The High Cost of Ignoring Poverty

WASHINGTON — Republicans once preached compassion, but then went off to war. Democrats waged a war on poverty, but then lost some elections. They decided the middle class is where it’s at.

But the poor are still with us and their ranks are growing. One in eight Americans lives in poverty, which seems obscene given that the really rich are enjoying a level of privilege that may make the Vanderbilts in the Gilded Age look like abstemious Puritans.

“Rising inequality” is a bloodless term. But consider the facts behind the phrase: In 2005, the richest 1 percent of Americans held 19 percent of the nation’s income, the largest share since 1929; the poorest 20 percent held only 3.4 percent.

The historically inclined will recall that 1929 was the year of the great crash, which was followed by the Great Depression. History suggests that concentrating wealth and income in a small group of privileged people is bad for economic growth.

One reason our nation has maintained generally healthy levels of economic growth is our success in spreading income around — particularly during the 1940s to the early 1970s. This created more purchasing power among an ever larger group of Americans. We are thus tempting fate by following the formula of Andrew Mellon, the Republican Treasury secretary in the Roaring ’20s who never met a tax cut for the rich he didn’t like. He was rather popular until 1929.

Here’s the odd thing about the present moment: As a country, we are much more practical about poverty reduction than we were in the 1960s. Most plans on offer are not utopian schemes. They promote work and would build ladders so today’s poor can become tomorrow’s middle class.

That’s the significance of the antipoverty report issued last week by the Center for American Progress, the think tank that is the closest thing we have to a Democratic administration in exile. The CAP report deserves more attention than it has gotten, not because it breaks new ground but precisely because it brings together some of the most pragmatic ideas on poverty reduction. The task force that prepared it included veteran liberals such as Peter Edelman and Angela Glover Blackwell, but also resolute middle-of-the-roaders such as the Rev. Floyd Flake, a champion of faith-based approaches to poverty, and Charles Kolb, president of the pro-business Committee for Economic Development.

Their first recommendations aren’t revolutionary, just sensible: They’d raise the minimum wage, and they’d expand the Earned Income Tax Credit, a program supported by Ronald Reagan and expanded by Bill Clinton. The EITC has done more than any other measure to keep working Americans out of poverty. The task force would also make unionization easier, on the theory that giving workers the power to bargain for themselves is better than a government handout.

More should be done for poor 16- to 24-year-olds who are out of school and out of work. In 2005, the report says, there were 1.7 million of them, a number big enough to be alarming but small enough to give public policy a chance to make a difference.

Other recommendations are designed to promote upward mobility through expanded child-care assistance, “early education for all” and stepped-up efforts to make higher education more accessible. The panel would modernize the unemployment insurance system and other low-income programs that date back 30 years or more. Capitalists should like their proposals to give the poor more access to financial services and expand their ability to save. And to prevent a new crime wave, the task force urges us to do a lot more to “help former prisoners find stable employment and reintegrate into their communities.”

Will all this cost money? You bet, about $90 billion a year — a little over one-fifth of the annual cost of the 2001 and 2003 tax cuts, many of which go to the rich. This would not break the bank of a country with a $13 trillion GDP, and it’s for programs that cannot be demonized as more of “the failed old liberalism.”

The new Democratic majority in Congress seems determined to “fix” the alternative minimum tax, which unfairly pushes many middle- and upper-middle-income taxpayers into brackets they shouldn’t be in. That’s just fine. But these taxpayers are still doing reasonably well after taxes. A lot of Americans in the ranks of the working poor are not doing well, and they are the people Democrats claim to represent.

And it would be awfully nice if Republicans revisited their commitment to compassion. As President Bush knew in 2000, swing voters like that sort of thing.

E.J. Dionne’s e-mail address is postchat(at symbol)aol.com.

© 2007, Washington Post Writers Group