Bringing Wealth to the Poor (with Michael Tanner)

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00:07 Aaron Ross Powell: Welcome to Free Thoughts. I’m Aaron Ross Powell.

00:08 Trevor Burrus: And I’m Trevor Burrus.

00:10 Aaron Ross Powell: Joining us today is Michael Tanner. He’s a Cato Institute senior fellow and author of many books. His newest is The Inclusive Economy: How to Bring Wealth to America’s Poor. Welcome to Free Thoughts.

00:19 Michael Tanner: Thank you. Pleasure to be with you.

00:20 Aaron Ross Powell: You discussed the history of thinking about poverty, which seems to divide into almost two camps. On the one hand, the poor are at fault for their poverty, and on the other, the poor aren’t at fault for their poverty. Which is right?

00:34 Michael Tanner: Well, I think there’s truth to both of them. And if you look at the current debate about poverty, what you find is that a lot of people on the right accept the idea of a culture of poverty or an individual responsibility for the idea of poverty. A lot of that is built around this idea of a so-​called success sequence, the idea that if you do certain things, like get a job, finish school, don’t have children until you get married, then you’re unlikely to end up in poverty, and that’s very true. On the other side of the equation, there are those who I think are over on the left, who generally say, “Okay, that’s fine, as far as it goes, but you also have to look at what influences those choices and decisions that poor people make, and that in a society in which they’re not treated fairly, in which there is still endemic racism and gender-​based discrimination, as well as economic dislocation, there’s going to be constraints on their choices that push them in certain directions, and it’s not right to blame them for those choices.”

01:34 Trevor Burrus: In the parts of the history that you discuss, in the church, did the church make a distinction between… When the church was involved in most of anti-​poverty efforts, say, in the Middle Ages, did they make a distinction between the undeserving and the deserving poor? That’s an old concept.

01:49 Michael Tanner: Yeah. Not generally. What was interesting was that, originally, the idea of charity was something between you and God. You earn points in heaven, and that was both the Christian church but also was in Judaism and Islam as well. The idea that what you were doing was something that was commanded by God and that’s all you really cared about. You didn’t really care what the poor did or how they got in that situation, or even what they did with the alms that you gave them. That really began to change, actually, in the Elizabethan age when the state got more involved and began mandating charity, if you will, began to tax people and distribute it. People then sort of resented it, and said, “Wait a minute, if they’re taking this money from me, I’m not getting any credit with God for this.”

[overlapping conversation]

02:32 Trevor Burrus: Take a Herbert Spencer line too. Herbert Spencer kinda says, “If they take this, I don’t have… I’m not really being charitable anymore.”

02:38 Michael Tanner: That’s right. Charity is something you do voluntarily, it’s not something you do at the point of a gun. And therefore, people began to say, “Well, maybe we need to make some distinctions about who gets this.” And, originally, the idea of orphans and the lame and the halt, widows, they could get charity, but the able-​bodied people, they were actually penalized and they could be whipped out of town, if they were found begging.

03:06 Aaron Ross Powell: Is this distinction even all that helpful when we’re talking about how we can actually help the poor? ‘Cause it seems like when you look at the way that the left and the right talk about poverty, there’s a lot of mis-​motivated reasoning, or getting this back to like… The left wants us to increase spending on anti-​poverty programs, say, and as a result, they kind of have an incentive to look for evidence that it’s not the fault of the poor that they’re poor; whereas the right doesn’t want us to spend more money, and so it’s easier to not spend more money, both politically, and to convince yourself you’re doing the right thing, if you convince yourself that these people deserve their lot. But both of them seem like they… If the underlying issue is simply like, “How are we gonna help the poor not be poor anymore?” These conversations, do they even really have a role to play in the first place?

03:54 Michael Tanner: Well, yes and no. I do think there’s a lot of backwards reasoning that people have set their position on what they’re gonna do as far as policy goes, and then they go looking for justification for that policy, and I think that that’s mistaken. On the other hand, if you were a doctor treating a disease, you wouldn’t start prescribing things until you knew what the underlying problem was. And I think, to some degree, looking at why people are poor is important in determining what policies you’re going to [04:20] ____… Incentives matter, for example, and if, as the right says, that people are not working because welfare pays too much, or things of that nature, then we should look at what incentive structure we’re creating. On the other hand, if there are things outside of people’s control that’s pushing them into poverty, government policies, in particular, then perhaps we should be looking at those and suggesting ways to change those.

04:41 Trevor Burrus: It also seems that the race issue, which you write about very eloquently and passionately in the book, could factor into undeserving and deserving poor concepts for voters, at least. If there’s a racial element where they tend to think maybe that African-​Americans are lazier and are more on the undeserving side, so they might vote… That’s kind of where the welfare queens thing seem to come in, with your perception of what the poor are like, and then you bring in the racial element, and it could get pretty nasty, I think.

05:09 Michael Tanner: Oh, absolutely. And I do think there’s a racial aspect to people’s attitudes towards welfare. One of the things that I found was very interesting was, you can go back to the start of the war on poverty, and you just came out of Michael Harrington’s The Other America, and people had a vision of the poor as being laid-​off factory workers or…

05:24 Aaron Ross Powell: When was this?

