Why People Are Poor

Michael Tanner of the Cato Institute has a book coming out this week titled The Inclusive Economy: How to Bring Wealth America’s Poor in which he argues that the primary reasons for poverty in this country are the laws and policies enacted by the government which make it harder for the poor to escape to the middle class.

He talks about his thesis in an article at National Review Online. His article opens with this:

Why are people poor? Conservatives and liberals offer very different explanations.

Conservatives point to a “culture of poverty” and suggest that much deprivation is the result of flawed choices and behavior by the poor themselves. They point to a strong correlation between poverty and a failure to follow the so-called “success sequence”: finish school, get a job, get married, and only then have children. Relatively few people who do those things end up in poverty.

Liberals, on the other hand, say that that is all very well, but choices are always constrained by the circumstances in which people live. Therefore, conservatives are wrong to discount structural factors, such as racism, gender-based discrimination, and economic dislocation, that can help shape people’s choices.

There is truth to both explanations. One can’t strip the poor of agency by treating them as if they were little more than chaff blown by the wind, with no responsibility for their choices. But neither should we ignore the context in which those decisions are made. For all the progress we have made, not everyone starts with an equal opportunity.

Tanner argues that five areas of government policy impede economic and social progress among the poor.

Criminal Justice: Studies show that a criminal record dooms an inmate's children to poverty, and having a criminal record makes it harder to get a job and get married once released, both of which increase out-of-wedlock births.

Tanner cites a 2016 statement from President Obama’s Council of Economic Advisers:

Having a criminal record or history of incarceration is a barrier to success in the labor market, and limited employment or depressed wages can stifle an individual’s ability to become self-sufficient. . . . Further, criminal sanctions create financial and emotional stresses that destabilize marriages and have adverse consequences for children.

Education: Poor children generally find themselves stuck in failing schools. These schools are not failing because they don't receive enough money, rather they fail for a host of socio-economic reasons that indeed may be intractable. The problem is that there are lots of motivated kids languishing in these schools who are essentially being taught nothing. The answer is to give parents a choice as to where their children will go to school.

Tanner writes:

An effective anti-poverty program would break up the government education monopoly and limit the power of the teachers’ unions. One can debate the precise merits of charter schools vs. vouchers vs. tuition tax credits, but, in the end, we must give parents more choice and control over their children’s education.

You'd think that people who talk about social justice would be on board with this, but it's the left which has over the years consistently thwarted attempts to give parents more options in their children's schooling.

Housing Policy: According to Tanner, government zoning and land-use policies can add as much as 40 percent to the cost of housing in some cities. In places such as New York City and San Francisco, the zoning cost is even higher, at 50 percent or more, and these regulations don’t merely increase the cost of rent which already consumes a big chunk of a poor family's resources; they effectively lock the poor out of areas with more jobs or better schools.

Savings: Tanner asserts that, "Asset tests for public programs punish the poor for saving. And Social Security squeezes out opportunities for the poor to save for themselves. We need to reconfigure a wide variety of current policies to encourage thrift, saving, and investment."

Inclusive Economic Growth: Tanner urges our leaders "to pursue policies such as low taxes, reduced government debt, and deregulation, policies that spur investment, entrepreneurship, and the economic growth that will increase the wealth of our society."

He goes on to add that,

[I]t’s not enough to encourage economic growth if the poor remain locked out of participation in that growing economy. That means we need to eliminate barriers such as occupational-licensing rules, occupational zoning, and the minimum wage.

For example, it's estimated that more than 1,100 different professions (25 to 30 percent of all job categories) require a license in at least one state, from florists to funeral attendants, from tree trimmers to make-up artists. The removal of licensure barriers not only unlocks employment and entrepreneurial opportunities for the poor in low-skill occupations but also lowers prices.

Similarly, occupational zoning can prevent a poor person from starting a small business in his or her home. And minimum-wage laws can block low-skilled workers from getting that first job, and therefore a start on the economic ladder.

Liberals will cheer Tanner's advocacy of criminal justice reform while conservatives will applaud his remaining four policy recommendations. The larger point, though, is that government bureaucracy, mandates and general officiousness does more to hurt the poor than to help them.

That's another assertion that conservatives will register strong agreement with.

Unfortunately, the poor, generally, keep voting for people who think that the way to eliminate poverty is to enact policies that make it harder for people to overcome it.

He concludes with this:

An anti-poverty agenda built on empowering poor people and allowing them to take greater control of their own lives offers the chance for a new bipartisan consensus that rejects the current paternalism of both Left and Right.

More important, it is an agenda that will do far more than our current failed welfare state to actually lift millions of Americans out of poverty.

It all makes sense to me.