Handouts Hurting Poor, Help Up a Better Way

DECEMBER 12, 2012 | Commentary by D. ERIC SCHANSBERG, CHARLES MITCHELL

The holidays are a great time to be grateful for the gifts we've received.  And, as we remember well, fallen Republican presidential candidate Mitt Romney claimed that some Americans have received "gifts" in the form of handouts from the government. 

The man sounded Grinchly for sure, but that makes this season a perfect time to confront a fact too few understand:  While many bipartisan government programs are intended as gifts for the poor, they are actually a lump of coal fortified with an unintended curse.  Not only do they hurt the people they're supposed to help, but they're unaffordable and unsustainable, leading to a circular problem of never having enough resources to find a cure.

Several "poor policies" in Pennsylvania hurt rather than help the poor because they fail to restore dignity and independence.  It's the "Good Samaritan's Dilemma" where even the best intentions won't help the needy if they're paired with policy that's, well, poorly designed and implemented.

Take education, for example.  You can't throw a rock in Pennsylvania's state capitol without hitting a politician who will tell you we need to spend more money on education, often because of failing and violent schools in places like Philadelphia and Pittsburgh.

Yet, we've already done that statewide and in the worst schools.  Expenditures have increased from $4 billion in 1980 to more than $25 billion in 2011.  In Philadelphia, taxpayers spent $14,132 per student in the 2010-11 school year, controlling for inflation, an increase of about half since the mid-'90s.

What has been the return on our investment?  Statewide, fewer than 20 percent of 4th and 8th graders are proficient in reading and math on the so-called "nation's report card."  And in Pennsylvania's worst academically performing public schools, there is one act of violence every 17 minutes.  By any measure, it is clear that despite dramatically higher spending, for Pennsylvania's poor, the situation in education is horrendous and getting worse.

Another supposed "gift" for the poor is large welfare programs.  Once again, good intentions don't improve bad policy: Since the federal government launched a "War on Poverty" in the 1960s, the poverty rate has gone up, not down.

Here in Pennsylvania, 1.6 million residents, which is about one in eight, live in poverty.  Our state is home to the poorest city in America, Reading, where nearly half of the city's residents are living below the poverty line.  If more government money was the solution, Reading would be rife with rich job creators.  Instead the situation is bad and will get worse. If Gov. Tom Corbett allows President Obama's health care law to take full effect in Pennsylvania, one in four Pennsylvanians will be dependent upon low quality, taxpayer-funded health care.

So what do we do?  Is the situation hopeless?

It most definitely is not.

When it comes to education, there are inspiring new models even in some of the worst neighborhoods in Pennsylvania that are getting fabulous results at a fraction of the cost.  That includes private schools such as the Gesu School in North Philadelphia and Logos Academy in York, both of which are able to better serve students and families thanks to the recently expanded Educational Improvement Tax Credit program.  It also includes public charter schools like the Propel Schools that serve some of the poorest communities in the Pittsburgh area with stellar results.

As for welfare, in order to give a gift this holiday that's worth receiving, we need to remember the story of the first Thanksgiving.  Those Puritans needed help, but a handout wasn't the solution – a hand up was.  Right now, politicians and bureaucrats in Washington are preventing decision makers at the local and state level from making those kinds of distinctions through miles and miles of red tape. 

Too often in politics, good intentions, such as helping the poor, lead to devastating policies that harm them – like the ones we have right now in education and welfare.  But if we work smarter not spend harder by scaling up innovative educational models that work at the local level and give states more flexibility with welfare programs, then we will truly give good and sustainable gifts to those who need them.  That will be cause for happy holidays indeed.

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D. Eric Schansberg is Professor of Economics at Indiana University Southeast and author of the book Poor Policy:  How Government Harms the Poor.  Charles F. Mitchell is vice president & COO of the Commonwealth Foundation, Pennsylvania's free-market think tank (www.commonwealthfoundation.org



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