05:25 Michael Tanner: Coal miners in West Virginia. 1965. And you… People were very supportive of the Great Society, it was very popular. And within a very few years, you have Ronald Reagan running on welfare queens, and we need to cut back on the welfare state. Now, some of that was the demonstrable failure of these programs, but a lot of it also had to do with the change in the perception. There was evidence to suggest that the majority of television news stories, for example, about the poor in the ’70s, at least, were about African-​American women with children. And so we got this idea of these women who are unmarried, having a lot of children, non-​working men. While there’s some truth to that in the welfare system, it also is a stereotype that makes it easy to say, “Well, let’s cut off the benefits to them.”

06:13 Trevor Burrus: Does redistribution work?

06:15 Michael Tanner: We just redistribute a lot in this country. The federal government has about 100 different welfare programs or anti-​poverty programs. I think about 70 provide benefits to individuals, the others to communities like Community Development Block Grants and such. We spend about $700 billion at the federal level, and about $300 billion at the state level. So we’re spending almost a trillion dollars. And to some extent, you could say it work, s in the sense that it’s impossible for the federal government, even something as ridiculous as the federal government or as inefficient as the federal government, to spend a trillion dollars and not get some results. You could fly over the country in an airplane, and shovel a trillion dollars out of it, and do something about poverty. But if you walk through poor communities, if you go to Sandtown in Baltimore where Freddie Gray was killed by the police, or Southeast DC, or Owsley, Kentucky, the poorest communities in America, and you say, “Are these thriving communities? Despite the millions and millions of dollars these communities are getting in welfare benefits and other federal programs, are they thriving?” And the answer is no. And that has to be accounted a failure.

07:22 Aaron Ross Powell: What’s the cost of redistribution, though? We can talk about whether it’s working to fulfill its goals, but… You say we’re spending this money, but really we’re taking this money from some people, and then we’re taking it out of the economy into the hands of government, and then the government is just putting it back into the economy, in the hands of other people who are then spending it. So outside of it not working and then maybe moral questions about whether it’s okay to take from some to give to others, is there an economic cost to this? Is this… Could we just keep increasing it, ’cause we’re just shuffling money around the country?

08:01 Michael Tanner: Sure. We know that you can’t redistribute something that doesn’t exist, and if your taxes are so high that people are not investing and innovating and creating new wealth, you ultimately run out of money to invest. As Margaret Thatcher said, the problem with the modern welfare state is eventually you run out of other people’s money, and that is true. It also squeezes out more effective avenues of charity. We know that private charity in many cases is more effective than these government programs, and yet the total amount of charity in society seems to be relatively constant, allowing for the increase in wealth overall. And what happens is the mix between government charity and private charity tends to shift back and forth depending on people’s perception of need. So to some degree, we could be making the situation worse by depriving people of the ability to give privately, and in fact, on a moral basis of taking that responsibility away from them.

08:55 Aaron Ross Powell: You said we’ve got these very poor communities that may have been getting millions of dollars in various welfare programs and funds given to them, yet they remain quite poor. So what’s happening? Where’s that money going?

09:11 Michael Tanner: Well, the money does, basically, deal with the bottom rung, if you wanna look at Maslow’s hierarchy of needs, so to speak, the bottom rung, it feeds people, it prevents people from starving, it makes sure that they have minimal amounts of healthcare or education, or things of that nature. And that’s important. The poverty rate would be higher in the absence of welfare programs. But yet it’s not doing the things that are necessary in order for people to become self-​sufficient, to get off of welfare and become the masters of their own fate. It creates kind of a custodial poverty, if you will, where we keep these poor people as if they’re little children getting an allowance, and we’ll take care of them, but we never allow them to grow up and be adults on their own, and that I think is demeaning.

09:56 Aaron Ross Powell: What’s stopping them from that? If I’m poor and I can’t feed myself, and you give me food to eat, that then doesn’t necessarily stop me from then going out and trying to get a job too.

10:07 Michael Tanner: Well, it might, actually. If the situation is such where getting that job would actually end up costing you those benefits, and could in fact, leave you worse, for all that we worry about high marginal tax rates in Washington, some of the highest marginal tax rates there are are for someone who leaves welfare and takes a job. Almost immediately of taking that job, they have to pay taxes, the payroll taxes on the first dollar you earn. They begin to lose their benefits right away, as well, so that you… If you earn a dollar and you lose 50 cents in welfare benefits, and then you have the expenses of going to work, transportation, clothing, childcare, and so on. In many cases, you could actually end up, at least in the short term, worse off if you take that job. So we’ve gotta look at the incentives in the existing system.

10:55 Trevor Burrus: I’ve heard those described as welfare cliffs, I think, before, where you lose a certain amount of benefits if you earn more money, that if you have $38,000 and you’re a woman with four children, a single woman, if you get a job… If you get a $2,000 raise, you might lose $20,000 in benefits or something like that. That seems crazy. Why would anyone have ever designed a policy that has such stark losses to it? Or did it come about through some sort of more random process?

