American Dreams (9 page)

When Lyndon Johnson announced the war on poverty, he gave away his big-government vision by saying, “The richest nation on earth can afford to win it.” I see America—and our obligation to ensure opportunity for the least fortunate among us—differently. I believe that the most
creative and innovative
nation on earth is uniquely qualified to lift the poor by putting Americans on a path to prosperity and self-sufficiency. To unleash that creativity and innovation, I have proposed the most fundamental change to how America fights poverty and encourages income mobility since President Johnson conceived of the war on poverty fifty-one years ago. At its center is the best antipoverty measure we know of: work.

As she struggles to do something more to help her clients, Christine Miller knows the importance work has in improving their lives. To that end, Christine has formed relationships with a hair salon and a dry cleaner. Now if a client is going in for a job interview, she and her staff can set them up with a new haircut and some decent clothes.

“That's where I'm hoping to give them a hand up as opposed to just a handout,” she says.

I have yet to talk to anyone who works day in and day out with Americans struggling with poverty and a lack of mobility who doesn't know what Christine knows. They all seem to emphasize some combination of the same three themes:

• the importance of the person in poverty taking responsibility for herself and her future
  
• the importance of addressing the whole person, not just the immediate need
  
• the importance of work
  

The top-down, Washington-controlled war on poverty has failed all three of these tests. Federal poverty programs are good at alleviating immediate needs by providing food and health care and writing checks. What they have failed to do—in truth, what they have rarely even tried to do—is to encourage and to help people to take that first step toward responsibility for themselves and their families by working.

Conservatives like to talk about incentives, and for good reason—incentives matter. One big reason we have failed to move more poor Americans to work and self-sufficiency is that we haven't given them the right incentives to do so. Here I'm not talking about the negative incentives sometimes favored by conservatives that tell the poor to pull themselves up by their bootstraps or suffer the consequences. I'm talking about offering the poor positive incentives to move from welfare to work—giving them a reason to become independent, not just a reason to avoid being poor.

As they exist, our antipoverty programs discourage moving from dependency to work by effectively levying a large tax on anyone who earns too much to receive benefits. House Budget Committee Chairman Paul Ryan calls this the “poverty trap.” For understandable reasons, most poverty programs offer decreased benefits as poor people make more money. This functions like an extremely high tax on the poor, particularly those in low-wage jobs, which is most of the poor. If people work and make more money, they lose more in benefits than they would earn in salary. At a time when jobs are scarce and wages are stagnant, the poverty trap is catching more Americans than ever. Programs like the Affordable Care Act double down on this work disincentive.

The poverty trap isn't just a bug in our antipoverty programs—it's a feature. To change this, we need nothing less than a transformation of our approach to fighting poverty. A well-intentioned desire to help the poor has succeeded in making government dependency more remunerative than work. A similarly well-intentioned desire to help the poor must now make work pay again. This can be accomplished through two significant but achievable changes in policy. First, give the states real freedom to create innovative programs to encourage work among the poor. Second, improve the current federal wage subsidy to keep them working.

In this transformed approach to fighting poverty, these two changes work together. States find creative ways to do what Christine is trying to do: provide relief for the nonworking poor that incentivizes and capacitates work. Then the federal government makes the transition to work profitable and sustainable. The goal, always, is independence and self-sufficiency through work.

The idea is to take the hundreds of billions of dollars' worth of federal antipoverty funds and consolidate them into something I call a “Flex Fund.” The Flex Fund would be just what it sounds like: a fund that distributes a lump sum payment to the states to use to support or create innovative and multifaceted state and local antipoverty programs. This change recognizes that there is no silver bullet to ending poverty, that it will take many different approaches for many different areas where poverty is found.

The animating principle behind the Flex Fund is this: Government has an important role to play in helping the poor, but it should be the government that's closest to the people it's trying to help. I first became convinced that the fight against poverty should be a local one when I was in the Florida legislature. Miami-Dade County, where I live, is a pretty representative microcosm of poverty in America. We have inner-city poverty and rural poverty as well as the working poor. Most of the poverty issues I dealt with as a legislator and then as speaker of the house had to do with children. Many of these are kids born into broken families, living in substandard housing in poor neighborhoods or in rural isolation. They're zoned out of good schools. Maybe they're being raised by their grandmother. And this has been going on for generations. I realized that the odds of these kids making it out of poverty are almost zero unless something dramatic happens in their lives.

It was about that time that I heard about the Harlem Children's Zone. I was so intrigued I visited the project in 2007 and saw something that could never have been conceived of by bureaucrats in Washington, much less implemented effectively. Geoffrey Canada and his teams go into neighborhoods and literally envelop poor children from before birth to college graduation with the education and support they need to rise out of poverty. The idea is holistic change—to break the cycle of poverty not just for the child but for the whole neighborhood.

