The Wolf at the Door
Rebecca talks to social insurance scholar Michael Graetz about his book The Wolf at the Door and how the U.S. might begin to address the rampant economic insecurity that long predated COVID — even in our current political climate. Subscribe to Off-Kilter on iTunes.
For the latest in Off-Kilter’s ongoing series on poverty and inequality in the age of COVID19, Rebecca sat down virtually with Michael Graetz, a Columbia and Yale law professor who’s spent decades studying U.S. social insurance. As COVID lays bare the gaps in America’s social insurance system that long predate the pandemic, Graetz’s new book The Wolf at the Door highlights a range of policy proposals that are even more timely now than when he and coauthor Ian Shapiro were writing the book pre-COVID — from a long-overdue updating of our Unemployment Insurance system the authors call “Universal Adjustment Assistance” to a much-needed boost in the Earned Income Tax Credit. The authors also lay out a framework they argue could move the ball forward on these and other measures even in the current political climate.
Host’s note: While Off-Kilter doesn’t necessarily endorse any or all of the legislative strategies in the book, I found the conversation really interesting and provocative as an approach to advancing achievable measures in the near-term that begin to address the rampant economic insecurity facing tens of millions of families… while progressives work to fundamentally change our politics for the longer-term.
This episode’s guest:
- Michael Graetz, professor at Columbia Law School, professor emeritus at Yale Law School, and author, The Wolf at the Door
REBECCA VALLAS (HOST): Welcome to Off-Kilter, the show about poverty, inequality, and everything they intersect with, powered by the Center for American Progress Action Fund. I’m Rebecca Vallas.
For the latest in Off-Kilter’s ongoing series on poverty and inequality and the age of COVDI-19 ,I sat down virtually, of course, with Michael Graetz, a Columbia and Yale law professor who spent decades studying U.S. social insurance. As COVID lays bare the gaps in America’s social insurance system that long predate the pandemic, Graetz’s new book, The Wolf at the Door, highlights a range of policy proposals that are even more timely now than when he and co-author Ian Shapiro were writing the book pre-COVID, from a long-overdue updating of our unemployment insurance system, to a boost in the Earned Income Tax Credit, while laying out a framework the authors argue could move the ball forward on these and other measures, even in the current political climate. While I don’t necessarily endorse any or all of the legislative strategies in the book, I found the conversation really interesting and provocative as an approach to advancing achievable measures in the near-term that begin to address the rampant economic insecurity facing tens of millions of families while progressives work to fundamentally change our politics for the longer-term. Let’s take a listen.
Michael, thank you so much for taking the time to come on the show. This is something that I’ve wanted to do for a while. We’ve been talking about doing this for a while, but now seems an especially timely moment given the focus of your new book.
MICHAEL GRAETZ: Yes, it’s a perfectly timely moment, and thank you so much for having me.
VALLAS: Well, rather than beating around the bush, I would love to start with sort of your central case in the book. And that is that the essential lesson from the 2016 election is that addressing voters’ economic insecurity is vital, as you put it, to the success of any future political program. So, would love just sort of as a starting point to tee you up to paint a picture of how we got to a place where nearly half of the country was struggling to afford basics like food and housing and healthcare prior to the COVID pandemic and now, doesn’t have any meaningful savings to fall back on in a moment like this. And given your scholarship over the years, part of that story has a lot to do with our social insurance system. I realize I’m asking you to summarize a lot of history here, but those are dots that seem worth connecting upfront.
GRAETZ: Well, I agree. I think the history is important. You know, people continue to talk about we should go back to the post-World War II period when we had robust economic growth that was widely distributed across all income groups. But we can’t go back, because after the war, Europe was a shambles, Japan was a shambles, China had just entered into a very harsh, backwards communist era, and Russia cared only about its military might, not its economics. And all of this began to change in the 1970s. We started getting imports from Japan and Germany, which really threatened the wages and security of manufacturing workers, particularly in industries like autos and steel. This was then followed by the oil crisis, which gave us stagflation, which was a debilitating combination of unemployment and inflation. And that’s when the fortunes of the highly-educated employees and those with only a high school education started to diverge.
Along the way, the collapse of private sector labor unions meant not only that middle- and low-income workers lost sway with their employers, but also that they lost their main political advocates. We then saw financial innovations, which gave very large payoffs to those at the top. And the rise in cost of U.S. health insurance meant that, because we depend, as we have, on an employer-based health insurance system for our workers, that health insurance costs just ate up wage increases in a way that made no one better off. And we then entered into a period of slow economic growth except for a very large burst during the I.T. revolution at the end of the 1990s.
