April 13, 2022
Susquehanna University recently hosted two nationally recognized scholars for a debate on the causes of poverty and wealth inequality and how to address them.
“The event goal was to enlighten on poverty issues from opposite perspectives while modeling how people can debate civilly on contentious topics of which they disagree,” said Matt Rousu, dean of Susquehanna’s Sigmund Weis School of Business.
Businessman Edward Conard and college professor Mark Rank both have written books on poverty and inequality, except they hold different views on these issues. The debate took on a question-and-answer format, with Conard and Rank offering their opinions and rebuttals. Responses have been edited for length and clarity.
What is the No. 1 thing we could all do to help the poor and the working and middle class, in the short and long term?
Rank: The best poverty alleviation strategy is to have more jobs that pay a living wage and that provide decent benefits. Over the last 50 years, the United States. has done a good job of creating jobs – much better than European countries – but they tend to be low-paying, part-time jobs without benefits. Today it’s estimated that 40% of all jobs in the U.S. are considered low-paying jobs – that is less than $16-17 an hour. And a lot of poverty and economic insecurity is tied to that.
In the long term, I think the most important thing we can do is to invest in children’s wellbeing and potential. This would include things like investing in healthcare, in childcare and making sure that every child in the U.S. gets a first-rate education, which is not the case today. In the U.S., we like to emphasize the idea of equality of opportunity, but that clearly is not happening and one of the reasons it’s not happening is because we have these wide differences in the quality of education that children are getting. Every child has the right to reach their full potential and that benefits us all.
Conard opened with a summary of what the U.S. is already doing to address poverty before suggesting the country reallocate spending rather than give more money to the poor.
Conard: We already transfer $2 trillion a year to the elderly. We also give about $1.3 trillion to the nonelderly, not counting the $4 trillion we spent during the pandemic. Together that’s 15% of GDP. Net of taxes, America transfers about 6% to the bottom 50% — a three times greater than western Europe and four times more dollars per capita because our per capita GDP is 33% larger. We divide $1.3 trillion among the poorest 50 million nonelderly Americans, which equates to about $25,000 per person or $100,000 for a family of four, far more than the $25,000 poverty threshold and the $65,000 median household income. Counting all the money we spend, most of which poverty statistics ignore, cuts poverty to about 15 million people.
The most impactful things we can do over the next 30 years would be to persuade more talented Americans to get the arduous training, perform the tedious tasks and take the risks that create high-paying jobs for other people. We should also use immigration to recruit talented people from the rest of the world. And if we don’t care about the rest of the world’s poor and only our poor, we could raise low-skill wages by reducing low-skilled immigration. We should also ease real-estate restrictions, especially in our fast-growing cities, to lower the cost of housing.
Do you support former presidential candidate Andrew Yang’s plan for a universal basic income?
Conard: I think it’s a bad idea. I think it’s a horrible idea. I’ll count the ways in which I think it’s bad. First, it would cost upwards of $3 trillion, as much as we’re currently spending to help the poor and the elderly. That’s another 15% on top of GDP. Second, if we just simply replace the existing aid program with UBI, we’re taking money away from people who need it and giving it to people who don’t. Third, one size does not fit all. We have a multitude of programs because people have a multitude of needs. We need to tailor the help to their need. Fourth, we know many people will work less if we give them more, and we already know there is a substantial problem with that. Fifth, many people need helpful supervision. Giving them money and sending them on their way hurts them and it hurts their children. Aid often has to come with responsibilities. I understand why people want to reduce the marginal tax rate on poor people who lose benefits as they work more, but we shouldn’t take a shot of malaria to cure a cold. UBI is a cheap political gimmick that will hurt poor people more than it would help them.
Rank: I’m kind of in the middle on whether this is a good idea or not. I think the advantage is it’s a very direct way of assisting low-income families. You wouldn’t have all the bureaucracy; you’re just transferring $12,000 in the Yang proposal. The [Stockton study] shows that UBI has had quite positive effects, and employment rates were higher for folks who were getting universal basic income than those that weren’t. What we saw with the child tax credit in the Biden administration was a form of a universal basic income — it went to children or people who had children — and a lot of people said that was really important help they were getting.
But, I think a universal basic income is a very hard sell in the United States because many people are going to say we’re giving people something for nothing and we expect something in return.
Does the United States provide enough of a safety net for the poor?
Rank: Definitely not. What we do in the United States is we punish the poor. We make it difficult to qualify for these programs. There is a huge amount of stigma. Data shows that if you look at the high-economy countries, they do much more in terms of the effectiveness of their safety net at reducing poverty. The only group where we can reduce poverty through social programs is the elderly. We’re also very much of an outlier in terms of universal healthcare, affordable childcare and affordable housing. Not only do we provide very little cash assistance, but we provide very little of these other programs.
Conard: There’s never enough. We have a much wider dispersion of potential earnings among Americans relative to northwest Europe and that makes it hard for us to craft a safety net in America that doesn’t discourage work among our much larger share of low-skilled workers. People mistakenly believe that Europe provides a much larger safety net because they don’t take into account the taxes that Europe charges the poor for the services they provide — a 20% sales tax and a much higher payroll tax. The United States distributes a three-times greater share of GDP to our bottom 50%. Our GDP per capita is a third larger than western Europe. Dollarwise, we’re distributing four times as much money per capita as Europe when you don’t consider the taxes they’re charging and that four times is spread over twice as many [people.] Net of taxes, we’re distributing substantially more to our working and middle class than Europe — about 4% of GDP versus zero in Europe. I don’t think we need to spend more. I think we need to spend it differently — less on the middle class and more on helping our low-scoring workers, so the workers remain attached to the workforce. Because, everyone who detaches from the workforce creates generations of poverty in their wake.
