Over at Tapped, Ezra Klein is wrestling with my interpretation of the new estimates of poverty and health insurance coverage released yesterday by the Census Bureau. I observed that after the 1996 welfare reforms made federal cash assistance less “generous,” poverty went down. In contrast, federal health care spending grew ever more “generous,” and the number of uninsured went up. I humbly submitted that perhaps Congress should stop being so “generous” with health care.
Klein thinks that’s “crazy,” but he misfires on poverty rates:
- He suggests that economic growth of the late 1990s and the expansion of the Earned Income Tax Credit were responsible for the post-1996 reductions in poverty. (The EITC does not directly affect the poverty rate, but it does affect the decision to earn other income that does.) Certainly each played a part. But prior economic booms did not have as dramatic an effect on the poverty rate even when the EITC was present, and scholars like June O’Neill have estimated that welfare reform had larger effects than did the economy. Moreover, although the EITC encourages some people to work more, it reduces work overall by encouraging others — those in the phase-out range — to work less. That might lift some out of poverty, but it traps them and others on the lower rungs of the economic ladder.