Blue Collar Conservatives: Recommitting to an America That Works (7 page)

CHAPTER FOUR

HOLES IN THE BOAT

S
ince Ronald Reagan came to Washington and launched the supply-side revolution, Republican economic policy could be expressed in one word—growth. “A rising tide lifts all boats,” as we like to say, quoting that earlier tax cutter John F. Kennedy.
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The theory is that by helping those at the top—the people who start businesses and create jobs—we help those at the bottom.

Our economic policy, therefore, has focused on tax cuts, deregulation, and free trade. While there have been a variety of different plans, from the “Fair Tax” to the “Flat Tax” to
“9-9-9,” they were all aimed at lowering taxes on job creators to stimulate economic growth.
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After more than thirty years of this policy, I think it is time Republicans ask themselves, “Does this really work?” The short answer is “Yes, but . . .” The “yes” part is pretty clear. If government policies encourage growth and business owners and investors earn more profit (“the rising tide” part), businesses will grow, and there will be more jobs at higher wages (“lifting all boats”). Since the Reagan Revolution, America has had the strongest, most stable economy in the world thanks to economic freedom, relatively low taxes (with the notable exception of the federal corporate income tax), and, until recently, a reasonable regulatory and legal environment.
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So why did I say the answer to the question “Does this work?” is “Yes,
but
. . .”? Advances in technology have helped people even at the lowest income levels. Telecommunications and medical treatment, for example, are better for everyone than they were fifty years ago. But the income gap is widening, and for the 70 percent of Americans who won’t get a college degree, it is increasingly difficult to find stable, full-time employment at wages that can support a family.
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Republicans love to quote Ronald Reagan, who declared in his first inaugural address that “government is not the solution to our problem; government
is
the problem.”
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But you rarely hear the four words that preceded that line: “In this present crisis. . . .” The economic crisis of our day is different from the one Reagan confronted in 1981. Everyone
was struggling then—businesses, investors, and workers alike. Today, large businesses are doing well, and stock and commodity prices are strong. If you are an owner or investor, life has been pretty good. But for workers, it’s a different story: unemployment and underemployment are high, and the percentage of working-age Americans who have given up looking for a job is at thirty-year highs.
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In short, the well-educated, the business owner, and the investor from a stable family are doing fine, but millions of Americans who can’t check those boxes are floundering. In an increasingly service-oriented economy, they are working part-time or in jobs that provide little prospect for advancement. The tide is rising, but many boats have holes of various sizes—for example, a lack of skills or experience, an unstable family, or no high school degree. They are sinking or are stuck on a sand bar. Lower-wage workers see the rich getting richer, but they feel poorer. Democrats are fond of saying that all the Republican talk about a “rising tide” really amounts to “trickle-down economics.” That accusation may be shortsighted and not entirely fair, but we have to admit that for the people at the bottom, that’s what it feels like these days—just a trickle.

President Obama recognizes the problem of sinking boats, but his answer, predictably, has been to raise taxes on those who are succeeding, borrow even more money, and hand out
that money not only to people in sinking boats but to almost half the population.

So how has that worked out?

Here are the facts of the first four years of President Obama’s attempt to tax and redistribute our way out of the wealth gap that existed when he took office. Income inequality has increased under President Obama.
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The gap between the rich and the poor is wider than it has ever been in American history.
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In President Obama’s first term, the income of the top 1 percent grew 31.4 percent, while the income for everyone else grew just 0.4 percent.
⁹
Yes, you read that right—
less
than 1 percent. And the top 10 percent of all Americans now have 50 percent of all the wealth in this country.
¹⁰
Since the Great Recession ended, 95 percent of the gains have gone to just 1 percent of Americans.
¹¹
It turns out that Obama’s attempted Robin Hood act has actually helped the rich and hurt the poor.

Why hasn’t taking from the rich benefited the poor? Higher taxes make America less competitive in the global economy for both jobs and investment capital. In spite of the Federal Reserve’s desperate effort to counteract the administration’s anti-growth policies by printing money, the economy continues to sputter. Slower growth hurts everyone, but it hurts marginal workers and low-wage workers more.

But how does a government handout hurt the recipient? How does it put more holes in the boats of people who are
already sinking? The government programs that have expanded most under this stagnant economy are benefits to able-bodied people. These benefits carry no expectation of work, service, or repayment, and they create a disincentive to climb the ladder of success and happiness. When the Congressional Budget Office forecast that the most recent entitlement aimed at working Americans, Obamacare, would result in 2.5 million Americans choosing not to work, President Obama responded with a “mission-accomplished” thumbs up.

Providing health benefits is not the first disincentive to work the Left has promoted. Look at unemployment benefits as an example. Early in the recession, President Obama requested that unemployment benefits be extended to ninety-nine weeks.
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At a time when the unemployment rate was over 10 percent, this was seen as an act of compassion.
¹³
But the purpose of unemployment insurance is to enable recipients to focus on getting a job, not to make it easier for them to stay out of work. Since the government began tracking long-term unemployment in the 1940s, no more than 25 percent of the unemployed had ever been out of work more than twenty-seven weeks,
¹⁴
and unemployment benefits usually lasted twenty-six weeks.
¹⁵
In 2010, by contrast, an unprecedented 47 percent of those on unemployment benefits received them for between six months and two years.