And as global trade and investment grew, we had lots of winner-take-all markets for people at the top. We’ve seen it with companies like Amazon, rock stars like Lady Gaga. And early in the 21st century, imports from China began to hollow out important communities. One example that we talk about quite a bit in the book is the furniture manufacturing industry in places like Hickory, North Carolina and Eastern Tennessee. But going forward, and I think especially after the virus, technology is going to cause more economic insecurity at this location in labor markets than global trade and investment. And so, what we know — and we know this particularly from the 2016 election, and Donald Trump’s surprising election was matched in part by Bernie Sanders’s rise in the Democratic Party and the Brexit in England — that people are angry, fearful, and resentful. And I like to quote Tucker Carlson, who I describe as Fox News’s badboy who, said Trump’s election was not about Trump. It was the throbbing middle finger in the face of America’s ruling class. It was a howl of rage. Happy countries don’t elect Donald Trump. Desperate ones do. And this, I think, is why we need to be looking at economic insecurity in the middle class and below, rather than the remarkable gains at the top: millionaires and billionaires, as Bernie Sanders once described them.
VALLAS: Well, and Michael, I think that’s exactly the right place to pick up. Because that really kind of brings us to the next major point that you really seem to make with this book, which is that all the various things you just mentioned being kind of the backdrop of how we got here. A couple of statistics listeners of the show are very familiar with, we’re talking about 43 percent of U.S. households were struggling to afford food and housing and healthcare and other kinds of basics heading into the COVID pandemic. The well-known Federal Reserve survey that comes out year after year finds that 4 in 10 Americans don’t have even $400 in the bank, a statistic with incredible importance in this moment where so many people in this country had nothing to fall back on after they lost jobs amid the pandemic. So, with all of that, it’s kind of a little bit of a reminder about the economic insecurity that is so widespread at this point and was so widespread, importantly, heading into the pandemic, right? These are numbers before the COVID pandemic. Now we’re talking about all of that put on steroids and getting worse and counting by the day.
But the reason I bring this up is because a big, and sort of I would say somewhat provocative, argument that you make in your book is that all of that stipulated, the focus on the 1 percent versus the 99 percent, and the focus on the tremendous and growing inequality itself, it is not what you advise progressives in this moment on to be as focused on. You actually argue that inequality, in some ways, should take a backseat to the narrative of clearly and concretely addressing the sources of that economic insecurity, and that that is what we should be doing right now. I want to, as I ask that question and as you sort of respond to that and explain that argument in the book, ask you to include the study, the famous study about monkeys and grapes, because it’s actually part of what came up when you and I first talked about your book before it came out.
GRAETZ: Absolutely. So, as you point out, the Occupy movement, which used as its rallying cry, “We are the 99 percent,” really blurred dramatically the distinctions between the top 20 percent or 30 percent and the bottom. And we’re not the 99 percent. There is a much larger overclass that does not have a billion dollars in the bank. And the key point here, I think, is that taxing millionaires and billionaires, which I think we can do, tax them more, but it doesn’t tell us anything about the needs and insecurities of the rest. And most people simply don’t care whether Jeff Bezos or Bill Gates has $100 billion or $30 or $40 billion. It’s a matter of indifference to them. People tend to compare themselves with people close to them, their colleagues or their neighbors. I often am reminded about how law professors are far more upset when they learn that they are making $10,000 less than the person in the office next door than $5 million less than the partners in the city’s law firms. People really don’t care that much about the top. And the psychological literature is extremely clear that people are much more worried about losses than they are about gains. And so, any shock to their system is incredibly troubling and creates major fears and dislocations. And that, I think, is crucial when we understand it.
And one of the maybe good things about the virus is that it’s made it clear just how precarious the workforce and their families are, and has shone something of a spotlight on the middle and lower classes. People can’t pay their rent. When our book was published, the unemployment rate was three and a half percent in February. And as you say, 40 percent of the people still didn’t have $400 that they could pay off with cash or a credit card, that they could pay off by the end of the month. And now we have more than 36 million people unemployed. Unemployment’s in excess of 15 percent and probably heading toward 20. And we just learned that the safety net for the middle class and below simply is filled with very, very large holes. We know that about health insurance. We’ve learned it about unemployment insurance. And the relationships between inequality and insecurity are very complicated. When we think about the cities that are producing most jobs and greatest economic growth, they’re cities like Los Angeles and San Francisco, Chicago and New York. But they’re also the most unequal cities in the country. So, this is really important to understand how people are thinking about their own lives and focused on that much more than they are on the people at the top.
