Yuval Levin’s 5 Steps to Achieve Economic Mobility

Yuval Levin’s 5 Steps to Achieve Economic Mobility

National Affairs Editor Yuval Levin / Photo: EPPC

Yuval Levin, Editor of National Affairs, writes in Commentary magazine that economic mobility will be the key debate of the 2016 presidential election. While Democrats will likely turn to their failed rhetoric of equating economic mobility with economic inequality, Levin outlines how conservatives can address the issue and what their reforms should look like in five steps:

1. Economic growth

The first is the most general and the easiest for Republicans to embrace: growth. Because growth is a necessary if not sufficient condition for improved economic mobility, policymakers need to create and sustain the right environment for economic dynamism.

This means a growth-friendly tax code, which in our time particularly requires corporate tax reform that lowers rates and encourages investment—bringing our corporate code into line with those of other advanced nations. It means a health-care system geared to enable real competition and cost containment. It means spending and deficit restraint, and the kinds of reforms necessary to avoid the fiscal collapse of our entitlement programs—a danger that politicians tend to talk about in terms of protecting their grandchildren but that is in fact projected to become an unmanageable burden just when Americans now entering the workforce will be in their prime working years. It means that monetary stability and predictability, free and open trade, and a restrained approach to regulation are all vital…

2. Clearing up bottlenecks

The second category of needed reforms would seek to address persistently low mobility among poor and lower-middle-class Americans. It involves clearing up bottlenecks, often created by public policy, which hold people back from pursuing opportunity and prosperity. A bottleneck is a particular kind of obstacle: It is a function of a narrowing of options. The upward path into and through the middle class has clearly gotten narrower in America in recent decades.

One primary culprit is our higher-education system. A college degree has become an increasingly essential ticket into middle-class life even as higher education has grown more expensive and less edifying. Tuition costs have tripled over the past three decades, so that an average year of college now costs about half the annual income of the average American family. For many families, this means going deeply into debt. And although a college degree continues to provide an important economic advantage, the earnings of graduates have been sliding for over a decade, and many in recent years have failed to find work in their field. Higher costs, lower value, and growing debt make for an increasingly bad deal, and families know that, but they are short on other options for upward mobility. Rather than a path to prosperity, college itself is increasingly a bottleneck…

3. Removing policy burdens

The third facet of a mobility agenda would involve lifting burdens imposed on the middle class and the poor by some perverse incentives and distortions in today’s welfare state. For instance, the structure of our entitlement and tax systems means that parents are overtaxed—paying for today’s entitlements while bearing the costs of sustaining tomorrow’s. A significant increase in the child tax credit that could reduce families’ payroll-tax burdens as well as their income-tax burdens would make an enormous difference to millions of middle-class families pressed by stagnating wages. And such tax relief for families would be a natural companion to the corporate tax reform necessary for stronger growth.

The unintentional marriage penalties in the tax code also burden many middle-class families, and similar penalties in most welfare programs (from the Earned Income Tax Credit to Medicaid, food stamps, and others) create disincentives to marriage that hurt the poor and counteract the very aims of these programs. No less perversely, many means-tested aid programs create disincentives to work, since working leads to benefit cuts that in many cases can outweigh the appeal of earned income. Correcting such disincentives would be no simple matter, but a number of conservatives have proposed promising ideas for doing so in recent years…

4. Enabling vigorous experimentation in welfare and education

The fourth element of a mobility agenda would go beyond lifting burdens and focus on the most difficult and important part of the mobility puzzle: the curse of entrenched poverty. This would involve the next stage of welfare reform, and it’s the arena where a conservative approach to problem solving can do the most good.

The overwhelming fact about our half century of intense and costly efforts to combat entrenched poverty is that they have not worked. Very little we have done has proven consistently effective in helping people in the worst circumstances to rise up and succeed, and a fair amount of what we have done has made things worse. That means we do not have an answer that can be put into effect using the resources and power of the government. Rather, those resources and that power can enable experimentation with different approaches by different public and private providers of services and aid throughout the country.

This was the essence of Paul Ryan’s anti-poverty proposal last year. Ryan would let states choose to replace the full amount of money they now receive to administer means-tested federal welfare programs (such as food stamps, housing assistance, utilities subsidies, and others) with a single, consolidated “opportunity grant.” They could then develop their own approaches to spending the money to help their poor residents rise, provided that these approaches involve programs that require work, emphasize reaching self-sufficiency, and prove their effectiveness over time. And states would have to provide each service through at least two competing providers, only one of which can be a state agency…

5. Separating welfare from disability support

Finally, the fifth element of a conservative mobility agenda should involve drawing a clear distinction between welfare assistance and disability benefits. In particular, the Social Security Disability Insurance program has come to function as a kind of welfare system of last resort, but it is very badly suited to that purpose. The share of working-age adults on SSDI has more than doubled since 1980, from 2.3 percent to 5 percent of the workforce, or about 9 million Americans. The increase is quickly bankrupting the program (its trust fund will be depleted next year) while contributing to the decline in workforce participation in America…

A mobility agenda should therefore reform these programs by tightening medical-eligibility criteria (to help ensure that disability support really serves its purpose), placing time limits on some benefits, and requiring more ongoing reviews of eligibility. It could also better encourage employers to enable workers with modest disabilities to keep working—for instance by requiring firms whose workers enroll in SSDI at substantially above-average rates to pay a higher rate of Social Security taxes (as some states now do with their workers’ compensation funds). Combined with a greater emphasis on work in the welfare system, as suggested above, this could help us begin to separate policies (like welfare) aimed to help people get back to work from those (like disability insurance) aimed to help those who are unable to work.

These are, of course, only the barest outlines of an agenda. But these five categories of steps—sustaining an environment for growth, clearing up bottlenecks, removing policy burdens, enabling vigorous experimentation in welfare and education, and separating welfare from disability support—offer the beginning of a conservative answer to the riddle of mobility.

 Read more at Commentary Magazine.

 

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