As Economies Rebuild, Tanner Urges Jettisoning Historically Repressive Policies

Michael Tanner, senior Fellow at the Cato Institute, has been analyzing and advocating for social welfare reforms for decades.

Asheville – The Inclusive Economy: How to Bring Wealth to America’s Poor, represents Michael Tanner’s latest thoughts about empowering those in poverty. Referencing Maslow’s hierarchy, Tanner says the long-term goal is for everybody to have a healthy sense of safety, love, and belonging and eventually arrive at self-actualization. He argues that helping the poor isn’t just the humanitarian thing to do, it actually makes life better for everybody.

The book came out right before the COVID shut down. In 2019, the federal government had increased annual spending on about 100 anti-poverty programs to $820 billion. On top of that, state and local governments were spending an additional $300 billion. In light of this, and all the rest the government had spent since Lyndon Johnson declared war on poverty in 1965, Tanner suspects flying an airplane and shoveling $1.2 trillion in cash out the back might have just as much impact.

For input, Tanner listened respectfully to arguments from the right and left, of politics and academia, to fairly address different sets of root problems. One group argues poverty is the result of poor choices: dropping out of school, having children before marriage, and failing to work a job. Statistics show the correlations.

The other side claims race and gender are to blame. Slavery and Jim Crow laws kicked an entire race of people out of the economy, and government policies are still shutting doors on people of color. Women, without getting married, have to run a household, keep a job, and care for sick children. They could be married, but, Tanner points out, a large percentage of men in their communities cannot get a job to support a household because they are involved at some level with the criminal justice system.

Complicating the situation, even before COVID, a technology shift was underway. The days of getting a steady factory job to support a family, he says, are gone and not coming back. As artificial intelligence displaces more and more workers, society will live in greater ease and comfort, but those displaced by technology, like the best buggy whip manufacturer in days of yore, will be left behind.

This isn’t to say the poor are “chaff blown by the winds of fate;” as many activists like to treat the dispossessed. Rather, it is an opportunity for society to reflect on how it managed to leave people of color in the same poverty trap they’ve endured for two centuries.

“What we’re doing now isn’t working,” Tanner says the government, having broken the leg in the first place, continues to argue about which kind of crutch the patient needs. “Stop breaking the leg…. Stop making people poor in the first place,” he says. Tanner then provides statistics and rationales for five ways the government could reduce poverty just by backing off.

Throwing money out of the airplane has its limits, as Margaret Thatcher illustrated in her quote about eventually running out of other people’s money. What would be more effective would first be criminal justice reform, a complex idea now at the forefront of Americans’ minds. The United States imprisons 698 out of every 100,000 residents, effectively removing many from the workforce and, hence, opportunities to improve their lot. Only the Seychelles Islands reports a higher rate of incarceration.

A second area for reform is education, and that is also getting a lot of attention. A third area concerns the deleterious effect zoning and land-use regulation have on viable affordable housing stock, and it is discussed elsewhere in this issue.

The other two areas in need of improvement concern unleashing people of color to accumulate intergenerational wealth and participate meaningfully in the overall economy. The way the federal poverty trap is designed, it makes acquiring assets cost-prohibitive. Getting a car, for example, could cost somebody their welfare check, but spending weekly paychecks on trinkets won’t.

Tanner talks about the “unbanked,” those who don’t have branch banks in their neighborhood, don’t have transportation, and don’t even have the kind of ID they would need to open an account. What’s more, they were never taught financial literacy, so the prospect of navigating investment options appears dizzying, with nobody else in the neighborhood in a position to clarify. 

A common flaw in public policy is growing the economy to the benefit of the wealthy, and, once again, leaving the poor behind. Areas of improvement that would unleash creativity in historically oppressed groups include ending occupational licensing with no impact on health and safety, eliminating minimum wage laws dismissive of the talents of the poorest of the poor, expunging criminal records when appropriate, and challenging union protection of antiquating jobs.

Perhaps the thesis of the book is what Tyler Cowens calls The Great Fact. “It is economic growth that lifts most people out of poverty, not transfer payments,” Tanner says most economists will agree economic growth is a function of higher workforce participation functioning at a higher level of engagement, innovating and cranking out better goods and services.

Adam Thierer argued elsewhere, however, that innovation thrived when the government provided stability with reliable policies, contract enforceability, and protection of property rights. Unfortunately, even before COVID, business closures were outpacing startups, and both firms and entrepreneurship were on the decline. The nation had fallen from second to 16th in the Fraser Institute’s ranking of economic freedom, fallen to 51st in the World Bank’s list of easiest countries in which to start a business, and landed 18th in Transparency International’s Corruption Perceptions Index.

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