Now, the monkey story is really a wonderful story because Frans de Waal, a Dutch ethologist, gave a TED Talk, rather famous TED Talk, in which he had two capuchin monkeys side by side. And the person who was doing the experiment was feeding them both cucumbers. And they could see each other. The monkeys could see each other through their separate cages. And then she started feeding the one monkey grapes and kept feeding the other monkey cucumbers. And the monkey who saw the neighbor getting grapes started throwing the cucumbers out the cage back at the woman, even though he’d been perfectly happy, and she’d been perfectly happy to accept cucumbers earlier. And this was a great visual demonstration of how people really care about the people that they’re like, or monkeys care about the monkey next door. Unfortunately, when he gave the TED Talk, de Waals said, this shows us why the 99 percent are angry. They’re focused on the top 1 percent. And I think that was a misreading of the example. Because what people really care about is their own situation and how they’re doing relative to others who they think are pretty much in their own situation. And they’re very concerned, as Arlie Hochschild has pointed out in her book [00:15:29]Strangers [0.0s] in Their Own Land, they’re very concerned about what they describe as people cutting in, in front of them. And so, this, I think, is something that we really need to pay attention to in order to have really positive results in U.S. politics.
VALLAS: And a big part of what you’re describing also is sort of the landscape that sets up that breeding ground for divide and conquer politics, the likes of which we’ve seen from the current occupant of the White House perhaps taken to their logical conclusion in ways that I know I certainly had never imagined I could see a president deploy them as shamelessly or immorally as he has. I want to just note as a side note here and not get into it extensively, because it’s really not the focus of your book, but for anyone listening and thinking, well, wait a second. You know, how can we talk about the outcome of the 2016 election and not talk about nativism and race? I think it’s worth noting that you don’t focus on race. You don’t focus on nativism in the book. Your book is focused on economic policy, but you do raise this point and speak to it upfront and note explicitly — I’m paraphrasing here just a little bit — that you aren’t intending in the slightest to erase the role that nativism may have played or seems to have played in the 2016 election outcomes. But what you argue in the book is that the rampant economic insecurity that we’ve been talking about, that we have in this country, that we’re permitting to persist and to get worse over time creates a dangerous breeding ground where nativism can be especially potent and played to in ways that we’ve watch this president do. Would love to give you the chance to speak to that just a little bit before we go back to the focus of your book.
GRAETZ: Thanks, Rebecca. We talk in the book about how villains are a powerful political force. And of course, racism is the great American sin, and it’s still with us. Donald Trump has been echoing the segregationist George Wallace more than anyone else. And it’s not an accident that he wants us to build a wall to keep out immigrants from the sout but is not concerned with immigrants from Canada or Europe. And that Chinese imports are serving as this villains along with Latinx immigrants. And his policies, that is the wall on the southern border and protectionism, which we do talk about quite a bit in the book, are not directed at helping the middle class and people below them. Steel import tariffs that he imposed really threaten to close down the biggest nail factory in the United States because the price of steel went up so high. Retaliation has really hurt Maine lobster fishermen because they have discovered that China’s buying their lobsters from Nova Scotia instead. And it has devastated small farmers when China stopped by U.S. soybeans. And farm country is really suffering as a result of protectionism. So, it’s not just that nativism which has this electoral pull in the United States. And the selection of villains is beside the point. It’s actually creating policies that are costing us jobs and people who would bring to the country major advantages. And we certainly don’t overlook that. I just want to be clear about that. We think it’s important. But it’s important to electoral politics, and it’s not doing anything to help the economic security of the people who are responding to it.
VALLAS: So, and I appreciate so much you kind of connecting those points because they are very much linked, and that is a big part of how you set this analysis up in the book. I think that’s really important. I want to go next to another big part of what I view as setting your book apart from a lot of the other conversations going on in various progressive economic and anti-poverty policy spheres, and frankly, a lot of conversations that happen on this show. And that is that you really set out with the core premise that we are living in a politics where, absent total overhaul, which may happen at some point, but is not what we’re living right now, bipartisanship is actually necessary to getting anything done, at least in the near-term, if we’re talking about how can we improve the lives of folks who are struggling to make ends meet today? And you argue that bipartisanship is going to be necessary for advancing measures that actually address the sources of rampant economic insecurity that millions of families are facing. Explain your case there. I mean, I’m thinking, especially as many people listening may be hanging their hopes on November for a significant changing of the guard, they may be hearing this and going, yeah, it’s all going to be different in November! But I would love for you to sort of explain your argument here and what you call “divide a dollar politics.” Because that’s really the backdrop for why you’re calling for a politically feasible agenda to combat the economic insecurity while we’re kind of on that long arc of justice, but not to a place where we could maybe do the complete overhaul pieces yet.