11:20 Michael Tanner: Yeah, I think it’s just a random thing that’s happened. The fact is, any time you have a phase-​out range of benefits, you’re gonna run into this. And we have such a multiplicity of programs with all these different overlapping programs that have different eligibility levels and different rules that you just sort of run into this. There’s no rational design behind our welfare system. It’s just that, basically, programs spring up because someone in Congress or some special interest group in particular tends to champion them. You have food stamps in part because, of course, the urban Democrats support them, but also because farm-​state Republicans back them. You have housing programs that are primarily to benefit landlords. You have hospitals that want more Medicaid funding, so we’ve expanded Medicaid. It’s a conglomerate of special interests, not a rational or thoughtful process.

12:08 Aaron Ross Powell: Are things getting worse? That’s kind of the consensus attitude you might pick up, is that the…

12:15 Trevor Burrus: Or at least from Bernie Sanders.

12:16 Aaron Ross Powell: Oh, from Bernie Sanders, sure.

12:17 Trevor Burrus: Yeah.

12:17 Aaron Ross Powell: But just this general that things are, especially over the last half century or so, things are worse for the poor than they used to be, so we better double down or fix it.

12:29 Michael Tanner: Well, there’s a lot of ways to look at that. If you wanna look at it just in absolute terms, the poor are much better off. Very few poor people would change their lifestyle today for the lifestyle of, say, a Vanderbilt or a Carnegie 100 years ago. They could have a much bigger house, I suppose, but couldn’t heat it and they had very little electricity and no Internet, no cellphone, and probably no car. Lifestyles have gotten better for pretty much everybody over the last 100 years, including the poor. You can also simply look at poverty rates through the various measurements, and what you find was that poverty had been decreasing throughout the century, until probably the mid ’70s or early ’80s, at which point it sort of leveled out, and we haven’t gained much since then. But certainly, people are better off than they once were.

13:18 Trevor Burrus: To return to some of the questions on race, ’cause you have a chapter on race and gender and inequality. You write that far too many conservatives minimize the cumulative weight of the African-​American experience. What sort of residual effects does slavery and racism have? And how do we see that in some of the poverty statistics?

13:35 Michael Tanner: Well, you hear a lot of conservatives argue as if, “Okay, we passed civil rights laws, now everything has changed and everybody’s equal now and we just need to go forward.” The reality is that you can’t have a race in which one group has been weighed down by chains for five laps, and they say, “Okay, in the last lap we’ll just let everybody run free and it’s an equal race.” The example, about $7 trillion, I believe, is the estimate of how much in terms of wages African-​Americans were deprived of during slavery. That $7 trillion in wealth that didn’t accumulate and build up over the years, passed down to their descendants today. That doesn’t count the losses during, say, Jim Crow era, or the ongoing discrimination today.

14:15 Michael Tanner: The fact is that we live only about 50 or 60 years away from the time when the federal government’s policy was to discourage home ownership among African-​Americans, not to mention red-​lining among insurance companies and things of that nature. Again, more wealth that simply doesn’t exist in the African-​American community today. And then there’s the mental capital. What happens when you saw people who got educated in your community, either gained nothing from it or else be persecuted for it, in some cases lynched, if you were educated in the South. Those attitudes get passed down from generation to generation, and you have to take those into account today. And now that, of course, includes ongoing discrimination we see today with law enforcement and education in other areas that happen now.

14:56 Aaron Ross Powell: But wouldn’t the conservatives just say, “Okay, sure. By and large, black communities have less money now, or are starting off behind because of this $7 trillion in lost wages, and so on, but so much of the problem now is attitude,” going back to the cultural questions we started at the beginning. And so, yeah, that attitude came from somewhere, but if it’s destructive, you just change it.

15:20 Michael Tanner: Well, yes, it’s easy to say, “Just change your mind,” but if you live in a community that has few economic opportunities, where every time you step outside your door you’re hassled by the police, where your school system basically is lousy, and where the teachers don’t think you can achieve anything, yeah, it’s gonna be pretty tough to achieve, to change your mind. That doesn’t mean some people don’t. There’s a great many people who were born in poverty, born under the worst circumstances, and through their own hard work, managed to achieve. But to say that everybody should therefore do it, I think, is a little unrealistic.

15:54 Aaron Ross Powell: Does acknowledging them… So in this case, the poverty is different in the African-​American experience than, say, poverty for rural whites. And so is poverty, as a whole, different for different races and different groups, different demographics, different geographical areas? And does this then mean that we ought to be taking those sorts of things into account? Basically, a poverty alleviating program that targets everyone is not going to work as well for different groups because of the different experiences?

16:27 Michael Tanner: I do think you probably need to look at the individual circumstances in what you’re talking about, both in terms of race and gender, but also in terms of communities. That’s not to say that a rural white person in Owsley, Kentucky who… The coal mines have now closed and they’re living in poverty, is better off than an African-​American poor person. But they face very different circumstances. The chances… How they’re gonna be treated by society, how they’re gonna be treated by others, and what we expect from them, is going to be different. And I think that those things need to be considered as part of an overall program.

