, these white middle-class women who used to be married to legislators will say no one can survive. On two thousand dollars (00:45:37) a year. Okay, this is so security for kids. It's very similar. It really solves the (00:45:46) you know, indeed. I have a sound bite on this the greatest source of insecurity America used to be getting (00:45:50) old. We saw that with social security system which was went to all people. It (00:45:55) was are oriented towards helping the middle class and indeed the more you work the more you got. Okay, (00:46:01) but there was also some protection for people at the bottom and as a result, we substantially reduce not eliminated but reduced poverty among the elderly the same lesson can be learned about this program. So what's my bottom line on all this? My bottom line is this we have got the worst of all conceivable world's right now. We are angry at the poor (00:46:22) because they are not behaving the way we want (00:46:24) them to or we think they're not (00:46:26) part of the reason we think they're not as all we see on TV is very very bizarre images of (00:46:31) them not us. The reality is (00:46:35) Winona Minnesota to say nothing of Boston, (00:46:38) Massachusetts and so forth are struggling with that's the reality out there (00:46:43) and those are things we can all (00:46:44) identify with the real problem is we've got people playing by the rules and losing the game and what's at risk is not just you know, some set of things involving some poverty and some children. It's really the next Generations values as much as anything. We've got a system that says if you work you're a chump if you're on welfare, you should cheat being poor in America is a screw you can't get ahead. That ought to concern everybody and indeed I find that conservatives conservatives as much in more than liberals. That's what concerns has been telling us for years. Okay, that's what the welfare system does. The point is you can be Auntie welfare and pro poor person. And that's an important lesson because in my experience when you talk about and you go up to (00:47:29) any Congressman or Senator or Governor or (00:47:31) never done with the present in the world in the (00:47:34) country, I mean and look in them right in the eyes are you for or against this proposition in America? If you work you shouldn't be poor (00:47:40) they don't line up on the other side. Okay. Now then all your fighting about is the (00:47:46) money and the money is a big fight, but that's (00:47:47) not what we've been fighting about up till now we (00:47:49) fight about welfare and (00:47:50) Welfare is about the inherent goodness of man or woman (00:47:53) welfare is about, you know, (00:47:55) do people I these people having babies in order to get more welfare benefits. That's what you're really fighting. The money in welfare is Trivial. It's a tiny amount of money trivial compared (00:48:02) sister. So I think there is a way I think there's a way to (00:48:06) to be encouraging integration to encourage work to encourage (00:48:10) family and so forth and I'm genuinely (00:48:12) optimistic that we can move forward. Let me also say this I think Minnesota is in the unique position (00:48:17) Minnesota's further along with some (00:48:19) of this agenda than almost any other state you're doing much better on medical care and almost any other state. (00:48:24) There's some impetus for doing some stuff on child (00:48:26) support though knows it's difficult. (00:48:29) You got a stronger economy than a lot of other states there is real opportunity here (00:48:33) and the key is if you can go the next step and really start to consider serious Alternatives welfare. Let me tell you a politically this flies. Wonderfully the national Commission on children had the most heterogeneous group of people I can ever imagine they people fundamentalist, right? (00:48:49) Advocacy left businessmen all kinds of (00:48:53) people they had one thing in common. They believed in kids they cared about kids they came out unanimously in favor of a whole bunch of wild and crazy ideas. Okay, unanimous and in fact, they were all not you know, so on health mostly because the administration said you can't do that. So there were some people in the administration that it had to back off but it's not so hard there is a way to go and the matter now is making things happen and also one final plea there's a lot of rhetoric surrounding the rich and the poor and the liberal and Democrats and And inside the Liberals and the conservatives Democrats and Republicans liberals versus the Democrats (00:49:30) and the Liberals versus the human beings is that (00:49:33) it's often described nowadays and what I see everywhere is in fact, people are scared. Everybody knows things are in trouble. This is bad. It's dangerous. It's scary. (00:49:46) But everybody also knows a lot of (00:49:48) the current ideas the welfare and welfare reform and fixing it doesn't seem to do it doesn't work. And my reaction is I think we can move forward if we change the dialogue if we do talk about values if we do think about things that reinforce the things we care about thank you very much in the (00:50:13) middle 1960s. Essentially what someone did was figure out how much money was needed to purchase a (00:50:22) basically What's called the Thrifty food (00:50:23) plan, which is if you're a very smart consumer how much money do you need to buy enough food to sustain life indefinitely at an adequate (00:50:30) level? Okay. (00:50:32) So that was the called the Thrifty food plan. Then we discovered that people sort of towards the middle and lower middle class tended to spend about a third of their income on (00:50:40) food. (00:50:42) So therefore the poverty line (00:50:43) was three times Thrifty food plan. That's how we came up with it. (00:50:47) Now since then we have adjusted the poverty line in the following way. Whatever the CPI is we change it for the CPI. So that's the way the Barbary lion got (00:50:55) calculated (00:50:56) currently people spend much less than a quarter (00:50:58) third of their income on food housing has gotten much more expensive and so forth, but the poverty line hasn't changed but let me also say (00:51:04) this I have been in (00:51:06) Endless debates over where you draw this Line in the Sand there's no right number for the poverty line. Okay, you can always find someone who can live better who can live (00:51:15) adequately in some (00:51:16) areas on a poverty level income. You can also find people that can't even come close Okay, and of (00:51:22) course, it doesn't vary by area (00:51:24) either by the way, the poverty line in rural Minnesota rural Mississippi is the same as New York City. Okay, no change no adjustment. Okay. (00:51:32) Well, you can make a pretty good case that that makes it means it's too high (00:51:35) in rural Minnesota warp to go in New York. My own view is I can't if you'll pardon Your friend David I've been in more pissing match is over this one than anything else (00:51:45) and then there's also question should we count medical care benefits or not? If we count them for the elderly it turns out no elderly (00:51:49) people are poor because they have so much health insurance from Medicare (00:51:54) or how do we handle daycare and so forth. (00:51:56) The bottom line is this whether the poverty line is 12,000 or 14,000 or 15,000 or 9,000. It doesn't take a PhD to notice that people are hurt and we ought to be able to do better (00:52:07) and I don't think that there's anything magic about getting someone one dollar above any (00:52:12) of these lines, whatever you pick they're still fairly poor but it is a way of tracking things. It is a way of keeping track of folks and you know with the current poverty line, which I think is a bit low. We already have 35 million folks. Okay. It's a lot that's more than anybody else has got per capita. (00:52:30) So I think rather than fighting about the (00:52:32) poverty line, although I think there's some of that it's a loser politically because people understand what happens when you redefine it. I think we ought to instead be concentrating on ways in which We can we can fundamentally change the system and move forward and then then the poverty line will look at the other thing about the poverty line. That's truly absurd is it's not adjusted for meeting income. So if (00:52:53) the whole country got richer there'd be less poor people, even if the distribution of (00:52:56) income was no better or no worse. So it's not about the distribution of income. The only reasons (00:53:00) helps right now is (00:53:01) since the median person hasn't gotten any richer for 15 years poverty hasn't gotten better because the whole thing hasn't drifted up.