GRAETZ: Well, the American system, with its separation of powers and federalism, is designed so that changes tended to be incremental, and the status quo is very much privileged. There are other aspects of this. Elizabeth Warren, I think, correctly pointed out the role of the filibuster. But the problem is that the pendulum swings back and forth. Even if November produces a Democratic House, Senate, and White House, the window for massive change is not going to be as great as people who are running for election seem to think. And it’s important to emphasize that our book is really about legislative politics, what you can get done in the legislatures at both the state and federal level, not electoral politics, and the kinds of rallying cries that move people to the polls. Divide a dollar politics, which is, as you say, the focus of our book, the lens through which we look at legislative politics, is really quite different from most of the political science literature and the economic literature, which seem to think that legislators will play to whatever the median voter wants, because that’s where the votes are. And what we’ve seen is that it just doesn’t work that way.
One way to think about this through the divide a dollar lens is just to play a game. We’ve done it at home with three people and asked them to divide a dollar by majority rule. It always starts off that people say, “Well, let’s just divide it one third, one third, one third.” And then someone says, No, let’s you and I do it 50/50 and leave someone out.” And then the someone who’s left out says, “Well, I’ll give you 60 and take 40.” And the game goes on without end. And so, the divide a dollar game shows you that there is no stable outcome based on self-interest alone. And the pendulum of American politics swings back and forth. And so, you need to create coalitions that will win in the legislative arena and stop or block coalitions that are in opposition to this change. And we basically say that there are six building blocks of distributive politics, which I’m happy to go through with you if you think that’s a good use our time.
VALLAS: No, I think that’s exactly where we should go. And I want to frame it up by saying that one of the core questions that you ask in the book, and I think this is a useful lens for kind of thinking about the type of legislative strategy that you’re describing here is, you ask why have successes like the New Deal, like the food stamp program (today called SNAP), like Medicaid, like the Earned Income Tax Credit, why have these kinds of successes been so hard to replicate in recent years? And many people listening might say, well, you know, it’s this increased political polarization, or it’s money in politics or racism or hostility to taxes. But you actually argue that these forces have coexisted with notably less political resistance to addressing threats to economic insecurity in earlier eras where these successes were still achievable. So, you’re basically saying it’s not good enough to say these things are going to prevent us from doing anything.
But as I understand your argument, you basically argue, while progressives work to fundamentally change the system — maybe that’s the filibuster, maybe it’s something else, maybe it’s money in politics — in the near-term, as I described it before, obviously, it’s an homage to Dr. King, but as the long moral arc bends slowly towards justice, you’re basically arguing we should figure out how to deal with these forces rather than pretending that they don’t exist or requiring them to be abolished before we can get anything done to promote economic stability. So, that is the lens through which I understand your six building blocks of distributive politics. And I would love to hear you kind of talk a little bit about what they are and why you think they create a framework for getting things done that are significant and worth doing, even with those forces of opposition in place.
GRAETZ: Well, we start off, as I said, we start off urging people to think about winning coalitions rather than what the 99 percent is supposed to want. And those winning coalitions now, we argue, really require business support. Because with the demise of labor unions, business has become the major political actor in American legislative politics. And if they oppose something — as we saw with the lack of a public option in Obamacare because of the insurance industry’s opposition — when they oppose something, it’s very hard to get something done. And so, you need a coalition. And the coalition has to have a moral commitment of some sort in order to be held together. Now, we don’t say that all members of the coalition has to have the same moral commitments.
But the SNAP program that you mentioned, the food stamp, formerly known as the food stamp program, is a perfectly good example of moral commitments and a business coalition where farmers have been a very important force, and the farm lobby, in keeping these benefits going. SNAP is a crucially important program for lower-income folks, and it was expanded actually with George W. Bush and a Republican administration at one point during his term. And of course, the moral commitments there are very strong, that people shouldn’t starve. They shouldn’t go hungry. But also that maintaining farmers and the lives of farmers and the role of farmers in the American system is a very important lynchpin. And if you go back in history, which we do in the book, that you’ll find that Medicare and Medicaid were supported by business interests. Social Security was supported by business interests and so forth. So, we do think that you need to have a coalition that people may not initially think it is necessary.
