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Catherine Rampell, Washington Post Writers Group

Photo: Mayra Beltran /Houston Chronicle

Liberals should look to all tools to help the poor

Extracting more money from evil, exploitative capitalists has become a rallying cry for much of the grass-roots left. In the meantime, though, its largely ignoring other important policies for lifting Americans out of poverty.

In a recent column, I urged progressives to more seriously grapple with the cumulative effects of policies that make workers more expensive to hire. More than doubling the federal minimum wage to $15, for example, would risk pricing a lot of people out of work. Especially in low-cost-of-living areas such as Mississippi, where half of all jobs pay less than $14.22.

In other words, well-intended, feel-good policies can sometimes backfire, hurting the people youre trying to help.

This humble suggestion generated a lot (like, a lot) of hate mail, along with a good follow-up question: What, then, should progressives who want to help the working poor devote their energy to?

Regarding the minimum wage, there are useful tools available to help set pay according to local costs of living. MITs Living Wage Calculator is used by some public officials and companies to determine reasonable wage floors.

More important, lots of the other anti-poverty tools deserve more love from the left in particular what might be called post-tax policies.

Pre-tax policies such as the minimum wage, overtime and fringe-benefit requirements help increase workers paychecks, with employers (and sometimes workers themselves) generally footing the bill.

Post-tax policies, by contrast, involve redistribution of income and wealth through the tax code and social safety net. Think: the earned-income tax credit (EITC), food stamps, housing vouchers, health insurance subsidies. They are about boosting living standards on the back-end, with the taxpayers paying. Relative to other rich countries, the United States relies very little on these post-tax tools.

If you look at Americas income inequality before taxes and transfers, its not great but its still about on par with France, Germany and Finland. If you look at income distribution after taking into account tax and transfer payments, we suddenly become the second-most-unequal developed economy in the world, behind Mexico.

There have been quiet efforts to expand some of these post-tax anti-poverty policies. This year alone, EITCs have been added or expanded in six states, according to the Center on Budget and Policy Priorities. But all these changes were done legislatively, rather than through well-advertised ballot initiatives. They get much less press coverage and popular organizing relative to, say, the Fight for 15.

At a conference last fall, I asked Jason Furman, then chair of President Barack Obamas Council of Economic Advisers, about the countrys reliance on pre-tax vs. post-tax measures to help boost economic security. He said he favored using both kinds of tools (as do I). But he also noted a remarkable disparity in progressive enthusiasm for the two approaches, especially relative to payoffs.

During Obamas tenure, the White House oversaw an expansion of overtime protections that was expected to put an extra $1.2 billion into workers pockets. It also helped pass tax-code changes that put an additional $28 billion in the pockets of low- and moderate-income families. Guess which inspired more attaboys?

Whatever the reason, the dearth of excitement for these post-tax policies is a strategic mistake. Programs such as the EITC and food stamps, if well-designed, complement the minimum wage. They can do things that the minimum wage cant, such as grow more generous for larger families. Critically, they also dont raise the cost of employees, which means the well-heeled business lobby is less likely to fight them.

Post-tax policies can distort labor markets too, of course especially if they result in benefit cliffs that discourage people from working more. Thats where smart design comes into play.

But every policy has limitations, which is why those on the left would do well to consider every tool at their disposal. Bleeding hearts are often helped by hard heads.

crampell@washpost.com

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