A Look Back: Things Are About to Get Much Worse for Poor Americans

by DEREK THOMPSON
f
rom The Atlantic

President-elect Donald TrumpCarlo Allegri / Reuters

In the last eight years, President Barack Obama oversaw the largest growth in federal spending to reduce inequality since the Great Society of the 1960s. In the next four years, President-elect Donald Trump and the Republican majorities in the Senate and the House of Representatives will probably try to undo almost all of it.

President Obama’s anti-inequality crusade has had three main pillars. First, the Affordable Care Act, or Obamacare, brought the percentage of uninsured down from 16 percent in 2010 to 9 percent, the lowest in U.S. history. Second, tax benefits passed in the 2009 stimulus, and extended throughout the last seven years, raised the overall income of millions of poor Americans. Third, the administration went beyond the tax code to increase anti-poverty spending, like food stamps and long-term unemployment benefits, and to support the national movement for a higher minimum wage. Together, these measures helped to reduce after-tax inequality more than any administration on record, according to the non-partisan Congressional Budget Office.

How will Republicans roll back these measures? Trump’s boldest proposals and most radical promises—to build a border wall and establish a police force to deport 10 million undocumented workers, while instigating a trade war, cutting taxes, trying to balance the budget, and hinting that the U.S. won’t pay back its debt—are together a recipe for financial panic and a possible recession. But even if the U.S. gets a more moderate version of Trump that dovetails with the wishes of his Republican Congress, there is another clear conclusion to draw. Quite simply, his administration would make it much harder to be poor in America.

First, Obamacare may be toast. By rolling back the Medicaid expansion and ending private subsidies, Republicans would almost certainly send the uninsured rate back up to Bush-era levels. In the last six years, the number of uninsured families living around the poverty line fell by almost 50 percent. Those gains would be reversed, and more than 20 million people, many of them just above the poverty line, could suddenly lose access to health care.

Second, Trump’s proposed tax cut will be one of the largest ever, possibly reducing federal revenues by more than $6 trillion in the next decade. His plan is in line with tax cuts envisioned by House Speaker Paul Ryan. Although taxes would be cut at every level, “the highest-income taxpayers would receive the biggest cuts, both in dollar terms and as a percentage of income,” according to the Tax Policy Center. The richest 0.1 percent of the country would save, on average, more than $1 million.

What does that have to do with the poor? Well, the massive size of the proposed Trump tax is significant, because House Republicans are also calling for a balanced budget. Mathematically that means that the GOP will be on the lookout for $6 trillion in spending cuts over the next decade. And Trump has essentially declared more than half the budget off-limits for cuts, since he wants to grow the military and preserve Social Security and Medicare.

With protective collars around defense and spending on the elderly, the rest of government spending would have to be bulldozed. This remainder is dominated by assistance for the young and poor. Medicaid would shrink, as might the Children’s Health Insurance Program. Food stamps would be cut. Federal unemployment insurance spending would fall, as would housing and energy assistance for the poor. The Department of Education would have to be gutted, taking federal student loans with it.

It’s not clear which of Obama’s economic policies would actually face elimination, because Trump has been so vague about his own plans, beyond Mexican walls and Chinese trade wars. In the absence of more details, one document that gives a sense of where things could go is Ryan’s grand plan “A Better Way.” This document is more thoughtful and potentially less draconian than Ryan’s previous budgets, which concentrated massive pain on the poor and the sick. But even this relatively kinder and gentler approach would still make it harder to be poor in America, by cutting welfare and health insurance payments to the poor in order to balance the budget while financing a historic tax cut for the wealthy. If President Obama was a throwback to the programs of the 1960s, this could be a throwback to the 1950s.

 

I once wrote that the U.S. president’s relationship with the economy is more like the captain of a ship sailing through turbulent waters rather than the bow-to-stern engineer. Presidents cannot slide the economy to 4 percent growth, as if GDP were a thermostat bar. But the government has great control over how growth is shared. For the last eight years, the Obama doctrine has put sharing at the heart of economic policy with a progressive plan to redistribute the country’s prodigious wealth to help low-income Americans of all ethnicities stay afloat in a period of severe inequality. Tuesday’s vote represents the repudiation of that economic policy, and the inauguration of a very different strategy. America is about to find out just how much a president matters to the lives of its citizens. For the poor, the stakes could not be any higher.

Trump’s victory on Tuesday night was clear-cut. But it is critical to note that an evisceration of poverty spending is not what America’s poor voted for. Hillary Clinton won by double digits among voters making less than $50,000. Trump won among all richer groups, and his coalition seems to be living in a world ever so slightly detached from that described by national statistics. More than half of Republicans think that unemployment has increased under Obama. It has in fact fallen from 10 percent in 2010 to below 5 percent today. The labor market is in its longest continuous expansion ever, and the last 12 months have been the best period for wage growth this century.

It is an interesting time to decide that America’s economic leadership deserves a risky head transplant. But if nothing else is clear, this is: We live in interesting times.

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