Arguments Blog
Thursday, Jul 24, 2014, 9:00 AM

Friday Round-up: Baby Steps Edition

Nathan Pippenger

Since the unveiling of the first, much-hyped “Ryan plan,” the left-wing response to Rep. Paul Ryan’s policy pronouncements has ranged from gleeful mockery to outright contempt. So it was striking when, in response to the release of Ryan’s new antipoverty plan on Thursday, liberals were suddenly finding nice things to say. Well, one nice thing, to be specific. That’s because, for once, Ryan actually suggested a good idea: expanding a well-regarded tax credit for the working poor.

The policy in question is the earned income tax credit (EITC), a refundable tax credit designed to bring low-income workers out of poverty. It’s extremely effective at that job, but there’s a problem: The EITC more-or-less ignores childless workers. As Jason Furman recently explained in these pages: “Credit amounts vary significantly by marital status and number of children. In 2014, the maximum EITC for a household with two children is $5,460, while for a childless household it’s $496.”

Ryan’s proposal would expand the EITC, by (among other things) doubling that maximum benefit for childless workers and lowering the credit’s minimum age to 21. And in contrast to many of Ryan’s Ayn Rand-inspired ideas, this plan enjoys a strong bipartisan pedigree. As Matt O’Brien notes:

This is almost identical to Obama’s plan—except for how to pay for it. Ryan wants to take money from social programs he doesn’t think are working, ag-subsidies, and, maybe, green energy subsidies. Obama wants to get money from closing both the carried interest loophole, which lets hedge funders pay capital gains rates on what should be ordinary income, and the ‘S-corporation loophole.’ A functioning political system would figure out a compromise.

At the moment, getting Congress to function is, admittedly, a long shot. But some agreement on an expanded EITC should be possible, and an expansion of the program—including getting it to cover workers in their early 20s—is a pressing issue. As Chuck Marr points out, “young adults’ labor force participation has dropped precipitously in recent years and their unemployment rate is very high.” The biggest obstacle to an agreement, then, is not the policy, but how to pay for it. This is no small dispute, since the funding plan outlined in Ryan’s proposal could actually prove counterproductive. Marr notes that Ryan “would pay for [an expanded EITC] in part by eliminating the refundable part of the Child Tax Credit for several million children in low-income immigrant working families, including citizen children and ‘DREAMers,’ thereby pushing many of them into—or deeper into—poverty.”

That outcome is likely to prevent congressional Democrats from accepting Ryan’s proposal in its current form, but nonetheless, Brian Beutler detects small advances in Ryan’s thinking: His tiny departures from Randian orthodoxy prove that he’s shed the inflexibility so typical of her followers. “And from the perspective of his critics,” Beutler argues, “no longer being Randian isn’t a great boast, but it’s progress of a sort.” One policy proposal at a time.

 

 

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