17:03 Trevor Burrus: You also discuss gender, and there’s a lot of discussions of things like the gender pay gap, and opportunities for women, and paid family leave, and things like this, but you also seem to think that there are some substantive points that they have, people who focus on gender inequality, about how there is discrimination against women and there’s things that we can help, we can try to fix.

17:27 Michael Tanner: Yeah. I’m very skeptical of some of the common complaints, things like the gender pay gap, and such. I do think that those things are overblown, at best. But I also think you have to look at the count, again, that we have a historical legacy of discrimination against women, that has influenced attitudes towards education, attitudes towards childbearing, that we acculturate women to the idea that they should have children, and that that’s their primary focus, and that this can lead them to spend less time in the labor force, and that can create a number of problems as well. So I think that it’s not as clear-​cut as it is, say, on the racial lines, but I don’t think you can dismiss the fact that women are treated differently in our society still.

18:11 Aaron Ross Powell: But what does that mean from a policy standpoint? The fact that our culture encourages women to have children before… Place that with higher value than having a career, say. We, as policy people recommending policies at the federal or state level, what are we supposed to do with that fact?

18:32 Michael Tanner: Well, I don’t think we should have policies that are based on that. I think the idea the federal government should now incentivize women not to have children or to have children as I think a number of people on the right want to do. But I think we also just need to recognize that it’s not always a choice. One of the things conservatives always say is, “Well, these women get pregnant and they’ve chosen to.” Well, yes, I mean, in a very basic sense they have, but they also made that choice under a lot of pressures from society in various ways and we should recognize that those exist. I guess, it’s more a plea against victim shaming than it is a recommendation for policy.

19:09 Trevor Burrus: We talked a lot about inequality, especially in the last, I don’t know, 15 years, maybe, it seems to be, at least 10. What’s the relationship, or how should we look at the relationship between inequality and poverty? Is it something we should care about equally? Is there… We see poverty… People seem to care about inequality when poverty is a little bit worse, possibly. And what can we do about it?

19:32 Michael Tanner: There’s actually very little relationship. If you look at something, what’s generally called the Gini coefficient, which is the way to measure inequality in a society, and you track that against poverty levels, what you find is there’s no correlation, that poverty levels are going down even as the inequality in our society is staying the same, or going up slightly. In Piketty’s famous book, he laments the growing inequality in China at a time when 800 million Chinese have gotten out of poverty. Inequality is not necessarily bad. There’s sort of a static pie model, if you will, it says, well, somebody got rich, therefore, somebody else must get poor. And the reality is that a growing economy can benefit everybody. In fact, there’s nothing that will reduce poverty more than a growing economy.

20:15 Trevor Burrus: But we have seen the… Have we seen the gains to the very wealthy outstrip the gains to, say, people without a high school diploma? It’s worse now to not have a high school diploma than before, correct?

20:24 Michael Tanner: Oh, yeah, absolutely. I mean, there’s things we need to do, and one of the things that I talk about in The Inclusive Economy is that economic growth is the great engine to get out of poverty, but only if it’s inclusive. If you have policies that sort of lock one group out of that economy while everyone else benefits, you are gonna create not just inequality, but poverty.

20:46 Aaron Ross Powell: But isn’t the argument… Not simply that the inequality is somehow causing the poverty, but that it’s more… When people say like the rich are getting richer and the poor aren’t getting richer as fast or whatever, it’s not so much that they believe necessarily that the rich getting richer is what’s causing the poor to stagnate, but simply, it’s more of an argument that like, look, if the rich are getting so much richer, we should have, say, more progressive taxation to try on the backend to level that out. That’s the relationship in the poverty is kind of almost like a moral care thing, as opposed to a strict like causal relationship.

21:30 Michael Tanner: Well, the risk, of course, is that you killed the goose that laid the golden egg, that in demanding higher and more progressive taxes on the rich, you will reduce economic growth. You create a disincentive for the type of risk-​taking in investment and entrepreneurship that actually creates new wealth and new growth. And if you do that, you’re not going to be able to benefit the poor either. On the other hand, there is a point to be made to the idea that a lot of wealth today is gained through sort of crony capitalism, the idea of using government to promote your business to gain subsidies, to sort of game the system, and at the same time, to lock out the poor from participation in the economy. And I think that that… There’s a point to that, and if people are getting rich because they’re preventing other people from moving up, that’s a cause for concern.

22:18 Trevor Burrus: You have another interesting line where you try to go after libertarians and conservatives on the issue of economic mobility. You say, “Libertarians and conservatives take the preference for absolute mobility too far, ignoring the value of relative mobility altogether.” What does that mean? What are those two types of mobility that you’re talking about?

22:35 Michael Tanner: Yeah, it’s also a question just in terms of poverty. There’s sort of a look at absolute poverty and absolute mobility and suggest that says, “Look, we’re not the South Sudan.” Americans, the poorest Americans are among the richest people in the world. So we shouldn’t… We’ve sort of eliminated poverty and we shouldn’t worry about that. In terms of absolutely mobility, it’s a question of, do people at the bottom move up over time? And yes, they do, ’cause everybody moving up, everybody’s getting richer all the time, as I mentioned earlier. The poor today wouldn’t wanna be Carnegie 100 years ago. On the other hand, I think there’s a danger if you have sort of a British-​style hereditary aristocracy that’s going to be at the top all the time. And even though everybody moves up, if you’re born in the bottom 20%, you will always be in the bottom 20%, your children will always be in the bottom, 20%. Yes, that 20% may get richer, you may have more things, but you can never aspire to be in that top 10% or top 20%. That’s relative mobility. And I think that that’s dangerous for society. I think that that’s the sort of thing that leads to gated communities and a large mob outside the gates. It’s very… It’s a recipe for instability.

