Social Welfare Policy Recommendations

How do we reverse the pattern of growing inequality?

The cycle of poverty is a vicious one. The most difficult question is, where do we start in order to arrest it? For example, it is clear that a college education is essential to obtaining a modern job that pays a livable wage. But, even if college were free, as it is in several other developed countries, children growing up in poverty today are not prepared to get into or succeed in college. Therefore, primary and secondary education in poor areas must be improved in order to prepare children for college. As we discuss in the Education Position, however, you can’t improve primary and secondary education in poor areas without addressing the trauma of poverty that prevents children from learning and makes it difficult for schools to succeed. One of the single biggest disadvantages of such children is the absence of early childhood learning. Preschool, despite Head Start, is not readily available or affordable for many children born in poverty. Daycare is also not often affordable, thereby preventing single parents from consistently working and depriving children of opportunities for early social emotional learning. Given all of these considerations, we have concluded that we must do the following:

Subsidize universal daycare: Follow the lead of countries like Germany and make daycare universally available. Government subsidies can be 100% for people at the poverty line and diminish as wealth and income grows. Such a program will begin to eliminate the early social emotional disadvantages that poor children have and contribute to the earnings stability of the head of the household. Additional earnings stability will lead to less homelessness and food insecurity, and contribute generally to lessen the trauma of poverty.

Provide universal pre-K education: Consistent with the philosophy underlying the Head Start program in the US, as well as the example set by several states and municipalities, make pre-K education universal in the US. 

Levelize school spending across rich and poor communities: Do this by shifting the tax burden from a heavy reliance on local funding to a more state and national basis. This gives poor communities the same financial resources that wealthy communities have.

Subsidize community and four-year college access for low-income families.

Provide universal healthcare as described elsewhere.  

Establish a system of vocational training schools, recognizing as other countries have that not every profession benefits from a traditional four year degree. Germany is well known for its highly developed system of apprenticeship and vocational training. The success of their approach has resulted in the creation of similar programs in Belgium, France, Austria, Switzerland, and South Korea. In Germany today approximately 47% of the population has a vocational qualification rather than a traditional college education.

Increase the emphasis on rehabilitation and re-entry versus punishment for people entering and preparing to be released from prison. The US has more people incarcerated on an absolute and relative basis than any other country on earth. Many are imprisoned for minor drug offenses. Our system of bail and lack of re-entry assistance results in a very high rate of recidivism and a continuation of the cycle. There are too many people and families hurt by this system to ignore. Approximately 600,000 individuals are released from prison annually, and three-quarters will be rearrested within five years of their release. A criminal record of any kind creates substantial barriers to employment, housing, and social services.

It should be assumed that an effort of this magnitude will require a full generation to have an impact.

How much would such an effort cost?

We do not have the resources at OurFutureAmerica® to fully estimate the cost of these prescriptions. We can, however, identify opportunities from the existing federal budget that we believe provide more than enough resources to begin the effort we have recommended. Some of them are as follows:  

Reduce military spending by 20%: $120 billion

Eliminate the mortgage deduction: $75 billion

Eliminate 50% of farm subsidies, retaining the subsidies only for lower-income farmers: $12 billion

Eliminate 50% of the healthcare deduction, retaining the deduction only for lower-income individuals: $120 billion

Eliminate 50% of the savings deduction, retaining the deduction only for lower-income individuals: $100 billion

Means test Social Security and Medicare, eliminating both programs for wealthy individuals: $150 billion

Total: $577 billion

With this target of resources, we believe that we can begin with the following:

Cost of subsidizing universal daycare: A current estimate by Elizabeth Warren is $70 billion per year.

Cost of universal pre-K education: In 2014, President Obama proposed providing pre-K education to low- and moderate-income four-year-olds. Estimates of the cost were based on a half-day program for which approximately 55% of the population would qualify. (Studies show that nearly 60% of children entering kindergarten have had pre-K education.) They also considered the cost incurred by the three states that currently provide universal pre-K. The Obama proposal estimated the cost at $12 billion per year. Other estimates are as high as $26 billion. As another data point, the Head Start program has 900,000 children enrolled at a cost of $7 billion. It is estimated to be available to only half of the eligible population.

Equalize school spending: While this effort will result in poor communities having the same resources as do wealthy ones, such communities require additional resources to address greater poverty, students with disabilities, costs of bussing programs, ESL learners, absence of parental resources, etc. Therefore, a significant effort would need to be made by the federal government as well. If we assume that the federal government increases its current contribution to local education by 30%, this would result in approximately $20 billion of additional resources to poor communities.

Cost to provide universal healthcare: Based on the analysis of countries that set an example, universal healthcare can be provided with no additional spending by the federal government.

Cost to establish a system of vocational training schools: Vocational training in Germany costs approximately $17,000 per student per year. In the US, 19.8 million students were enrolled in degree-granting institutions in 2016/17. This represents 66% of those who graduated from high school. If you assume that 25% of those who do not enroll in college enroll instead in a vocational program, this would constitute approximately 2.5 million students. Applying the cost incurred by the German example, the cost would be $42 billion, split in some measure between student payments and government subsidies.

Cost to subsidize community college: Studies have shown that community colleges have the biggest impact on changing the economic trajectory of low-income students. They are the most accessible in terms of cost and availability and are best equipped to assist low-income students in beginning their college education. We think a reasonable objective would be to provide free community college to low-income families nationwide as 17 states already do. The cost of doing so is relatively modest, with estimates by the Obama administration of about $6 billion per year.

Cost to increase emphasis on re-entry: The US spends $80 billion on its prison system and over twice that on overall criminal justice enforcement. The cost to the economy of lost productivity is several times this amount, causing analysts to conclude that the return on investment for re-entry programs such as job training, substance abuse treatment, and mental health programs is high. We believe that the cost of increasing this effort could be financed by replacing spending on incarceration with spending on rehabilitation. We assume that a reasonable effort could be made by adding 20% to the annual prison spend, which would be $16 billion.

Final thoughts: While we acknowledge our limited ability to estimate the cost of our proposals, it does seem reasonable to conclude, based on what we do know, that a reasonable effort can be undertaken with currently available resources. We would also point out that while the cost of the programs addressing poverty can ultimately be known, what is much more difficult to measure is the cost of continuing poverty at today’s level. These costs are not just in terms of pure human suffering, but also in the underemployment and lack of productivity of the poor, the cost of gang and gun violence in their communities, the stress on our healthcare system while we treat those unable to provide for themselves, and the cost of related incarceration. Were these hidden costs identifiable, we believe the explicit cost of addressing them would be insignificant by comparison.