POVERTY-2012/12/05 1 THE BROOKINGS INSTITUTION A POVERTY AND OPPORTUNITY AGENDA: WHAT’S IN STORE FOR THE NEXT FOUR YEARS Washington, D.C. Wednesday, December 5, 2012 Introduction: RON HASKINS Senior Fellow and Co-Director, Center on Children and Families The Brookings Institution Keynote Address: GENE SPERLING Director of the National Economic Council The White House TEVI TROY Senior Fellow, Hudson Institute Former Deputy Secretary, Department of Health and Human Services Moderator: RON HASKINS, Senior Fellow and Co-Director, Center on Children and Families The Brookings Institution Panelists: MONA SUTPHEN Former Deputy Chief of Staff for Policy The White House JOHN BRIDGELAND President and Chief Executive Officer Civic Enterprises ISABEL SAWHILL Senior Fellow and Co-Director, Center on Children and Families The Brookings Institution JOANNE BARNHART Former Commissioner Social Security Administration JARED BERNSTEIN Senior Fellow Center on Budget and Policy Priorities * * * * * ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 POVERTY-2012/12/05 2 P R O C E E D I N G S MR. HASKINS: Welcome to Brookings. My name is Ron Haskins. I’m a Senior Fellow here, and along with Belle Sawhill we run a center here called Center on Children and Families. So, the question is why are we doing this event? And I think there are at least two good answers to that. The first one is if you’re like me, you’re sick of all the discussion of the Fiscal Cliff and the deficit crisis and Social Security and Medicare and so forth, and hardly any discussion of poverty, opportunity, and the programs that we all know and love. And so we would like to focus our attention explicitly on those issues this morning, and not enough attention has been focused on them during the whole election season for that matter, as well as since. And then the second thing is that it’s not impossible to budget (inaudible) will involve cuts in some of these programs. It’s very much up in the air now. If the sequestration were to go through, for example, there would be substantial cuts in Head Start. There would also be cuts in other programs that we know and love, like housing programs and education programs. So, these programs -- and usually we’re talking about how much to expand them, especially in the last several years, and now we’re talking about there’s a very good possibility they’ll be cut. So, all these issues are extremely important, and we ought to focus attention on them, and I expect tomorrow morning in the Washington Post and New York Times the headlines will be all about these programs, because Brookings addressed them, so. (Laughter) Now, Belle and I are pleased to be able to sponsor this event with Spotlight on Poverty and Opportunity, which is an organization that both of us support and advise since its inception. It’s a nonpartisan initiative that aims to bring together diverse perspectives from the political policy, advocacy, and foundation worlds to find ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 POVERTY-2012/12/05 3 ways to reduce poverty and increase opportunity in the United States. And both our Center on Children and Families and Spotlight are supported by several foundations, especially Annie E. Casey. So, then we have two terrific keynote speakers. Right now we have one. (Laughter) Soon, if we’re lucky, we’ll have two, followed by an equally terrific panel, and we’re featuring people most of whom have a scholarly background, a lot of history of writing, but also people who have had extensive experience in government. So, we’re trying to represent both those worlds in there that amount to prognostications today about what’s going to happen. So, let me just say one word about each of our keynote speakers. First, Gene Sperling, who will be here momentarily. He may be here already. He has to do a couple of things first. And Gene, as many of you may know, has had a brilliant career in Washington. He’s the Director of the National Economic Council, and I believe it’s correct to say that he’s the only person that has held that position in two administrations -- in both the Obama and Clinton administrations. The only thing that would be more impressive than that -- for those of you who don’t know, that is probably the -- in many administrations, the present senior economic advisor. What could be more important than economics? So, the only thing I think would be more impressive than having done it under both administrations is if one of the administrations had been Republican, the other had been Democrat -- then that would really be something to talk about. (Laughter) And then Tevi Troy, who’s a former Deputy Secretary of HHS. He’s held several senior positions on the Hill and in the Bush White House, where I first met him, and if Romney had won, Tevi would probably be the most popular man in Washington, D.C., because he was in charge of the Domestic Transition Team, which means everybody would be coming to Tevi, telling him what a great guy he is and oh, please, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 POVERTY-2012/12/05 4 give me a job, you know. (Laughter) So, we’re very privileged to have both of them here today to reflect on what the meaning of the selection is for social policy, and we’ll begin with Tevi, and then if Gene is here by then he will speak and then we’ll have a chance to ask questions. I think Gene may have to leave, but if he does, I’m going to pester you with all the questions and you’ll have to be half Democrat and half Republican, which will be -- MR. TROY: Applicable. MR. HASKINS: Yeah, good, okay. Tevi Troy. MR. TROY: All right. Good morning. ALL: Good morning. MR. TROY: Thanks, Ron, for setting this up -- Belle. My predecessor at Domestic Policy