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Will ‘Build Back Better’ Work? An Interview with Robert Rector

*This interview is the second installment of BPR’s series, The Last Line of Defense: How Expansive Should the US Social Safety Net Be? In it, we are spotlighting differing viewpoints on the efficacy of widening our social safety net, particularly in light of the Covid-19 pandemic and the heated debates in Congress over President Biden’s Build Back Better Act.

Robert Rector is a Senior Research Fellow for Domestic Policy Studies in the Heritage Foundation. He joined Heritage in 1984, and he previously worked as an analyst in the US Office of Personnel Management. Rector also served on the congressionally mandated Millennial Housing Commission. He is the co-author of America’s Failed $5.4 Trillion War on Poverty (1995) and co-editor of Steering the Elephant: How Washington Works (1987). He received a bachelor’s degree from the College of William and Mary and a master’s degree in political science from Johns Hopkins University.

Sam Kolitch: You are an ardent critic of expanding the US social safety net, particularly through measures such as those included in President Biden’s Build Back Better Act. In fact, you recently wrote, “Today’s welfare system—plus Democrat expansions and changes—penalizes work and discourages marriage, undermining self-support and the well-being of the poor.” Broadly speaking, what values should an ideal welfare system embody? 

Robert Rector: We need to have a welfare system that not only meets material needs, but does so in a way that helps to meet higher-order human needs as well. First is the need for strong families, for strong relationships. Second is the need for accomplishment, for an individual to be able to contribute to society and gain respect from contribution; that need is fulfilled, in part, from work. I think the current welfare system utterly fails in respect to these needs.

Since the beginning of the war on poverty in the ’60s, there has been an absolute collapse of family structure in low-income communities and a huge loss of employment in the labor force, primarily among non-married, less-educated men. The decline in labor force participation among these men is linked to their declining role as husbands and breadwinners.

We spend a lot of money on material needs, most of which is not counted. But we have undermined the fulfillment of higher-order needs. We need a welfare system that seeks to harmonize needs, creating a synergistic effect where we’re encouraging work and marriage while meeting material needs.

SK: You just said, “We spend a lot of money on material needs, most of which is not counted.” If you are referring to how we measure poverty, in what ways do you think we fall short?

RR: We don’t measure poverty correctly at all. What we do is preposterous. For example, since Lyndon Johnson launched the war on poverty in 1964, we have spent $34 trillion—with a T—on means-tested cash, food, housing, medical care, and social services. Out of that, the Census Bureau has only counted $2.5 trillion as income for the purposes of measuring poverty. And because the Census’ official poverty reports are the foundation by which people gain information about welfare and poverty in the United States, people do not understand that, in reality, we have a large means-tested welfare system.

If you were to look at the typical poor family with children today, it receives, on average, something like $38,000 in cash, food, housing, and medical care from the government. The Census Bureau only counts roughly $3,000 of that as income in its official measurements of poverty and inequality. So it is not that the Census misses the welfare state, it is that the welfare state is essentially non-existent by their records. 

Since the war on poverty began, we have added food stamps, Section 8 Housing, Medicaid, public housing, school nutrition programs, WIC, the Earned Income Tax Credit, and literally dozens and dozens of other programs. But out of the nearly 90 means-tested programs, only 3 are counted for the purposes of measuring poverty in the government’s Official Poverty Measure (OPM). 

SK: Yet doesn’t the Census Bureau’s Supplemental Poverty Measure (SPM) include, in its words, “government programs designed to assist low-income families individuals that are not included in the Official Poverty Measure”? 

RR: The Supplemental Poverty Measure rarely appears in the press or political discourse. The SPM excludes all medical aid and undercounts cash, food, and housing benefits by around 40 percent. This can be determined simply by looking up the budget outlays of these programs (net of administrative costs) and comparing them to the benefits reported in the SPM. The SPM also undercounts the earnings of low-income persons by around 30 percent. This can be determined by comparing the earnings figures in the SPM with the earnings for the same family in IRS and Social Security records. At the top and bottom of the income spectrum, you have serious underreporting of all forms of income. And everyone who’s in this field knows that. 

The great mystery about the SPM is that it ostensibly counts welfare benefits but actually ends up with higher poverty rates than the Official Poverty Measure. How did that happen? It happens because the Supplemental Poverty Measure has raised poverty thresholds by about 30 percent in a complicated way that only a few specialists can understand. This is almost never explained. 

The poverty thresholds in the SPM are auto-escalating. As the constant dollar incomes of the lower middle-class rise, the poverty income thresholds also rise. Over time, it takes more and more real income to rise out of poverty. It’s like running a race where every time you take a step the finish line moves away from you by three feet. It is designed so that it is almost impossible to cross the finish line.

SK: So do you believe that there is a deliberate misrepresentation of poverty in America as well as the true size of our social safety net?

RR: Yes, clearly. Government bureaucracies are not non-ideological. The permanent bureaucracy in Washington promotes a larger welfare state and what I would call the “grievance culture.” Accurately reporting the current size of the welfare state is not advantageous to those goals. Therefore, the bureaucracy consistently underreports resources through both the Official Poverty Measure and Supplemental Poverty Measure. The Official Poverty Measure uses a flawed methodology from 1945 which excludes nearly the whole welfare state. When the SPM was introduced, it was very well known to everyone in Washington that it still undercounted benefits and earnings, but nothing was done to fix it.

SK: In your estimation, then, are there actually fewer poor people in the United States?

