Investing in an Export

Disappointingly, Julia Steiny's column yesterday takes a two-dimensional view of poverty programs:

... it's nothing short of glorious that Rhode Island has managed, over the course of three years and with a few strategic investments, to reduce the number of families in poverty by 6 percent. That's huge. Six percent of Rhode Island's population of 1 million is 60,000 low-income people doing better financially. For the first time in memory, the state is not the poorest state in New England, but only the second poorest, above Maine.

We need to honor this achievement while we can, since it is gravely threatened by the state's budget crisis.

According to Kids Count, in 2004, fully 21 percent of the state lived at or below the poverty line. The federal government’s notoriously stingy threshold for poverty is $21,200 for a family of four. So more than a fifth of the state's kids were living with chronically anxious parents, in troubled, often violent neighborhoods, and driving their teachers nuts with their inability to focus on math facts, instead of problems at home. Reducing poverty doesn't remove these conditions, but greatly improves the chances they'll get better.

In 2005, Rhode Island's poverty rate dropped to 19 percent, and in 2006 to 15 percent.

What Steiny doesn't acknowledge (perhaps doesn't know) is that this "huge" achievement came at the effective cost of pulling thousands below the twice-poverty line and driving out the working and middle classes. She apparently has that peculiar blind spot that prevents one from seeing the effect on the payer of glorious welfare programs. Consider her apparent view that "one smart investment ripple[d] productively throughout the low-income community":

Initiated in 1998, Starting RIght recognized that welfare recipients could never make the transition to work without help with childcare. So the program offered full childcare subsidies to working parents at or below 100 percent of the poverty level. Parents making up to 225 percent of poverty paid a co-pay on a sliding scale.

But there were very few childcare spots available. So the program offered incentives to more people, mostly women with children of their own, to open licensed childcare businesses, by offering RIte Care, the state-provided health care, to those who did not have health insurance. The program also paid close to market rates. Availability ceased to be a problem.

But notice that the childcare subsidy first circulated directly to a cottage industry within the low-income community itself. Starting RIght got more parents into the work force, and it generated jobs. Cash assistance (old-school welfare) dropped by a whopping 72 percent.

The "ripple" hasn't been one of salutary effects so much as an expansion of the paid benefits. As we've been pointing out around here for a number of years, while cash assistance payments are way down, the combined cost of these programs is up exponentially — and the trend is unsustainable. To Steiny, the daycare and healthcare subsidies may be a good investment, but it's one that fewer and fewer of her fellow Rhode Islanders are willing to pay, as evidenced by the fact that there are fewer and fewer Rhode Islanders to pay it.

With this additional dimension, the characterization of these expenditures as an investment requires clarification. Obviously, poor Rhode Islanders benefit financially (even if only in the immediate term) from handouts, and we can assume that, on average, their children benefit in more important ways from improved circumstances. But in the absense of a vibrant economy presenting local opportunities, our tax dollars will prove to have been an investment in another state's taxbase.