Next week, the House and Senate will release their fiscal year 2016 budget blueprints, the clearest statement of their priorities for the country. Meanwhile, several prominent congressional Republicans have been underscoring their concern about rising inequality, the struggles of working and middle-class families, and the increasing challenges many Americans face in getting ahead in life despite their hard work.
There is little dispute that economic inequality has widened in recent decades, as the gains from economic growth have concentrated among the wealthy few. This concentration of income and wealth has translated into flat or declining wages for working- and middle-class families. At the same time, the costs of the pillars of a middle-class life—child care, higher education, housing, health care, and retirement—are all rising faster than wages, squeezing the budgets of everyday Americans. In fact, for a married couple with two children, the costs of these basics rose by more than $10,000 between 2000 and 2012 while that couple’s income remained essentially flat.
An off-kilter economy where average Americans don’t share in the gains produced by their labor doesn’t just hurt family balance sheets; it undermines the country’s economic growth and makes it harder for working families to get ahead. New research from the World Bank reveals that while rising income inequality may boost income growth for the rich, it actually slows income growth for the poor. A recent study released by the International Monetary Fund found that inequality undermines economic growth.
A strong middle class is not just an outcome of economic growth and stability; it is a prerequisite for these conditions. The middle class produces not just our consumer base, but also an educated workforce and base of entrepreneurs that can drive the next wave of innovation and jobs. Analysis by the Center for American Progress has also shown that regions of the United States with larger and stronger middle classes tend to have greater economic mobility for those at the bottom.
Unfortunately, the policies and priorities outlined in the FY 2015 House Republican budget were nothing short of a blueprint for exacerbating inequality, poverty, and wage stagnation. The House’s budget proposal paid for lopsided tax cuts for the wealthy by making draconian cuts to health care and nutrition and by placing tight caps on funding for priorities such as job training, transportation and infrastructure, child care, early education, and research and development.
With Republicans in control of both chambers, the FY 2016 congressional budgets offer an opportunity to show that they are serious about tackling inequality, addressing stagnant wages, and cutting poverty—by abandoning their failed policies of the past. If they mean what they say on these issues, here are five key priorities we should see in their budgets next week.
Create good jobs
There is broad agreement on both sides of the aisle that the best ticket out of poverty and into the middle class is a good job. But Republicans in Congress have traditionally opposed the critical economic investments needed to support job creation and pathways to good jobs. If they have truly come around in their concern about the economic security of working and middle-class families, we should expect the FY 2016 House and Senate budgets to support investments in infrastructure, education, and research. In addition to supporting the critical investments that grow the economy and lead to good jobs, their budgets should also support policies that set up pathways to good jobs. For example, in 2009, Congress passed the Serve America Act to create 250,000 national service positions, but it never funded the program. Fully funding the Serve America Act would put Americans who want a job back to work.
Similarly, Congress should support subsidized jobs, which offer a win-win strategy for helping disadvantaged workers—such as those with limited education or work experience, people with criminal records, and non-college-bound youth—get a foot in the door of the labor market, while simultaneously helping businesses and the economy. CAP has proposed a national subsidized jobs program modeled on the successful TANF Emergency Fund, which put more than 250,000 Americans to work at the height of the recession through bipartisan cooperation in the states.
Boost wages
Decades of stagnant wages in the face of ever-rising costs has meant that American families are having a much harder time making ends meet. And when American families are hurting and cannot afford to spend, the entire economy suffers. Boosting wages is critical to ensuring both the economic security of American families and the growth of the economy. If the House and Senate majority are serious about combating poverty and inequality, then they should embrace raising the minimum wage. In the late 1960s, the minimum wage was enough to lift a family of three out of poverty. Had the federal minimum wage kept up with inflation since then, it would be $10.90 per hour, compared to the current $7.25 per hour. Raising the minimum wage to $10.10 would lift more than 4.5 million Americans out of poverty, and nearly one in five children would see their parents get a raise. Raising the minimum wage would also create budgetary savings in programs such as the Supplemental Nutrition Assistance Program, or SNAP—formerly food stamps—to the tune of nearly $46 billion over 10 years.
Ensure an adequate safety net
The U.S. poverty rate would be nearly twice as high without vital programs such as Social Security, nutrition assistance, and tax credits for working families. A recent study by Columbia University showed that when using a measure of poverty that takes the safety net into account, the poverty rate fell by nearly 40 percent from 1967 to 2012, and without critical safety net programs, nearly 40 million more Americans would be poor today. Last year, SNAP alone kept almost 5 million Americans out of poverty. Moreover, antipoverty programs not only mitigate hardship in the short term, but also serve as an investment that pays dividends in the long term. For example, a growing body of research finds that SNAP not only helps families put food on the table, but also boosts long-term health, education, and employment outcomes.
If the House and Senate majority are serious about expanding opportunity and mobility, their budgets will not only protect key investments in the safety net, such as SNAP and Medicaid, but also take steps to bolster our system of work and income supports. For example, they should embrace reform of counterproductive asset limits in aid programs, which penalize savings and ownership and prevent struggling families from getting ahead. They should also modernize and strengthen programs that have withered due to neglect—particularly Temporary Assistance for Needy Families, which today helps only about one-quarter of poor families with children, and Unemployment Insurance, which now reaches a historically low one-in-four unemployed workers. Additionally, we would expect them to make permanent the improvements in the Earned Income Tax Credit and Child Tax Credit made as part of the American Recovery and Reinvestment Act, currently set to expire in 2017.
Adopt work-family policies
Closing the gender wage gap would cut poverty for working women and their families by half. Today, nearly two-thirds of families with children rely on a mother’s paycheck, yet the nation’s workforce policies have failed to keep pace with the times, dampening women’s ability to stay employed and climb the economic ladder. A pro-mobility budget would include policies such as paid family leave and incentives for states to enact paid sick days legislation to ensure that workers do not have to make impossible choices between a needed job or paycheck and caring for themselves or a loved one.
Invest in human capital
Education is the single strongest predictor of adult earnings in the United States, but research shows that a large part of disparities in eventual schooling outcomes can be predicted long before children ever enter the kindergarten classroom. If the House and Senate majority are serious about expanding opportunity and mobility, their budgets will make investments in high-quality child care, pre-K for all through a partnership with the states, and evidence-based home visitation programs that help parents become their children’s first best teacher. In addition, they would embrace policies to improve access to higher education. The jobs of the 21st century require a highly trained workforce, often with the levels of knowledge, skills, and abilities that are best acquired through higher education. Yet access to higher education is moving farther and farther out of reach for many American families. CAP has developed a new proposal, College for All, which would ensure that any student attending public college or university would not be asked to pay any tuition or fees during enrollment, removing a significant barrier to access.
We can make these investments while cutting the long-term deficit if we ask the wealthy to pay their fair share, curb long-term health care costs, and make strategic spending cuts, particularly in defense spending.
Income inequality has been high and increasing over the past several decades, with important implications for economic growth, our political process, and access to the American Dream. Despite these trends, there’s much reason to be hopeful. Decades of research have yielded a wealth of information on the many public policies that contribute to economic opportunity and mitigate income inequality and its ill consequences. As congressional Republicans up their rhetoric on poverty and inequality, next week’s House and Senate budget resolutions will be an important indication of whether or not their rhetoric will translate into policies and investments that will actually grow and stabilize the middle class.
Melissa Boteach is the Vice President of the Poverty to Prosperity Program at American Progress. Rebecca Vallas is the Director of Policy for the Poverty to Prosperity Program at American Progress. Anna Chu is the Director of the Middle-Out Economics project at American Progress.