23:46 Trevor Burrus: Guillotines, things like that, yeah.

23:47 Aaron Ross Powell: How much of the overall, say, poverty rate is kind of caught up in this… In mobility? So when I was a… Just had graduated from college and I grew up in an upper-​middle class background, I had certainly not been poor, but when I left college, I didn’t have a job and I was, I’m sure, living beneath the poverty line for a while. And so then I show up in that, but it was highly unlikely that I was going to end up staying at that level for my entire life. And so how many people are like me and showing up in that data at any given time slice, and how many people are like the way that we tend to think of the poor, which looks more like what you’ve described with the British experience?

24:35 Michael Tanner: Of course, poverty measures are a snapshot in time. Generally, they’re taken from the Census Bureau, they do a survey every year and they ask what your income is, and if you’re below this arbitrary level, we say you’re poor. We don’t really measure it over time. There are other measures out there that shows that over time, people do move up and down. And in fact, your likelihood of reaching the top 20% is roughly the same as your likelihood of staying in the bottom 20% over time. So people do move up… And in particular, people move down. Being rich today is pretty much a guarantee… No guarantee at all that your family is going to stay rich. In about two generations, of three at the outside, most fortunes have been dissipated and people are no longer as wealthy as they were. So we do still see mobility in our society. America is very different than a lot of the world, in that we still… You still can pursue that American dream of becoming rich here. That’s something that a lot of the world doesn’t still have.

25:30 Trevor Burrus: So if we take your book and we laid the groundwork here about the way we treat poverty, the way we spend a lot of money on it, and you say that there’s probably diminishing returns to just straight redistribution, which seems to be the case, so you focus, as you mentioned, on things that are not just redistribution, reforms that can be made that can help people get wealthier and live more productive lives rather than just be wards of the state, so to speak. So let’s talk about the first one. You say reform the criminal justice system and curtail the war on drugs.

26:01 Michael Tanner: Right. I think that the… Surprising that criminal justice has such an impact on poverty. There’s a lot of reasons to reform the criminal justice system, basically, its unfairness to people, generally, it’s certainly unfair to people of color. It is class-​based, it is race-​based. There’s a host of problems with the criminal justice system. But it also significantly impacts poverty. If you are arrested when you’re 22 and you get a felony conviction and now you’re 45 applying for a job, you still have to put down that you’ve been arrested for a felony, which makes it harder for you to get hired. And in fact, it can certainly follow your whole life. It makes it harder for you to get housing in many cases, if you have to put down that you have a felony conviction. You’re not eligible for college scholarships or even admission to some colleges if you have a criminal record. So it can hurt you… A whole host of reasons that can trap you down into poverty. In addition, you can look at poor communities in the whole question of childbearing outside of marriage; something conservatives worry about a great deal. They’re always talking about all these women having children, they’re not married. Well, who are these women supposed to marry?

27:07 Michael Tanner: You can look at the work by William Julius Wilson and others. There’s a million and a half young black men who are basically outside of the marriage pool because they’re in the criminal justice system. They have the criminal records that prevent them from working and supporting a family, or else they are still in jail or on probation, and so on. These women are sort of left without potential mates, sex being sort of a natural thing for mankind, womankind, they’re going to have sex and that’s gonna result in children, but no potential husband.

27:42 Aaron Ross Powell: So, does this mean that you think we should ban the box, that we shouldn’t… Employers shouldn’t be allowed to ask if you had a felony conviction, or that I, if I’m hiring people, shouldn’t be allowed to take the fact that this person spent time in prison into account?

28:00 Michael Tanner: Well, that may be a second best solution. There is some evidence… I think it’s probably a step in the right direction, although there is some evidence that suggest that what employers do when you ban the box is simply assume all black men are criminals and simply stop hiring on that basis. So, we’ve gotta be careful of that. I think a much better approach is to look at our over-​criminalization in general. Many of these young black men who are arrested, are arrested for things that shouldn’t be crimes. There’s the drug laws, of course, for women, there’s prostitution laws, but there’s a host of other things as well. Let’s remember that Eric Garner was killed for the crime of selling untaxed cigarettes.

28:40 Trevor Burrus: Do we have any data on how much having a felony conviction diminishes your earning potential? ‘Cause it seems like this double whammy, we pay… Especially if you think of something like the drug war, which shouldn’t be a crime; first of all, you pay a bunch of money to put someone in a cage, just like… $30,000 is usually what they say, but of course, that’s at the marginal cost. And then you’ve diminished their human earning potential for their whole life. Do we have any idea how much it goes down?

29:05 Michael Tanner: Well, there is data on individual earning potential that I can’t recall off the top of my head, but I can tell you that overall, scholars at Vanderbilt suggest that if we did criminal justice reform, it would reduce poverty rates by about 20%.