The longer someone receives unemployment benefits, the more difficult it becomes for him to return to employment.
¹⁶
Consider how an employer is likely to view an able-bodied worker who has been on benefits for two years and, now that those benefits are exhausted, is applying for a job that is a step down from his previous position. The applicant’s job skills have probably eroded, his work habits and attitude are questionable, and he is more likely than someone else to go back on unemployment. A long stay on unemployment makes the recipient less employable, which makes him less likely to be successful, independent, and happy. The politically popular extension of unemployment benefits, therefore, is less compassionate than it seems.

As my grandfather and dad drilled into me, hard work is the key to success and happiness. How tragic, then, that our government, which should promote the common good, undermines the work ethic of its citizens in so many ways. Even state-run gambling and lotteries promote the idea of get rich quick without earning it, instead of the slow and steady climb up the ladder that comes from working hard and improving your skills. An estimated 70 percent of lottery winners, who struck it rich, go broke.
¹⁷

But more harm is done by welfare programs. The government “safety net,” as the metaphor implies, is intended to catch us as we fall and help us bounce back to a position of safety and stability, ready to continue life’s climb. It has
evolved, unfortunately, into a hunter’s net that ensnares the vulnerable, robbing them of their dignity and trapping them in generational poverty and hopelessness.

Designed with the best intentions, welfare programs, like Obamacare, have a “phaseout” feature. The more you (or your spouse) earn, the less you receive in government benefits. At first glance, phaseouts seem to make sense, but they are a powerful disincentive to take a job or get married. In other words, they discourage the behavior most necessary for rising out of poverty.

Glenn Grothman is a state senator in Wisconsin whom I met while campaigning there in 2012. He shared with me the startling fact that in his state, a single mother with two children was eligible for over $38,000 in a variety of government benefits as long as her income didn’t exceed $15,000 a year. For every dollar she earned over that amount, she lost more than a dollar in benefits! If she married the man she was living with, he would have to earn over $60,000 a year for her to remain in the same place economically. In their desire to help, the architects of the welfare state have steered single mothers away from working and marrying. Millions of Americans face enough barriers to success—a poor education, poor work habits, a criminal record, lack of experience—without the government adding more.
¹⁸

As more citizens receive government welfare benefits, the stigma is being replaced by an expectation of being on welfare,
especially in areas where out-of-wedlock births are a multigenerational norm and government has replaced fathers. Without the stigma, recipients lose the sense of welfare as a temporary solution and see it simply as a way of life. When most of your neighbors live this way, there is no shame in living this way too. Programs designed to help in the short term do great harm in the long term.

Let me be clear: conservatives should not rail against properly incentivized government safety net programs for those whose lives have taken a bad turn, nor against government programs that provide lifesaving care for the disabled, the chronically ill, and the elderly. A compassionate and caring society should have such programs in place, but the programs must be private-public partnerships that are more affordable, more efficient, and better targeted than the current slate of programs.

With hopelessness and a lack of ambition comes crime—and not all of it happens out on the streets. When most of your neighbors live on the dole and accept it as a way of life, when you think of government benefits as something you deserve rather than something you tap only in an emergency, then it’s a short step to figuring out a “creative” way to get at those benefits. This little act of fraud can go beyond stealing from the taxpayer to stealing from a community’s own future. In a remarkable and heartbreaking column in the liberal
New York Times
last year, Nicholas Kristof described a poor rural
community in Kentucky where parents admitted to taking their children out of literacy classes to protect a Supplemental Security Income benefit they received for having a “disabled” child.
¹⁹

An entire legal subspecialty has developed around the aggressive pursuit of Social Security disability claims (“We don’t take no for an answer!” one lawyer advertises). Fraud is far more widespread than you might imagine.
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In some small, low-income towns, the retail stores are packed on the days disability checks are issued.

It’s sad that people are in this position. It’s sad that misguided government policy has made it worse. And it’s sad that the president hasn’t learned anything from experience. It wasn’t that long ago, in the 1990s, when I lead Republicans working with President Clinton to reform welfare in a way that preserved the safety net but got people back to work. Maybe it was tough love, but it was compassionate. Our goal was to encourage people to return to the labor force, enhance their job skills, and accept the responsibility (and earn the self-respect) that comes with employment. You need three things to avoid poverty—education, work, and marriage—and we tried to shore up all three. We ended welfare as an entitlement; we provided block grants to the states so that they could use the money in the most effective way, which included providing vocational training; and we strengthened enforcement of child support payments, among other provisions.
Welfare rolls plummeted, poverty rates fell, people went back to work, and we showed that while poverty is an undeniable problem, it need not be an inescapable condition.