How important is economic growth for a society and how should that factor into creating policies to help the poor?
Conard: The vast majority of Americans are not poor. Even those who can’t work by and large aren’t poor. It’s the people who can work that we’re denying aid to. The rest of the world is vastly larger and poorer than America’s poor. Arguably, China, global warming, biological warfare, artificial intelligence — these things — threaten our survival. You can see from Ukraine that the world would be a dark place without America to defend it. And, it’s growing darker as China grows stronger while the West’s population shrinks. Any shot at solving these issues is surely going to come from America. Our innovators produce five times as many billion-dollar start-ups as Europe. Europe is shirking its responsibility by underinvesting so that it can consume more in the short run. Without continued investment, competition with the rest of the world is going to drag our wages down to the world wage. Our outsized contributions on innovation, defense spending and healthcare has made the rest of the world a lot richer than it would be without us. No high-wage economy has done more to help the poor. Those contributions have come at the expense of not devoting more financial resources to our less skilled, native-born workers and to America’s poor.
Rank: I think economic growth is essential for addressing poverty. I think it’s important in terms of expanding the pie. But what we need to make sure is that everyone benefits from the growth. The old phrase is a rising tide should lift all boats and what I would argue is what we’ve seen over the last 40 or 50 years is that the rising tide has lifted the yachts, but has left the row boats behind. The growing inequality that we’ve seen in the United States has stunted our economic growth because that growth is not going to the middle class as it used to go. In general, I think economic growth is fundamental in helping to address poverty and helping to change the structure of the game rather than just who loses out in the game.
What anti-poverty policy could gain bipartisan support?
Rank: The earned-income tax credit. For those of you who don’t know, if you’re working during the year and you’re below a certain level when you file your taxes, you can get a refund. It turns out that that’s the largest anti-poverty cash program in the United States. It has a pretty strong effect in pulling individuals and households above the poverty line. And it is a policy that conservatives and liberals tend to support. Conservatives like the policy because it reinforces the work incentives. Liberals like the policy because it’s providing support to poor families.
Conard: I agree. And if we can’t all agree to enhance high-skilled immigration, if that can’t garner bipartisan support then I don’t know what can. That’s just free money and we’re letting it slide away and we’re doing it at a time when it’s critical for America to be strong, not to be weak. I believe that fair-minded liberals and conservatives want the same thing — they want to maximize middle- and working-class income and they want to help the poor. We just differ drastically about how to do it.
Is poverty inevitable?
Conard: It sure seems inevitable when you look at the world. There’s large differences in the capabilities of people and in the value of paying people to help other people, so I think we’re always going to have inequality. But despite having far less talent, we’re substantially far more prosperous and growing faster than Europe and Europe would be poorer still if it wasn’t free-riding on our leadership. To my perspective, it’s immoral to demand equality at the expense of everyone else or to demand equal distribution throughout the rest of the world at the expense of American innovation and our ability to defend freedom. As long as we are logically paid for successful risk-taking that’s being taken in the best interests of everyone, there’s always going to be inequality. And we’re lucky there’s going to be inequality because it means people are succeeding in the risks that they take, something that’s not happening in other high-wage economies.
Rank: Poverty is definitely not inevitable. The myth goes back to the Bible, “The poor you will have with you always,” and that is not true. There’s a wide variance in terms of poverty rates across other countries. Most countries in Europe have a much lower rate of poverty than we do and the main reason they do is because they do much more to address the issues of poverty. In the United States in 1959, the poverty rate was 22%. In 1973 it was 11%. We had a war on poverty. We had a strong economy. We cut poverty by half, so this is not just written in stone. This can change quite a bit over a short period of time. In 1959, the poverty rate for the elderly in the U.S. was around 35%. Today it’s 9%, and there’s only one reason for that — Social Security and Medicare. Those programs have been remarkably effective in reducing poverty among the elderly. If we didn’t have those programs today poverty among the elderly would go from 9% to about 40%, so that shows you that poverty is not inevitable.
The debate was the culmination of an interdisciplinary course taught by Rousu, who served as moderator, Nick Clark, chair and associate professor of political science, and Dave Ramsaran, provost and dean of the faculty. Students in the course read Conard’s and Rank’s books and conducted Zoom sessions with them throughout the semester before Conard’s and Rank’s live debate in Stretansky Concert Hall.
Conard is the New York Times-bestselling author of The Upside of Inequality: How Good Intentions Undermine the Middle Class (2016) and Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong (2012). He is an adjunct fellow at the American Enterprise Institute. Conard has a Master of Business Administration degree from Harvard Business School and a bachelor’s degree in engineering from the University of Michigan.
Rank is a social scientist and Herbert S. Hadley professor of social welfare at Brown School at Washington University in St. Louis, known for his work on poverty, social welfare, economic inequality and social policy. Rank is an expert in poverty studies. He is the author of notable books such as One Nation, Underprivileged: Why American Poverty Affects Us All (2005). He earned his bachelor’s and master’s degrees and doctorate in sociology from University of Wisconsin-Madison.