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Comments for the Record
U.S. House of Representatives
Committee on Ways and Means
Subcommittee on Human Resources
Subcommittee on Select Revenue Measures

Hearing on How Welfare and Tax Benefits Can Discourage Work
Wednesday, June 27, 2012

By Michael G. Bindner
Center for Fiscal Equity

Chairmen Davis and Tiberi and Ranking Members Doggett and Neal and members of the subcommittees, thank you for the opportunity to submit comments on these issues.  These comments are an update to comments we submitted last September.  We find, however, that they are just as valid.  

Let me first highlight our main point – which is that simply putting people to work in low wage jobs is not enough.  Indeed, if child care and pay are inadequate and these jobs have no future than removing disincentives to work is simply code for slavery.  This should NOT be the goal of public policy in 21st century America.  Instead, the focus should not be on making people go to work as soon as possible, but instead giving them the skills to make full use of their potential – which most likely involves making up for badly funded rural and inner city schools, where the lack of funding bears some relationship to their ethnic backgrounds.  Failure to recognize the racist roots of poverty in America simply perpetuates the sins of the past.  That is simply honesty, not playing the race card.

The work opportunities available to most TANF participants can easily be described as low wage work and, without significant resources in human development, are likely dead-end jobs.  Such jobs often receive tax subsidies, such as the Earned Income Tax Credit and the recently expired Making Work Pay tax credit.  One must look askance at any programs which transfer the responsibility for providing adequate wages from the employer and the consumer to the taxpayer.  

The expired Making Work Pay tax credit enacted as part of the Recovery Act subsidized low wage labor where the preferred option would be a higher minimum wage, forcing employers and ultimately consumers to pay for the services they receive. Minimum wage laws are necessary because they level the playing field so that employers cannot initiate a “race to the bottom” by allowing workers to compete against each other to offer ever lower wages, often leaving families in the impossible position of having to bid well below what would otherwise be a reasonable standard of living in order to survive.

Increases to minimum wages and benefits, such as mandatory sick leave are, by far, the best incentive to get people to work.  Mandatory sick leave would also help the prospects of health care reform, as parents would no longer be forced to resort to emergency room care because the doctor’s office is closed during working hours, thus decreasing costs for all.

Another area that will help make work more attractive is income support for families.  Such support addresses real market failure in the employment market. It is entirely appropriate to use tax benefits to assure that all families receive a decent wage.

The United States Department of Agriculture estimates that it should cost $1,000 per month per child to provide a decent level of subsistence. The federal government could easily guarantee half of this amount using tax reform, with states providing the other half with coordinated tax benefits.

This credit would replace the earned income tax credit, the exemption for children, the current child tax credit, the mortgage interest deduction and the property tax deduction – and possibly the 10% tax rate.  Any consumption tax prebate should also be included in this total.  This will lead employers to decrease base wages generally so that the average family with children and at an average income level would see no change in wage, while wages would go up for lower income families with more children and down for high income earners without children.

This shift in tax benefits is entirely paid for and it would not decrease the support provided in the tax code to the housing sector – although it would change the mix of support provided because the need for larger housing is the largest expense faced by growing families. Indeed, this reform will likely increase support for the housing sector, as there is some doubt in the community of tax analysts as to whether the home mortgage deduction impacted the purchase of housing, including second homes, by wealthier taxpayers.

One major obstacle in getting TANF recipients into the working world is the quality of skills they bring to the table.  Indeed, a recent survey of the vocabulary of TANF recipients in public housing puts it below the level of the average seven year old.  Not seventh grader, seven year old.  

State based efforts to improve TANF participants to a level of basic – or even advanced literacy – should be applauded.  Indeed, provisions to not only provide remedial education to all who require it should be a mandatory part of TANF reform, not just in states that chose to.  

Literacy training must also be provided to fathers if required.  Indeed, to facilitate this, the restriction on benefits to intact families must be abolished.  Furthermore, compensation for this training should be as rewarding as work, so participation should be compensated at the minimum wage.  

In addition to the wage, participants should also receive the same Child Tax Credit as those who work, as well as the same level of health insurance, which could be offered to them as if they were employees of the education provider – thus ending the second class care they receive through the Medicaid program, as well as the need to pay benefits through large, yet underfunded, social welfare bureaucracies at the state level.  Public housing should be replaced with residential training programs for both parents and children.

