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Analysis: Trump's promising plan to link welfare to work

Bloomberg logoBloomberg 4/24/2018 Cass R Sunstein

Editor's note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.

President Donald Trump’s “Executive Order on Reducing Poverty in America” has produced the expected political reactions. Because it focuses on saving taxpayer money and strengthening work requirements for federal programs, many conservatives are celebrating it, while many progressives have attacked it as punitive and dehumanizing.

As it turns out, it’s a lot more interesting and subtle than either side has seen – and potentially more constructive.

As one of its “Principles of Economic Mobility,” the executive order emphasizes the importance of helping five groups that struggle to find employment – single parents, the formerly incarcerated, the homeless, substance abusers and “disconnected youth.” The emphasis on these groups makes perfect sense in light of the findings of the best book on poverty in the last decade: “Scarcity,” by Sendhil Mullainathan and Eldar Shafir.

Mullainathan and Shafir argue that when you are poor, a big part of the problem is cognitive: You have to focus on how to deal with your immediate economic situation. You don’t have a lot of time for anything else.

In that respect, being poor is a lot like being hungry, lonely or extremely busy. Your current circumstances take over your mind. That means that you are likely to neglect other matters (including the long-term). It also means that unwelcome, unanticipated problems and tasks (say, a health issue or an obligation to deal with the public authorities) can impose an unbearable toll.

Mullainathan and Shafir help explain why Trump’s five groups find it unusually challenging to find and keep good jobs. If you are a single parent, you have to focus on childrearing. If you were incarcerated, you face continuing stigma and suspicion.

Related problems are faced by homeless people, substance abusers and young people who lack social networks that provide essential information and emotional support. In a section that reads as if based directly on Mullainathan’s and Shafir’s work, Trump’s order refers specifically to the importance of “strong social networks as a way of sustainably escaping poverty.”

The order directs government agencies to act in accordance with its “principles of economic mobility,” and also to review existing regulations and guidance documents to ensure that they are consistent with those principles. For the agencies, an immediate priority should be to look at increasing the availability of the Earned Income Tax Credit, which provides a strong incentive to work, and which is especially valuable for single parents.

Too few people who qualify for the EITC take advantage of it. According to some estimates, 25 percent of eligible Americans (perhaps as many as 6.7 million people) do not apply for the benefit, even though it could have a major impact on their lives.

An excellent step would be for the Internal Revenue Service to provide eligible Americans with multiple reminders, offering information that is both simple and personally relevant.

More generally, Trump’s order is an occasion for improving the take-up rate for many programs designed to help people to find work. In view of what we know from Mullainathan and Shafir, the Office of Information and Regulatory Affairs, in collaboration with Cabinet agencies, should undertake a sustained review of existing paperwork and reporting requirements, which sometimes have the unintended consequence of undermining programs designed to promote economic opportunity.

According to the most recent federal report, the American public spends an astonishing (and disgraceful) 9.78 billion hours on federal paperwork each year. The Treasury Department (meaning the IRS, mostly) is responsible for nearly 7 billion of those hours; the Department of Health and Human Services accounts for over 600 million.

There is no question that poor people – seeking education, training and jobs – are often deterred and stymied by form-filling burdens and reporting requirements from federal, state and local governments. Trump’s executive order should be taken as an occasion for radical simplification. It should also be a basis for an effort to reduce occupational licensing requirements, which make it unnecessarily hard or even impossible for people to enter the workforce.

Franklin Delano Roosevelt can be seen as the founder of the modern welfare state, and he was full of compassion for poor people. Indeed, he called for a Second Bill of Rights, including a right to a decent home, adequate medical care and “protection from the economic fears of old age, sickness, accident and unemployment.”

But Roosevelt was also an advocate of the importance of work, and his programs were generally designed to encourage it. “When any man or woman goes on a dole,” Roosevelt said, “something happens to them mentally, and the quicker they are taken off the dole the better it is for them the rest of their lives.” 

In keeping with Roosevelt’s plea, Trump’s executive order directs officials to track whether measures are actually helping people to escape poverty by finding jobs and avoiding long-term dependence. It also calls for information-sharing, so that states and localities can learn from successes and failures.

What an excellent idea. With a clear focus on the most vulnerable among us, it’s past time for a sustained attack on existing barriers to entry into the job market – emphatically including those of the government’s own making.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Cass R. Sunstein is a Bloomberg View columnist. He is the editor of "Can It Happen Here? Authoritarianism in America" and a co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.”

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