Rashida Tlaib's new proposal is the easiest smart idea in Washington
Liberal policymaking has long been in thrall to disgusting conservative prejudice about poor people. Policies like the Earned Income Tax Credit (EITC) and the Child Tax Credit have a "phase-in schedule," meaning that in order to claim any benefit, one must first earn money working at a job. That excludes the vast majority of the poorest people, because they are overwhelmingly people who have difficulty working. Children, students, the unemployed, the disabled, the elderly, and people caring for someone else make up about nine-tenths of people in poverty.
Rep. Rashida Tlaib (D-Mich.) — no doubt after consulting closely with some #disruption specialists at Aspen Ideas, or perhaps watching a few TED talks — has innovated a brilliant new solution: just don't do that. Get rid of the stupid rotten phase-in and give money to all poor people. It's both an excellent idea that would slash American poverty, and a crucial step in shaking off the baggage of capitalist ideology.
Jeff Stein reports at the Washington Post that Tlaib is developing a plan called "LIFT+" which would drastically restructure the EITC. Instead of its current hideously complicated benefit structure, Tlaib would give $3,000 to individuals and $6,000 to families. It's somewhat akin to a small universal basic income — though it would still phase out at the top, meaning people that make middle-class or above wages would not be able to claim it.
As Matt Bruenig writes, this is an enormously promising development. Capitalism causes poverty because it only gives income to workers and owners of wealth, but about half the population does not work and most wealth is held by a tiny minority of rich people. Therefore, the way to solve poverty is to make sure that all people who can't work have income through the welfare state. Countries like Denmark, Finland, and the Czech Republic have nearly eradicated poverty with benefits aimed at every category of people who can't work — stuff like a child allowance, student benefits, generous unemployment insurance, disability benefits, retirement pensions, and so on.
Liberal objections to this are totally unconvincing. "It'll discourage people from working who can work," the Tax Policy Center's Leonard Berman complained to the Post. In reality, it would neither discourage nor encourage work, since poor people would receive it regardless. It might reduce people seeking work out of pure desperation, but trying to horsewhip poor people into the labor market is never going to work very well, since as we've seen, such people are already largely unable to work in the first place.
Indeed, the latest research on the EITC itself shows it probably does nothing at all to increase labor supply. The smart way to keep employment up is to focus one's efforts on the population of people who can work — with public works projects, fiscal and monetary stimulus to fight recessions, worker retraining and job placement programs, and so on. European countries with such programs employ a greater fraction of their prime-age working population than the supposedly job-focused U.S.
(As an aside, it's funny how worries about work incentives never apply to rich capitalists who take in about a 30 percent of the national income every year without having to work for it. Don't they deserve the dignity of work too?)
Now, Tlaib's proposal is not quite perfect (and at time of writing, it's not finished yet). It is extremely obnoxious to actually claim the EITC, in part because tax prep companies have lobbied to make filing out the necessary paperwork as onerous as possible so they can force (or trick) poor people into paying them part of their EITC payment. Some 20 percent of people eligible for the extant EITC don't claim it, probably because they don't know it exists or don't understand its structure — though it would surely be easier to do so with Tlaib's simplified program.
Moreover, it's not ideal for all the EITC payment to come in a lump sum once per year. Poor people routinely have cash flow problems, and struggle to spread that income out properly. It would be far better for it to be paid out automatically to all eligible households (as the IRS has detailed income data for the whole population) on a monthly basis. The Social Security Administration is already sending out millions of checks every month; they could easily add LIFT+ payments to their current duties.
But these are minor technical quibbles. Tlaib has gotten the big picture absolutely right. America has an appalling rate of poverty because we do not distribute enough income to poor people. The way to solve is to give them some. It really is as simple as that.