Program participants must be treated as adults.  If they are, they can be expected to behave as such.  All too often, the fiscal, welfare and immigration policy of the United States seems designed to provide a pool of low wage workers for the food service industry – from the field to the fast food counter. While these jobs may provide some degree of upward mobility, at times they are akin to slavery.

In the 21st Century, we can do better than that. If some products cannot be produced without what amounts to subsistence wages, than perhaps those products should not be produced at all, either at home or abroad. It should not, indeed it must not, be the policy of the United States Government to shield consumers from paying decent wages to those who feed us.

Establishing a decent level of income through paid remedial training, increased minimum wages and increased family support through an enhanced refundable child tax credit will also reduce the need for poor families to resort to abortion services in the event of an unplanned pregnancy.

Indeed, if state governments were to follow suit in increasing child tax benefits as part of coordinated tax reform, most family planning activities would be to increase, rather than prevent, pregnancy. It is my hope that this fact is not lost on the Pro-Life Community, who should score support for this plan as an essential vote in maintaining a perfect pro-life voter rating.

Thank you again for the opportunity to present our comments.  We are always available to members, staff and the general public to discuss these issues.  

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Comment Preferences

  •  I just want to note for the record that (1+ / 0-)
    Recommended by:
    Horace Boothroyd III

    "work" is defined as doing what someone else wants. Sometimes that contributes to the working person's welfare; sometimes it doesn't. When working conditions create or contribute to injury and disease, even when partially compensated, work is coercive, especially when access to the necessities of life has been restricted by private property rights.

    Giving some people the exclusive use of natural resources is fine, as long as it is understood that the fruits thereof have to be shared. The obligation to share is what's often forgotten. Also the obligation to provide for the general welfare, which agents of government undertake.

    Willard's forte = "catch 'n' cage"

    People to Wall Street, "let our money go."

    by hannah on Wed Jul 11, 2012 at 04:39:37 AM PDT

  •  What a load of crap. (1+ / 0-)
    Recommended by:
    pat bunny
    One major obstacle in getting TANF recipients into the working world is the quality of skills they bring to the table
    The only major obstacle to most people in TANF getting jobs is money.

    It takes money to dress for work, it takes money to get to work, it takes money to keep your kids in daycare while you work...

    None of those essential needs is addressed by those work programs. Instead as soon as wages come in supports are taken away. Ignoring the fact those wages will never cover the work expenses and starting the cycle all over again.

    Education is a progressive discovery of our own ignorance.

    by Horace Boothroyd III on Wed Jul 11, 2012 at 04:41:48 AM PDT

    •  Not true. (1+ / 0-)
      Recommended by:
      happy camper

      I operate a one-stop, which includes administering TANF.   The problem with TANF is that it takes a miracle to kick off those that are gaming the system, and you can't help those that need and want help because the rules are so rigid and cookie cutter.  
      Welfare is suppose to send us able-bodied, job ready TANF recipients, and we get women 8 mos pregnant, women caring for kids/spouses so severely disabled they can't possibly find them care or afford it if they do, and others in such desperate straights they can't possibly focus on getting or keeping a job and rightly so.   There are always exception to the rule, but not many.

      If the state welfare departments and programs were run as efficiently as social security, there wouldn't be half the problems.    Some people will never be able to hold a job. ; and you can't have rich people without poor people - yin and yang.   Washington needs to climb off the asses of the poor, unemployed and underemployed and focus on the real welfare queens - big corporations and the people in DC "suckling off the teat of big government" while they bash and attack poor people and the middle class.    Have any of them taken a pay cut or given up their taxpayer funded health care benefits?  Hell no.

      TANF sucks.  Bill Clinton pushed TANF because MacDonalds and the rest of the low-wage jobs in the service industry of the 90s couldn't find help.  You remember when Mac's was paying $10/hr.   So the same way industry met their labor needs by pulling women out of the home and creating the need for two working parents and incomes, industry pushed for TANF to drive low skill and low income people into the labor market to meet their needs.  

      Instead of TANF, parents with children not in school full time should be required to have their kids in pre-school or other programs to help them prepare for k-12; and the custodial parent should be  required to attend adult ed or other self-improvement programs simultaneously.   Once the kids are in school full-time and barriers have been resolved, employment becomes an option.   Until then, it is all punitive and bull shit.   The real welfare queens work in DC and private industry.

      "bin Laden's dead, and GM is alive" ~ Biden

      by dkmich on Wed Jul 11, 2012 at 06:01:56 AM PDT

      [ Parent ]

      •  Do you cover child care? (0+ / 0-)

        Until the parent is actually able to support themselves?