The third point is that we really urge people to pursue proximate goals. Bob Greenstein of the Center for Budget and Policy Priorities, who’s been very successful in advocating for low-income people, puts it very well. He says that you need to go two steps forward when the opportunity arises, and be sure that you only go back half a step when the opposition is in control. We’ve seen this with Social Security. Franklin Roosevelt had to leave domestic and agricultural workers out of Social Security initially in order to get support of southern Democrats for whom race was paramount. And these workers were often Black, predominantly Black. And later, Social Security was extended to them when the opportunity arose.
And that really gets us to our fourth point, which is that you need to entrench the proximate gains that you make, as we describe them. And Social Security financing is the gold standard for this. George W. Bush learned that when he tried to repeal it and privatize it during his administration, and he couldn’t do it for lots of reasons. And you need resources. And here, we’re not just talking about campaign contributions, which are often important but not always important. But you need resources for polling and for access and meeting with legislators and disseminating information and keeping the coalition together.
And then the final element of our list is that you need effective leadership. And that leadership can come from the White House, but not necessarily comes from the White House. It often comes inside the legislature, relevant legislature. But it also is necessary to have leadership, as we’ve learned, in the outside coalition. So, those are our six building blocks.
VALLAS: And so, with that as sort of the framework that you offer and a little bit you shared some of the kind of historical examples that help you get there with your analysis. I would say for people who are nerds on this stuff, like I know I am and like I think a lot of our listeners are, I would actually strongly recommend reading these kind of stories that you share throughout the book because they’re really rich with the detail of how certain compromises got struck and why they were heartbreaking at the time, why they ended up being the ones that moved the ball forward. People will have different views about those deals that got struck and whether they were the right ones, but a lot of rich detail in there to learn from for sure.
So, Michael, with that as sort of the framework then, I think what a lot of people are probably listening and wondering is, OK, so, what policies could we actually advance within that framework using that strategy? And you have several ideas, perhaps most timely is strengthening our unemployment insurance system. I want to quote you here. You write, “The weakest link in the U.S. social insurance system is protection from job loss during the working years.” Talk a little bit about the shortcomings of UI, which are so fully on display in this moment, and your call for what you term a UAA, Universal Adjustment Assistance. I find this to be a really, really interesting idea, especially in this moment, particularly because you actually note in the book that you thought the only thing that was missing pre-COVID, which is when this book was published, was a powerful political constituency to get something like a UAA done. And now maybe we have it? So, would love to hear you talk about that proposal and the shortcomings with UI that it would address.
GRAETZ: Well, we’ve learned during this period of the virus the weaknesses of the unemployment insurance program. It was created in 1935. And Roosevelt knew during the Depression that we needed a national program, but he was very fearful because of constitutional constraints that are now archaic. He was very fearful to produce a national program because he was afraid it would be struck down by the court. So, in 1935, he created a state-based system with federal guidelines and administrative support. And what that has produced is state legislators who are afraid of a costly race to the top or too much in the way of benefits that they have tended to race to the bottom to attract businesses. And so, the unemployment insurance system has covered very few workers. It does not cover temporary and part-time workers. It does not cover independent contractors, even though the CARES Act during the virus has extended that kind of insurance to those folks. And in 2016, only about a quarter of unemployed workers received benefits. And the benefits they received, on average, were less than half of their prior earnings and often much less, so that they do not keep people out of poverty when they’re unemployed. And of course, the unemployment insurance is financed with the most regressive tax in the system. And so, it hasn’t worked.
And the other program that has failed dramatically is something called Trade Adjustment Assistance, which was initiated when barriers to free trade were reduced in the Kennedy administration. And they were, these assistance programs, were designed to help workers who lost their jobs due to trade. And they provided, at least in principle, retraining and relocation support and so forth, but they never were implemented appropriately. Congress just refused to spend the money that was necessary. And so, there was just a tiny number of people who were covered. And so, our Universal Adjustment Assistance program, or UAA, is designed to take the best of unemployment insurance and of adjustment assistance and cover workers when they lose their jobs for whatever reason, when their jobs are lost through no fault of their own. So, it would be a national program. It would cover all job losses, not limited to trade as a basis for losing your job. It provides benefits that allow time for reemployment. We urge the enlisting of community colleges that have been quite successful in retraining people. It would help secure transportation to a new job, and it would help relocate workers to where the jobs are, if that’s appropriate.