29:21 Trevor Burrus: Wow, that’s a lot.

29:22 Aaron Ross Powell: That’s pretty substantial, but does that… The worry, and, again, we are picking on conservatives some today, but the worry is, okay, great, we do criminal justice reform and we reduce poverty by 20%, but what that also means is that we’ve got a whole bunch of criminals out there who people now either don’t know are criminals, can’t ask if they’re criminals, or aren’t dis-​incentivized to become criminals in the first place.

29:45 Michael Tanner: Well, and certainly, people who are armed robbers I guess should be locked up, or rapists or murderers. On the other hand, people selling those untaxed cigarettes, I suppose I could live with the idea that they’re loose in society.

29:57 Trevor Burrus: That’s the under… Thinking about, I think is Tom Cotton who talks about the under-​incarceration problem, and of course, there’s the point that usually after 30 years, you’re not gonna commit many more crimes. So…

30:09 Michael Tanner: That’s right. The young man’s crime is a young man’s game.

30:11 Trevor Burrus: Yeah.

30:11 Aaron Ross Powell: So, we just lock all young men up until they’re 30, then let them out.

[laughter]

30:17 Trevor Burrus: Well, that is… That makes a huge difference on crime rates. Any time young men are being taken off the streets, like video games, video games probably have a crime mitigating effect. There’s a couple of papers on that, as opposed to this violent video game thing. Your next reform you propose, which is something that would seem to be crucial to this, is education, and especially getting rid of the public school monopoly.

30:39 Michael Tanner: Well, we know that whether or not you graduate school, particularly just graduating high school, but going on to college, of course, as well, has a tremendous impact on poverty. About half of people who don’t graduate high school end up in poverty. The idea that you could drop out of school and go down to the factory and get a job that’s gonna support your family is just no longer viable. If it ever was, it certainly is not in today’s age. So, we need an education system that actually prepares people for the jobs that we have today and educates them. And yet, despite more and more money, we see poorer and poorer results, particularly in low-​income and minority communities. Cities like Chicago or Washington DC or Baltimore where we spend an inordinate amount on a per student basis, and yet large numbers of students fail to graduate; those who graduate test very poorly, in some cases, they can barely read their diplomas.

31:37 Michael Tanner: So, certainly, we need to do something to change the education system. The problem is that we have an entrenched bureaucracy, essentially a monopoly, in the education system that works largely for its own benefit or the benefit of the teachers’ union, and not for parents and teachers or parents of students. And I think that what we need to do is inject more competition into the system, more experimentation in the way they teach and, particularly, to return control over it to the customers, to the idea that the parents are ultimately in charge of their child’s education and not the teachers’ union.

32:11 Aaron Ross Powell: Does this mean you would push for something more like education as jobs training? Is this part of the problem? Not only do we send these kids to bad schools, but we’re sending them to bad schools where they’re learning social studies and geography, and as dear as this is to my heart, English literature, which isn’t gonna necessarily help them in the job market. So would pivoting to education as a way to keep people out of poverty be a better way to approach it?

32:40 Michael Tanner: Well, the evidence actually is fairly mixed on that. The idea that a vocational or… Not vocational, but a particularly skills-​based college education versus a liberal arts college education makes a big difference in terms of your future income actually is disputed in the literature.

32:56 Trevor Burrus: But if we’re good students of Bryan Caplan, we could say for the high school dropouts, is it the dropping out of high school that made them poor, or is it the fact that they’re the kind of person who doesn’t finish high school?

33:09 Michael Tanner: Well, that’s a problem with the entire success sequence, is you’re dealing with this correlation and has A caused B, or B caused A. The same is true on out-​of-​marriage births, the same is true on employment; are there circumstances that cause people to be more likely to fall into those categories? And that’s a subject that social scientists debate. What we do know is that in many inner city schools, there’s not the programmatic or teachers or other ways in which to encourage students to stay in school. There’s very low expectations for them to achieve. We have what people call the school-​to-​prison pipeline in which people of color, children of color, if they misbehave, can get thrown out of school easier or in other ways, disciplined in ways that leave them vulnerable to the criminal justice system. We’ve certainly seen that, some very disturbing videos that have made the rounds in recent years. So, whether or not everybody’s going to have the innate skill set, innate ability to go on to higher education is probably not, and they certainly could benefit from vocational training, more use of apprenticeships, things of that nature, but I’m not sure we should write them off yet.

34:28 Aaron Ross Powell: What about… So we talked about higher education, what about on the other end with early childhood education where we could be helping these kids get used to being in school earlier, so they’re gonna succeed better in it, but also potentially helping their parents to, say, remain in the labor force, they don’t have to drop out of the labor force to watch children?

34:49 Michael Tanner: I would have actually expected there to be more of a benefit from early childhood education than there appears to be, but what studies we see on it suggests that there is very little benefit, it tends to be dissipated very quickly once students enter the public school system. That may be testimony to how bad the public school system is, more than it says anything about early childhood education. But we do know that by third or fourth grade, any gains that they’ve made tend to be gone. And we also know that the few successful experiments are very difficult to replicate. They are very individually, of individual high cost, they spent a lot of money per student and have one teacher for every couple of students and it’s just not something that seems to be replicable when done on large scale.