RR: When most people hear the word “poverty,” they are thinking of physical deprivation. But most of those identified as poor by the government and the media are not in physical deprivation. The typical family that is defined as poor lives in a perfectly good, uncrowded house or apartment, and has one or two cars. They have air conditioning, cable TV, wide-screen televisions, Internet access, computers, and smartphones. If you ask them, “Were you hungry?” roughly nine out of ten of poor adults will say, “No, I wasn’t hungry at all during the previous year.” Some 97 percent of the poor children were not hungry at any point during the year. If you ask them, “Did you have access to medical care when you needed it?” Most will say yes. These families are not strolling down “easy street” by any stretch of the imagination, but they’re also, for the most part, far from physical deprivation.

SK: What would you say to someone who argues that “physical deprivation” is too low a standard for poverty in a country like America, which is the wealthiest nation in the world at the wealthiest point in its history?

RR: Well, if you choose that approach, then you need to be very clear to your audience what you mean by “poverty.” The government and the media still conflate the term poverty with severe deprivation. Whenever the media runs a story about poverty, they start with pictures of boarded up shooting housing in inner city Detroit. Those conditions tragically exist, but few of the forty to fifty million people the government defines as poor live in those conditions. If you want to define families that are well housed, reasonably well fed, have medical care, wide-screen TVs, computers and internet access as “poor,” that’s okay. But you need to be very clear about what you mean.

A long time ago, a major reporter on one of the networks said to me that when she would go out to do a story on poverty, she would bring back footage, and her producer would say, “These people don’t look poor, go find me somebody who looks poor.” And she would go and find someone who would fill the bill, but they were not representative of the population the government defines as poor.

SK: You mentioned earlier that our welfare system is much larger than the public realizes. Would you mind elaborating on that? 

RR: The discourse about poverty and the welfare state in the United States starts with what I call policy fragmentation. It begins by taking the total funding and splitting it into little parts. We have separate “issue silos”: housing, nutrition, cash, medical care, child care, and education. Then within each issue silo, we generally talk about one program at a time. Discussing welfare one piece at a time inevitably makes the welfare state appear small. 

In reality, we currently spend $1.16 trillion on means-tested assistance, cash, food, housing, medical care, and direct social services through roughly 90 programs. About half of that spending goes to families with children. (That figure does not include Social Security or Medicare.) The average family with children, defined as poor by the government, receives $21,000 per year in cash, food, and housing benefits, and an additional $23,000 in medical care and social services. The family also receives public education for its children at a cost of around $22,000. (This is not means-tested, but is largely paid for by the taxpayers.) In addition, the average poor family will have $18,000 in earnings and other private income. Adding everything together, average total resources among poor families with children come to around $83,000 per family per year.

Of course, resources will vary among poor families. The high average level of resources does not mean that there are no holes in the safety net and no deprivation in the United States. It does indicate, on the other hand, that support for the poor and the social safety net are far more extensive than most imagine.

SK: Then is your main concern that our welfare state is too big or that it is directed at the wrong places?

RR: I’m not primarily complaining about the size of the welfare state; I’m complaining about the fact that the taxpayer gets no credit for the support it gives. Viewed holistically, the taxpayer is clearly spending a lot for the well-being of these families. Given the level of taxpayer commitment, a key question is: Does the recipient have any obligations in return for the aid given? Do poor families have any obligation to contribute to their own self-support, even partially? That question gets to the heart of welfare reform in the 1990s. About 90 percent of the American public believe that an able-bodied adult who gets cash, food, housing, or medical care from the government should be required to work or prepare for work as a condition of receiving that aid. But the Biden administration is pushing strongly in the opposite direction.

SK: It sounds like your position is that our welfare state is incorrectly geared toward the symptoms of poverty rather than its underlying causes. Where and how should money be spent to address the needs of low-income individuals?

RR: When Lyndon Johnson launched the war on poverty, he said specifically, “I don’t want to deal with the symptoms of poverty, I want to deal with the causes.” He wanted systems that gave people employment, that integrated them into society, that made them upwardly mobile—rather than systems that simply made them dependent on the government. That was a sound perspective, but it has long since disappeared.

Welfare should be redesigned so that benefits act as partners rather than antagonists to work and marriage. A positive goal for the welfare system would be that a parent who works full time or something close to full time, even at a low wage, should have enough complementary assistance to take them well above the poverty level. That was a goal that Bill Clinton used to articulate. And the reality is we already largely achieved that goal through existing programs. But no one knows that.

What I would do is take the waste and inefficiency in the system and turn it in a way that begins to encourage and reward working and marriage, rather than the opposite. It is particularly harmful that most welfare programs penalize marriage by sharply cutting aid when parents marry. We should sharply reduce these marriage penalties but the Biden administration is increasing them.

SK: Lastly, is there anything in the Build Back Better Act that you think would be beneficial if enacted? 

RR: Not really. The main thing it does is effectively remove work requirements out of what will be the largest cash grant program. It expands the Housing and Urban Development budget by nearly 50 percent. It heavily subsidizes center-based daycare and Pre-k in public schools. But most parents, low- or high-income, do not want their kids in formal centralized daycare, do not want their kids in pre-k, and those programs do not have the benign effects that are usually touted for them. The bill exacerbates the marriage penalties across the board. It’s just an absolute disaster. And it is by far the largest expansion of welfare in US history. It’s adding close to 1 percent of GDP into the welfare system.

Again, I would say if you want to expand the welfare state, you should be honest about what’s currently being spent and what’s currently being received. We certainly do not have that factual base in our current discourse.

*This interview has been edited for length and clarity.