And we, when we wrote the book, thought the time had come for a transformation of this system. The political barrier, as you say, is that it’s very hard to find a constituency for changing these inadequate systems. People don’t like to think of themselves as potentially the future unemployed, even though we know that young adults are going to change jobs 12–15 times during their lifetime. And we know how much job loss there has been for older adults due to technological change and to globalization. But people are happy to think of themselves as future retirees. And so, we’ve got the American Association of Retired People, which is one of the three most powerful lobbies in the legislatures, but we don’t have an American Association of Future Unemployed.
And I do think that the devastation to the economy and to jobs of this virus may create an opportunity to think about how we can move to a system of unemployment insurance and adjustment assistance that we can build on should something like this happen again, or should a large number of Americans find themselves out of jobs, as they did during the Great Recession or the financial crisis of 2008, 2009. So, we may be having an opportunity, but I have to say I haven’t seen much evidence in the Congress of people willing to think about how to restructure that system so that it works. If we had a working unemployment insurance system, we would not have had to send checks of $1,200 to individuals and their children, whether they need it or not. It was the only solution available because we didn’t have a system to build upon. We had a foundation built on sand, and we could not build on it when this economic shock hit.
VALLAS: Another policy that you point to as what you view as part of this kind of realm of the politically feasible. And I want to know, for folks who are listening as we’re thinking about what falls in this part of the Venn diagram that you’re effectively drawing here and what falls in the politically feasible, the way I understand a lot of your strategy here is that it coexists with strategies by folks who are looking to push the Overton Window, as it’s often described, right, the realm of what is politically feasible. And so, I view the two as really kind of going hand-in-hand. What can you do now while you shift the realm of what’s possible? But as I sort of lay that backdrop of some of how I understand your argument here, you also point to the refundable tax credits, the Earned Income Tax Credit in particular. I would argue the Child Tax Credit should be right there with it in your analysis. And you actually lift it up and you start to compare how it ranks in this framework and in this window of current feasibility as a strategy for boosting struggling workers’ incomes compared with, say, the minimum wage or a Universal Basic Income. Talk a little bit about those three strategies, all of which are getting lots of attention right now in this COVID moment, and kind of why you end up falling with the Earned Income Tax Credit as where you think people should be putting their resources in the short-term.
GRAETZ: Sure, I’m happy to do that. I should just say, by way of background for the listeners, that we really focus in our book on the key role of work to families’ well-being. And we are focused on creating jobs, making work pay better, and protecting workers who lose their jobs through no fault of their own. We do talk about other policies like health insurance and child care. But as we know, wages have been remarkably flat in the United States for an awful large group of people and for a long time. They were just beginning to rise this year when the virus hit. And to rise slowly, I should add. And the Universal Basic Income, which we saw Mr. Yang propose in his presidential campaign, and the minimum wage, which has been a rallying cry of many Democrats — $15 an hour as a national minimum wage, for example — are important ideas. But they’re much better, we think, in electoral politics as things that people might like than they are in terms of getting legislation actually passed.
And so, we do focus on the Earned Income Tax Credit. We don’t say that minimum wages shouldn’t be raised. And we have applauded states and localities that have raised minimum wages. But minimum wages are often paid for by workers and consumers. The Earned Income Tax Credit is paid for by general revenues and the income tax, and the income tax is much more progressive. So, the financing of the Earned Income Tax Credit is more progressive than minimum wages. And the EITC history is a really good example of what we mean by proximate gains and entrenching them for the future. The program started very small in the 1970s as an effort to reduce, somewhat, the burdens of Social Security taxes on low-wage workers. And it has been, and started in a Republican administration with support from a Democratic senator, leadership from a Democratic senator. And it has been a bipartisan program ever since. And the states have found it very easy to piggyback on the Earned Income Tax Credit simply by adding a number to whatever the credit is at the federal level. And many states, including lots of red states, have expanded the benefits beyond what the federal government has provided.
So, the Earned Income Tax Credit has a long history of bipartisan support. It doesn’t require any new bureaucracy or enforcement techniques because it’s done through the tax system. Republicans have long thought that any tax reduction is a good idea. And as you say, along with Child Tax Credits, the Earned Income Tax Credit and Child Tax Credits have become one of the most important programs for helping low-wage workers, falling alongside food stamps, SNAP, and just below Medicare, Medicaid, and Social Security in terms of their impact on lifting people out of poverty. So, it’s been a very successful bipartisan program for a long time that has grown over time through both Republican and Democratic administrations. And we think that the opportunities in the legislature to build on it are quite great. It’s much harder to explain intellectual politics than giving everyone a basic income or raising minimum wages, which is why we hear less about it, I think, in political process.