35:36 Michael Tanner: In terms of childcare, what’s particularly interesting is that the parents themselves tend to resist the sort of large institutional childcare that seems to get most of the money and most of the subsidies, that they would actually prefer sort of informal arrangements with their local church, their neighbor or the families in particular. That’s why it’s so destructive when you see things like Washington DC debating whether or not to require that all daycare providers must have a college education. We don’t require that of parents, so I’m not sure why a daycare provider is suddenly different. But what that’s gonna simply do is make it harder and more expensive for poor families to find someone to take care of their kids.

36:17 Aaron Ross Powell: This freed up educational system that you’re advocating, so we can unleash experimentation and therefore, hopefully alleviate poverty, or at least help in alleviating it, do we have evidence from other places that that works? There are other countries that have more open and free and dynamic education systems than we do. Do we see in those places an impact on poverty?

36:39 Michael Tanner: Well, we see from around the world that poor families will go way out of their way and spend what limited resources they have to educate their children and they will see results from it. The terrific book on this, The Beautiful Tree, I think goes into some detail on some of the benefits you gain from this. Even as a for-​profit education in poor third world countries is quite popular with the parents and their children and shows promise. And we’ve seen sort of… The results are mixed in the United States because it’s hard to get truly free education. People talk about charter schools and they appear to work well in Louisiana, but not work well in Detroit and things of that nature, but they are still heavily regulated by the government. Even when you have things like vouchers, they tend to come with so many strings attached that you’re still keeping the government heavily involved in education, and that tends to limit the amount of innovation that you can have. Education hasn’t changed much. You’re looking basically at Roman pedagoguery. We don’t have a Greek slave teaching the subjects, but it’s basically the same education system that they had. What we really need is to change something differently.

37:58 Trevor Burrus: Your next suggestion is bringing down the cost of housing. What are the biggest factors in raising the price of housing?

38:06 Michael Tanner: People don’t realize how big a deal housing policy is in terms of perpetuating poverty. It’s a huge cost to the poor themselves just in terms of rent taking a disproportionate amount of poor people’s income, but it also tends to lock people into where they are. It makes it hard to move to where the jobs are, or to a lower crime area, or to where your children get a better education. You can’t… People say, “Go to a better education district in the suburbs.” Well, if you can’t afford the rent there, you’ve got a problem.

38:36 Michael Tanner: So being able to move, being able to afford housing is important, and yet government policy drives up the cost of housing tremendously, often to benefit the elites. It was particularly interesting ’cause zoning laws started in this country very explicitly racially. The first zoning laws was actually in Los Angeles, I believe, but Baltimore was a close second. And the law, the zoning ordinances actually prohibited you from selling a house to someone who was not of the majority race on your block. So, if most of the people on your block were white, you couldn’t sell or rent to an African-​American family, for example.

39:18 Michael Tanner: And they still sort of have that impact on segregation today of forcing minorities into certain areas of the city. And of course, class-​based as well. These zoning laws can add tremendously to the cost of housing; there’s evidence to suggest that they add 10%, 20%, in some places like Manhattan or San Francisco, they can add 50% to the cost of housing, and that’s a huge burden that the poor are largely bearing, and to protect the aesthetics of wealthy elites who don’t want multi-​family housing in their area.

39:55 Michael Tanner: There was a story in The New York Times not long ago about a family who was very upset. Their $2 million condo, someone built a building next door to them cutting off their view, so they barely made a profit when they sold that condo.

[laughter]

40:12 Trevor Burrus: The next one is bringing down the costs; making it easier for the poor to bank, save, borrow and invest. I see banks everywhere. It doesn’t seem that difficult to get a bank account.

40:23 Michael Tanner: Well, it surprisingly is because of money laundering laws. There’s a requirement for identification and specific kinds of identification in order to open a bank account, and it’s, in many cases, the poor don’t have it; about 20% of poor people lack the proper ID to open a bank account. Something we hear talked about a lot in terms of voting, the poor don’t have the proper ID to be able to vote. There’s a lot of fighting over that.

40:45 Aaron Ross Powell: Why don’t they? It seems it’s relatively easy to go to the DMV and get a driver’s license.

40:50 Michael Tanner: It is, although there’s a transportation cost to that, there’s the cost simply of purchasing it. There’s a time attitude involved if you lived in certain areas, and there’s some poor people, particularly in the rural South, for example, where they lack birth certificates. They were often delivered by midwives; they didn’t apply for Social Security right away. There’s certain… In the minority community, it’s often the case where they simply lack the type of identification necessary to prove a date of birth, which can create problems. Ultimately, I think there’s ways to provide them with identification that we simply haven’t done, and that gets tangled up again in these voting questions. There’s reasons why your college ID in Texas is not sufficient to vote, but your gun certificate is.

41:42 Trevor Burrus: So that’s bank accounts, you have these other ones, borrow, which I think it would be difficult for them to borrow because they probably don’t have collateral or income…

41:51 Michael Tanner: That’s right.