        Or do you get them set up for a crap job with no REALISTIC* transportation and then expect them to survive on minimum wage when that doesn't even cover child care for two children so you can work?

        *There is no magic ride fairy that will get you to child care and work. And guess what the bus is not going to cut it. There are not enough actual hours in the day for these parents to do what they are supposed to do with out help. Help you DEMAND they actually have absolutely no resources to get. You know resources like money enough in the bank to absorb going to work for a full month without receiving a paycheck.

        gaming the system
        Is that how you justify why dozens of your charges if not hundreds never manage to keep a job? Because you cut them off too soon?

        Education is a progressive discovery of our own ignorance.

        by Horace Boothroyd III on Wed Jul 11, 2012 at 06:24:57 AM PDT

        [ Parent ]

        •  Welfare pays for child care, but.... (0+ / 0-)

          they pay less than the market value (child care centers can take it or leave it), and if you screw up a freaking form, they shut everything down and cause even more havoc in the recipients struggle to keep a job.  We all know how "forgiving and helpful" employers are - NOT.   They think they deserve a PhD to clean their toilets.  

          There was one of our participants that we would pass in the morning on our way into work.   She would be standing at a bus stop in the freezing cold with her two kids.   On a bus, every morning and night, rain, sleet and snow, she had to take them to child care, then go to work, then pick them, and then go home.  In the freaking cold on a bus.  How many stops do you think she had to wait on everyday?   TANF sucks.      

          "bin Laden's dead, and GM is alive" ~ Biden

          by dkmich on Wed Jul 11, 2012 at 04:55:00 PM PDT

          [ Parent ]

          •  PS - I am NOT welfare - DHS. (0+ / 0-)

            I do not put them on or take them off.  I am a contractor that receives their referrals and is required to comply with their rules.   And yes, some people game the system.   While that woman and her kids are freezing their asses off to "earn" their help, others are filing grievances because we refused to buy them a suit for work from Nordstroms.   I know from your writing that you are a kind and concerned man, but you really don't understand welfare, TANF or the recipients.     Some win, some lose.   I don't like it, but it is the way life is.   Not all welfare recipients are noble or victims of the system.  Many are - but not all.  

            "bin Laden's dead, and GM is alive" ~ Biden

            by dkmich on Wed Jul 11, 2012 at 05:00:41 PM PDT

            [ Parent ]

  •  Before I retired I was VP for Research & Sponsored (0+ / 0-)

    programs at a regional state university.  In this capacity I provided administrative support for grants directed by two faculty members that began about 1995 with the new "Welfare to Work" approach which ultimately morphed into TANF.  I want to comment on one change in particular.  When we first received the grant there was an educational component and people enrolled got credit for being in legitimate educational and training programs.  Further, the program was evaluated with that in mind.  By 2006 or so that had changed with the change to TANF and all that was reinforced was work and I found the rules very strict. Educational programs did not count. What did count was not just how quickly a client could be placed but also long they held the job.  Our program managed TANF for the state in about 30 rural counties in the Appalachian hearland.  Trying to find work that was long-lasting for unskilled and under-educated folks was a continual trial and there was no support for increasing skill levels.  As noted in previous responses this is a failure of the system

    Any Jackass can kick down a barn. It takes a carpenter to build one. - Sam Rayburn

    by Old Gray Dog on Wed Jul 11, 2012 at 06:48:10 AM PDT

  •  I have long viewed (0+ / 0-)

    the EITC as nothing more than a subsidy to low wage employers, and a deliberate attempt to hold the minimum wage at a poverty level. Too often, people ignore or don't realize that an adequate minimum wage drives all other wages up. We've become a high poverty, low wage nation due to our failure to set a living wage for all workers.

    "A lie is not the other side of a story; it's just a lie."

    by happy camper on Wed Jul 11, 2012 at 07:10:50 AM PDT

  •  Let us not forget how welfare reform (0+ / 0-)

    has allowed states to take these block grants and divert funding away from the actual program. It also allowed them to play fast and lose with the eligibility rules which has pushed people off the rolls and due to its inefficiency at a state level allowed some people to game the system.

    --Enlighten the people, generally, and tyranny and oppressions of body and mind will vanish like spirits at the dawn of day. - Thomas Jefferson--

    by idbecrazyif on Wed Jul 11, 2012 at 07:37:56 AM PDT

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