VALLAS: And obviously, the big ask in the EITC realm is to expand the credit so that it actually reaches workers who don’t have dependent children. That is kind of the big shortcoming in the EITC right now. Part of the reason that I bring up the Child Tax Credit in that context is actually, as I was reading this particular chapter and you were talking about the desirability of a Universal Basic Income from the political perspective, as you said, it kind of makes for a better rallying cry than refundable tax credits! Which you can’t really imagine a candidate quite standing on the stage and pumping their fists in the air with the same fervor. Although we have seen the EITC featured in presidential primary platforms, if not on the stage.
Part of the reason, though, I sort of bring up the Child Tax Credit is, as I was reading this chapter, I found myself kind of thinking that, yes, the Child Tax Credit has bipartisan support, and in a lot of ways, has kind of a similar political history to the EITC. Also, it’s got the focus on kids. All those reasons make it something that should be in that chapter, and it’s on the list of sort of doable things, even within these current politics. But there’s another dimension of the push to expand the Child Tax Credit, which because of the design of some of the recent proposals, which start to make it look more like a universal child allowance, I wonder, should it be where progressives are putting a lot of their emphasis in the near-term legislatively, as sort of a back door version of a UBI that is going to be a lot more effective at getting income into the hands of struggling families because of its universality and connection to kids, than say, programs like Temporary Assistance for Needy Families, TANF, which are withering on the vine and probably not really ever going to be able to be resuscitated to be significant programs?
GRAETZ: Well, that’s a very interesting suggestion, and I agree with you. The Child Tax Credit will have a lot more support than revising or expanding the TANF program. But as you point out, one of the big weaknesses with the Earned Income Tax Credit is that it is trivial for single workers without children. And a lot of the unemployed and the temporarily-employed and part-time workers are people without children. I think these need to be complementary. You know, if I were designing it, I think what you’d do is you’d design a universal program for workers, a universal workers’ program, which would reach people higher than the current Earned Income Tax Credit does in terms of wages, phases out gradually so it doesn’t go to high, truly high-income people, along with child credits. And you’d separate the two and create two different programs. But having children in the EITC has been very important to its success. So, I’m not sure that one should do that. But I agree with you that it’s a combination of the Child Tax Credit. that can be expanded and the Earned Income Tax Credit that can be expanded, especially for children.
And the politics of these are quite good. And the politics, the legislative politics, of Universal Basic Income are really remarkably bad because while people on the left and the right support a UBI, they are thinking about it very differently. People on the left just want to add it onto the existing programs that are there and have mixed success. But people on the right want to substitute a UBI for all welfare programs and make it smaller than what we now have. And so, I think there are real downsides to thinking about a Universal Basic Income in addition to the problem that giving income to Bill Gates or to surfers in the Pacific Ocean who are not working and choose not to work, trust-fund babies, as they’re often called, it’s just not an idea that’s going to get the kind of bipartisan support that it needs unless it really does cut back on existing programs. And that seems to me to be a high-risk operation.
VALLAS: It’s such an important point, and one that you mentioned, Bob Greenstein before. I know this is an area where he has also, I think, made the point loud and clear in a way that I think a lot of progressives have heard and really started to understand. A Universal Basic Income would have to be really, really significant in terms of a dollar figure if it were to be envisioned as replacing in-kind programs like Medicaid or housing assistance or food assistance. Which when you start to think about what you would need in cash to replace those kinds of in-kind benefits, particularly health insurance and housing, you’d have to be talking about something that is well beyond the realm of what conservatives would ever be able to support. It’s such an important point.
So, Michael, in the time that we have left, there are a couple of other models that you note sort of in the telling of the historical examplea that you weave throughout the book as really foils to the framework that you’ve laid out about how to achieve these and some other things that you view as politically achievable wins to address economic insecurity even within our current politics. And those two other models that you lift up and really, as sort of cautionary notes, are populist scapegoating, which you liken to dangerous catnip. I particularly like that as the mother of cats. And also, you lift up triangulation ala what we saw from President Clinton in the ’90s that gave us the dismantlement of a lot of our core safety net programs. Talk a little bit about those models and why they don’t work to move the ball forward.
GRAETZ: Well, I think we’ve seen in the Trump administration that the nation and perhaps the world is ripe for populist charlatans who basically exploit economic insecurity and then promise solutions that are snake oil for the public, like protectionism and walls at the border. And you know, they’ll likely fix thing that are not broken and make the problem worse. And they also undermine — we’ve seen this during the virus — they undermine expert opinions. And trust in experts has declined dramatically over the years. So, I think that is a big problem.