I like the idea so much I sponsored a bill in the Florida legislature that established the Miami Children's Initiative, which is taking the same holistic approach to Miami's Liberty City, another area of concentrated multigenerational poverty. When Cecilia Gutierrez-Abety and the good folks at the Miami Children's Initiative started to run into trouble with all the strings attached to federal funds, it occurred to me that there is a better way.

The Flex Fund would allow states to support projects like the Miami Children's Initiative by allowing them to both fund and administer their program without federal interference. Under the Flex Fund and Wage Enhancement Credit, total antipoverty funding would be unchanged, but states would be required to spend the Flex Fund allocations on antipoverty programs that are consistent with the purposes of the federal programs they are replacing. The amount of money each state would get would be determined by the number of people in poverty in that state. An individual state's funding would increase if its population in poverty increases. But, critically, if poverty goes down, the state would be allowed to keep the extra money, no strings attached. With this “shared savings” funding formula, states would be incentivized to find ways to actually eliminate poverty, not just cut spending on poverty programs.

I know from my time working in state government that states are capable of coming up with creative and innovative new ideas if given the flexibility. Utah is an example. While Washington replays the same debate over how and whether to extend traditional unemployment insurance, Utah is experimenting with ways to get people into well-paying jobs. In a pilot project, Utah required people who had been out of a job for six months or more to take online training courses in order to continue receiving unemployment benefits. The courses focused on skills needed for modern professionals, with topics spanning from résumé building to career direction to interview skills.

The state tracked the progress of the participants and found that their professional preparedness to go back to work improved so much that what had begun as a requirement quickly turned into a sought-after tool. Thirty-six percent of participants found the courses so helpful that they voluntarily completed more training than required. Most important, the online training helped them find a job faster. Among the test group, unemployment duration was reduced by 7 percent.

The program has now gone statewide in Utah, and a 7 percent reduction in duration of benefits is expected to save $16 million dollars annually, not to mention the boost to the state's economy and culture from a more engaged labor force.
11
Not surprisingly, other states are taking notice. A similar program was attempted in Mississippi with even better results. Participants there increased their preparedness by a staggering 31 percent.
12
And in Kentucky, workers spent 2.2 weeks less on unemployment insurance benefits when required to take training courses.
13

The beauty of the Flex Fund is that it will make states accountable for how they spend their federal antipoverty funds in ways they aren't today. It's the difference between spending someone else's money and spending your own. When it's your own, you care more about results. As it is, the funding formula for programs like food stamps and Medicaid contains a perverse incentive for states: It rewards them with more federal dollars the more they spend.

Some states are pretty good at gaming this arrangement. In one case, states were taking advantage of a provision in federal poverty regulations that made families who were receiving benefits through a federal home heating assistance program eligible for additional food stamps. To boost their food stamp funding, states were signing up residents for a single dollar of home heating assistance. They called it “Heat and Eat.” When Congress tried to tamp it down by requiring that families receive at least $20 in home heating assistance to get more food stamps, the states responded by spending more of their home heating funds—most of which came from the federal government anyway—in order to preserve higher food stamp funding. Democratic New York Governor Andrew Cuomo proudly announced that he would spend $6 million in federal home heating funds in order to get $457 million in food stamp funding.
14
This example is telling. As long as the current incentives to spend someone else's money exist in our poverty programs, some states are going to take advantage of it. Giving states their own funds to spend and be accountable for through the Flex Fund would put an end to this kind of abuse of the American people's taxes and their goodwill.

After serving eight and a half years in state government, I know that if free to innovate and if responsible for their own spending, the states could implement programs that give those currently stuck in low-wage jobs access to a job training system. They could offer relocation vouchers that would help the long-term unemployed to move to areas with more jobs. They could remove the marriage penalties in safety net programs like Medicaid. They could enact a nearly infinite number of other nimble and targeted reforms to address the needs of people in their communities whom they know and understand in ways Washington D.C. never could. Their funding would remain about what it currently is, but if history is any guide, costs would decrease as new state initiatives move people from dependency to self-sufficiency. Ultimately, my proposal isn't intended to increase or decrease the amount of federal funding spent on antipoverty programs. My approach is intended to take us from tired old battles about money in Washington D.C. to new ways to cure poverty at its root.

In my proposal, revitalized state poverty programs under the Flex Fund will work hand in hand with a new federal wage enhancement tax credit to encourage and reward work. The philosophy behind the federal Wage Enhancement Credit is summed up very nicely by Robert Doar, who was in charge of implementing welfare reform for New York City between 2007 and 2013. One of the things he learned, Doar says, is “making work pay is welfare reform too.”