41:52 Trevor Burrus: That’s part of being poor versus…

41:53 Michael Tanner: In part, it’s lack of banking. If you don’t have a bank account, then you can’t borrow against them. What you end up with is the poor largely dealing in a cash economy. We’re moving to this cashless economy everywhere else, but the poor largely deal in a cash economy, which means you’re carrying around large wads of money in your pocket; leaves you vulnerable, of course, to being robbed or picked up by the police as a drug courier or something because they say, “Why do you have $500 in your pocket?”, in that regard. We also… One of the perversities of our welfare system today is the idea that we punish savings and we encourage consumption. That if you get a welfare check and you spend every penny of it, we’re perfectly fine with that, it doesn’t matter, don’t even care what you spend it on, but if you save some of that money so that some day you could send your kid to school, we’re gonna take away your check.

42:41 Michael Tanner: We have these asset tests and we count things like your car against your assets for eligibility. Well, how are you supposed to go get a job if you don’t have a car in many locales? So we sort of have this perverse set of incentives that encourages you to consume as much money as you can today, but not be the sort of responsible person that the rest, the non-​poor people are expected to be, and save for the future and invest for your children’s future. We kind of think that that’s a bad thing for the poor.

43:11 Aaron Ross Powell: Why… If these policies sound terrible, and sound obviously terrible, so the ones about the stuff we just talked about with banking, it clearly is hurting the poor, it makes perfect sense that these policies would hurt the poor because of the way the poor is situated, and yet, these are policies… These are areas where the people who control the policy in the area, the representatives, the legislators, the regulators, whomever, seem to also profess a lot of desire to help the poor. And so, what gives? Why haven’t we just seen, “Oh, well, of course, poor people are having hard time getting IDs and that means they can’t open bank accounts, so let’s just change the law there”?

43:53 Michael Tanner: So a part of that is these laws came out of a fear of money laundering, so it’s drug war-​related once again, or a fear of terrorism, so we panic everybody into saying, “Oh, my God, Osama Bin Laden might have used a bank account some place with a phony… Or some Al-​Qaeda guy or ISIS guy used a phony ID, so let’s toughen the ID laws for banking.” And nobody ever thinks about whether there’s gonna be an impact on the poor. The poor are by and large left out of policy debates. I mean, come election time, everyone raises a hue and cry about it, but when you actually get to legislation on the hill, people don’t pay much attention to the impact on the poor.

44:32 Aaron Ross Powell: Is that because the poor lack the resources to, say, hire lobbyists or donate to campaigns? Is it just they don’t have enough money to…

44:39 Michael Tanner: The poor are more apt to abstain from voting as well. But you’re right, they don’t have lobbyists. There’s very… What ostensibly passes for lobbyists for the poor are largely lobbyists for the special interests that serve the poor, not for poor people themselves.

44:57 Trevor Burrus: Well, it seems to me that, going back to stuff we were talking about the beginning, that people think that we spend a lot of money on welfare programs, like clearly, there’s some people who champion the poor, who have made victories for poverty alleviation programs, and maybe the average American voter is thinking, “Well, we’re giving them a lot of money, what else do they want? I guess they want more money, but we can’t afford that.” Maybe that’s the extent of their thinking about poverty.

45:24 Michael Tanner: I think that there largely is. People are naturally concerned about themselves. There’s a certain selfishness that goes to… Or self-​interest that goes to our thinking about policy in general, and I think that that contributes to this idea that we think about poverty policy in terms of what’s it going to cost me? I’ve criticized a lot of libertarians for this idea that when poverty comes up, it’s all about, “Well, what’s my taxes gonna be?” “This program on the poor, I don’t care what it does it for the poor or whether it’s good or bad for them, but they shouldn’t take money from me. Taxation is theft, and therefore, that ends the debate.” I tend to think that policy should be based on something larger than that. The whole idea of why we do public policy, of why I am a libertarian is the idea of human flourishing of a better society, of one in which everybody is better off, and that includes the poor, and I think that libertarians should pay more attention to that.

46:22 Trevor Burrus: An interesting line you have is, “Anyone who spends much time reading contemporary poverty scholarship realizes that the dirty little secret among many scholars as well as many of those who work directly with the poor, is that they do not believe that every person who is poor can thrive on his or her own.”

46:39 Michael Tanner: Yeah, that really is. There’s a belief out there, and it’s surprising, it’s widespread on the left as well, that poor people lack the skills, they’re less intelligent, that they are not capable of taking care of themselves, and we do need a sort of custodial system that’ll simply take care of them. We don’t want them to starve, and so we’ll give them their allowance. I don’t buy that. I’ve known poor people in my life, I’ve talked to a lot of poor people, I’ve gone and visited poor communities, and I don’t see any evidence that suggests that poor people are lazy or stupid. I think poor people simply are in a bad situation and adjusting to it the best they can.

[music]

47:27 Aaron Ross Powell: Thanks for listening. Free Thoughts is produced by Tess Terrible. If you enjoyed today’s show, please rate and review us on iTunes, and if you’d like to learn more about libertarianism, find us on the web at www​.lib​er​tar​i​an​ism​.org.