And triangulation, which is at the other extreme, which Bill Clinton was the perfect example of, is very risky. Because as Clinton did, every time he moved toward the Gingrich Republicans’ position, the Republicans then moved the goalpost further away. And you really have to have principled decision making. You need to know what what you’re willing to accomplish and what you’re willing to compromise and what you’re not willing to accept. And the problem with triangulation is that it is tactical and not strategic. It doesn’t think about how these moves are going to create the potential for further moves when the Republicans are all in charge, in this case, the [inaudible] coalition that was really pushing for change to the right. Clinton met them halfway, and when they got in charge, they wanted to go more than halfway. And I think he met them more than halfway. So, I think triangulation without principles, without strategy is a very dangerous process. That’s different from the kind of bipartisanship which we’re urging.
VALLAS: So, Michael, any closing thoughts or takeaways that you want listeners to have or that you hope policymakers have in this moment? Obviously, there’s a lot of focus on the immediate need to pass additional relief packages. We’re seeing the House Democrats do their damnedest to try to put things out there that start to approach the response that economists are saying we need. We’re seeing Senate Republicans obstruct pretty much everything that we know we need to be happening in this moment, including even state and local aid. But as we start to think slightly longer-term rather than the next couple of months, do you view COVID and the pandemic and the attendant economic circumstances as creating a window of opportunity for taking some of these steps? And I guess I ask that question in part as someone who’s also simultaneously not just hopeful along those lines, but also fearful of another age of austerity, where we see conservatives, who have always wanted to find any opportunity and excuse to cut Social Security or Medicaid or SNAP, using this moment and this downturn to try to actually cut back programs we already have rather than entertain conversations about moving the ball forward.
GRAETZ: Well, that’s an important point. I do think we need to avoid austerity. And the size of the spending that we’re seeing during the virus is going to cause calls for austerity, which would be exactly the wrong answer. I’m an optimist about this, not a pessimist. And I do think that the virus has really created a spotlight, as we’ve discussed, on the weaknesses of the unemployment protections that the nation has. It has also demonstrated the weakness of relying on employer-based health insurance in a situation where jobs are precarious and people are going to change jobs and lose their health insurance during periods of unemployment. So, I think it does open a window for a public option or options to opt in to Medicare in the health insurance realm.
And we’ve seen that child care is so important when people are trying to work from home and having their children at home with them. We do talk about child care in some detail in the book. And as you know, when Richard Nixon, in 1971, vetoed a child care proposal very close to the one he had initially proposed, Congress has failed to take seriously issues of child care ever since. And I think this is another opportunity that we would see the cities and states, cities like Boston and New York and Washington, but states like Oklahoma and Alabama and Florida have been very good about creating universal pre-kindergarten programs for, first four-year-olds and then three-year-olds. And that’s the kind of program where I think bipartisan support exists. It will have to be done at the state and local levels. So, federalism will have to be an advantage, not a disadvantage. But I do think the windows are open for this. Of course, it does depend greatly on what happens in the November elections, as we all know. But I am hopeful that people will start thinking a little bit about the longer-term.
It’s clear that we have to spend money on hospitals and testing and contact tracing in state and local governments and the like, and small businesses in order to get through this crisis. But I am hoping that some of our political leaders will begin thinking about what follows and trying to develop programs so that if the window is open and the opportunity arises, they are ready. And I do think some of the things that we’ve talked about and things that we write about in our book are certainly a place that people can start thinking about these issues going forward.
VALLAS: A great note to end on, and a lot more where that came from in the book in terms of the policies that you push forward. I’ve been speaking with Michael Graetz. He’s a professor of law at Columbia University. He’s also professor emeritus of law at Yale Law School. And the book is The Wolf at the Door: The Menace of Economic Insecurity and How to Fight It. It was written and published before coronavirus, but could not be more timely. Michael, thank you so much for taking the time to come on the show. And I’m so glad that we bumped into each other at that National Academy of Social Insurance meeting and started talking about doing this. This was a real pleasure.
GRAETZ: Thank you for having me. It was really my pleasure.
VALLAS: And that does it for this episode of Off-Kilter, the show about poverty, inequality, and everything they intersect with, powered by the Center for American Progress Action Fund. I’m Rebecca Vallas. The show is produced by Will Urquhart. Transcripts are courtesy of Cheryl Green. Find us on the airwaves on the We Act Radio Network and the Progressive Voices Network, and say hi and send us your show pitches on Twitter @OffKilterShow. And of course, find us anytime on iTunes or wherever you get your podcasts. See you next time.