This article is a response to “When Times are Tough, Tax Credits Are Not Enough” by Premilla Nadasen.
For anyone who has followed welfare politics since the 1960s, the prospect of a “children’s allowance” in the United States is heady stuff. The expanded Child Tax Credit (CTC), enacted in March, will provide $3,000 per child per year to most families — including those with no income — without a work requirement. At the same time, this welcome surge in progressive anti-poverty policy encourages some to “get out over their skis,” so to speak.
The U.S. welfare state is a cruel master, but it provides benefits worth defending. In recent years, the Left has risen up against means-testing, and more pointed attacks have been launched against the Earned Income Tax Credit (EITC). Matt Bruenig, among others, has been sounding this alarm in Jacobin magazine and elsewhere. Bruenig reserves particular venom for the EITC’s work requirement and phase-in of benefits, which “continue to exclude the poorest kids.”
A common gambit by such critics is to unfavorably compare actually existing programs to idealized, non-existent and exponentially pricier ones, such as a national Universal Basic Income (UBI). A widely shared view on the Left is that universal cash assistance programs would prove more politically robust and reach more poor people than means-tested programs (like the EITC).
Professor Premilla Nadasen takes this argument a step further. She criticizes the EITC for failing to solve the problems of precarity and the proliferation of low-wage jobs. The EITC doesn’t cure cancer, either. Public benefits are not a likely tool for generating living wages, but they can supplement wages and they can protect families from financial adversity.
But let’s step back. The United States has never had a socialist party comparable to those in Europe. Our labor movement is a shadow of its former self. Our constitutional system presents formidable institutional obstacles to progressive change, including the Electoral College, the Senate and the Supreme Court. Racism is a plague on our politics. And so, advancing the interests of the U.S. working class has relied not on big-picture system changes but on defensive strategies, on preemptively making a claim as to why a person “deserves” assistance.
When it comes to supplementing market wages, the overarching defensive strategy has been social insurance. Instead of aiming for perfect, cooperative altruism (the sharing of resources without qualifications or conditions), with social insurance, those who participate are guaranteed protection from adverse financial contingencies — what President Franklin D. Roosevelt called “the great disturbing factors in life.” Despite being insurance, the scheme is (intentionally) not actuarially perfect: Those with lesser means pay less and get more and vice versa. That’s the “social” part of social insurance — a feature, not a bug.
In the U.S. public sector, the greatest source of measurable poverty (and inequality) reduction has been Social Security, a social insurance program.
The “defensive shield” — the ability to protect public benefits against attacks — is stronger for means-tested benefits, also known as the safety net. The design of means-tested benefits rests upon the premise that the benefits are “deserved.” This concession to popular prejudice requires the benefits be restricted to those with low income — “means-tested” — and, to some extent, conditioned on paid employment.
Social insurance programs like Social Security, Medicare, unemployment insurance and worker’s compensation are commonly cited as universal — but they are not and never have been. Each requires a worker to “pay in” and report a record of earnings and payroll tax payments. They also exclude undocumented immigrants and some unpaid caregivers in the home. And yet, Social Security and Medicare have still been the targets of attacks for decades (and, incidentally, the targets of President Joe Biden for most of his political career).
It’s true that the public animus against welfare culminated, in 1996, in the destruction of the leading means-tested program of cash assistance, Aid to Families with Dependent Children, thanks to President Bill Clinton. However, the three largest remaining means-tested programs — Medicaid, the Supplemental Nutrition Assistance Program and the EITC — have grown significantly over the past 30 years.
The current progressive wind, however, encourages a yearning to forsake the defensive postures of the past. This view urges a precipitous rejection of past victories in favor of an overenthusiastic embrace of new, progressive paradigms.
In her column, Nadasen advances several such ambitious paradigms. One is the goal of a guaranteed income. Another is wages for housework. At the same time, she discounts the value of the U.S. safety net, since it relies on means-testing.
We should certainly consider improvements in the safety net, but in the here and now, it still helps a lot of people. Means-tested benefits are income guarantees by other means.
The EITC is real. UBI is not. UBI exists nowhere in the United States except for the unique case of Alaska’s Permanent Fund and a few rinky-dink experiments in California. A UBI that genuinely provides a “basic” income — say, $1,000 a month — to absolutely everybody would rival the size of the entire federal budget. In that sense, UBI is a pipe dream — and is especially intoxicating to libertarians who dream of it blowing a huge hole in their hated welfare state. By contrast, the new CTC and EITC expansions fit within the federal budget.
Nadasen also describes the EITC as a subsidy for low-wage employers, but this is an exaggeration. Empirical research shows the EITC does increase incomes and reduce poverty. And regardless, most any benefit — means-tested or otherwise — enables lower wages.
In the fantastical world of universal programs, where “everybody” is eligible, supposedly the program’s administration would be easy and the politics congenial. But that’s wrong, too. Even on the “easy” side, there is no current mechanism to provide a cash benefit to “everybody.” There is no big list of everybody and their address. The SSA has no such list, and neither does the post office.
The politics of “everybody” are harder. Does it include the foreign-born? The incarcerated? What looks like an obvious moral imperative to us on the Left is not seen in the same way by most Americans, and perhaps even more skeptically by their risk-averse representatives. We will see this sort of scuttlebutt as the Biden administration’s CTC extension comes up for debate.
Making the new CTC permanent would be, to borrow a phrase from Biden, a “big fucking deal.” By all means, we should embrace it — but we should mind the price the opposition would have us pay.
Romney’s model, for example, has beguiled some progressives even though the proposal would be financed by questionable “pay-fors” — cuts in other programs. As I have calculated elsewhere, some of these cuts would have meant millions of single-parent families (most headed by women, of course) would see reductions in benefits and increases in taxes.
Libertarians like the idea of UBI just because it might eliminate other programs. And embedded in right-of-center child allowance advocacy is natalism, the support for a higher birthrate. I suppose some conservatives should be praised for their heroic efforts to sell a children’s allowance to their brethren, but natalism supposes that America’s birthrate is too low. I have to ask, if we wanted more children, aren’t there many families around the world eager to move here?
Meanwhile, sectarians on the Left like to elevate ideal alternatives against the rotten status quo. Medicare for All vs. Obamacare. Socialism vs. barbarism. What they are really against is pursuing meaningful, incremental reform. A radically different political period might offer bigger opportunities for substantial breaks with our conservative history, but now we find ourselves in a life-and-death struggle simply to secure the right to vote.
With or without an expanded CTC, the general paucity of U.S. social insurance and the scantiness of our safety net mean our remaining means-tested programs still provide essential sustenance to the most impoverished members of the working class.
They deserve defense.
For a response to this article, read “When Times are Tough, Tax Credits Are Not Enough” by Premilla Nadasen.
Max B. Sawicky is a senior research fellow at the Center for Economic and Policy Research. He has worked at the Economic Policy Institute and the Government Accountability Office, and has written for numerous progressive outlets.