Council, John Bridgeland. Good to see you. I’m reading Robert Caro’s series on Lyndon Johnson right now -- the third book is the one I’m up to at the moment -- and in the book he tells a joke that Lyndon Johnson used to like to tell. The joke is about a man desperately in need of a heart transplant. The man has three options of possible donors. The first donor is a 23- year-old who died in a skiing accident. Terrible, tragic thing. The second one is a 35- year-old teacher who died in an automobile accident. Also a terrible, tragic thing. And the third one is a 79-year-old Republican banker who died of old age. Well, when faced with these three options, the man says I’ll take the 79-year-old Republican banker, and the doctors are incredulous and they say why would you want that one? He said well, if I’m going to get a heart, I’d like to have one that hasn’t been used before. (Laughter) Now, I see the humor in the joke, begrudgingly I must confess. Lest you Democrats out there get too excited, just recall that there is a corresponding Republican ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 POVERTY-2012/12/05 5 joke about brain transplants. (Laughter) But, nevertheless, the image that Lyndon Johnson was talking about, (inaudible) 50 years ago, is one that I find very disturbing. It’s one that really bothers me, profoundly bothers me. In fact, I always tell my kids not to use the word “hate,” but I hate it. I hate that Republicans are seen as the party that is not the pro-poor party, that the Republicans always are tagged with this image of not being in favor of the poor. And it’s particularly bothersome to me, because I’ve dedicated my life to trying to come up with good policy that is helpful to all Americans, particularly those who need the most help. So, this has been a theme of my life throughout my career in Washington and is something that has really inspired me. In fact, it inspired me to come to Washington to begin with; inspired also by people like Ron Haskins, who’s been groundbreaking in his -- that’s a Republican in his work on how to find good policies to help the poor. So, it’s really something that inspired me from a very young age. I grew up in New York City at a pretty rough time in New York City history. I was growing up in the late 1970s. You had a disastrous budget situation. There’s the famous headline of Gerald Ford telling New York City that he wouldn’t back up the New York City bonds, and the headline in the Daily News is “Ford to NY: Drop Dead.” But it wasn’t that particular situation. As we could see, debt’s been a problem in American politics before. But there were also some other more unique situations. Graffiti was terrible, crime was out of control. There was just the sense that things weren’t working, and the thing that inspired me to come to Washington was this notion that there had to be a better way, that we had to find a different way of doing things. And I saw some examples in my young life when Ed Koch became mayor of New York City. He was a Democrat, to be sure, but he also talked about things ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 POVERTY-2012/12/05 6 in different ways. He went out and he balanced the budget in New York City, which people didn’t think was really possible. He started a conversation about crime where he didn’t necessarily -- he was willing to criticize the criminals for what they were doing, which is also somewhat groundbreaking. And he started a conversation about crime that was continued later by Rudy Giuliani, and Giuliani implemented policies that really helped bring down crime. You know, crime around 1990 in New York had about 2000 murders annually. There was one year it actually had 2200 murders. And there was this day that made all the headlines this week where there were actually no murders in New York City. It was a completely murder-free day, which is a great thing, and we really made a lot of progress, and that, I would attest, is also a form of social policy, because crime has serious and greater implications for the poor, who are often in the neighborhoods where they get hit worse by it. So, I got this sense. I saw in my young life that there are better ways of doing things, and that’s what inspired me to come to Washington to see if we could put some of those things into action. And in doing so, I’ve been long governed by two rules, and I’m going to talk about a third new rule. But I’ve been governed by two rules. The first rule is that more is not better. This is different than the old modernist architecture rule that less is more. Less is not necessarily more, but more by itself is not better. It does not lead to better results. And so we’ve seen in the war on poverty -- we mentioned about Lyndon Johnson earlier. Lyndon Johnson initiated the war on poverty, and by some estimates we spent over $13 trillion in fighting the war on poverty. There’s the old joke, not quite accurate, but that we fought the war on poverty and poverty won. I wouldn’t say it’s a question of winning or losing, but poverty is still endemic and still with us and something that must be addressed, and maybe we ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 POVERTY-2012/12/05 7 need to think about better ways to do it. We spend about a trillion dollars a year, and every year we spend more and more money on poverty. Each year we spend more and more to do it, and the problem is not going away. We have 122 separate means-tested programs in the federal government. It seems to me too many programs, not enough focus. In addition, in the Obama administration we’ve seen an increase of about $183 billion in means-tested programs over the course of this administration thus far. And the results in poverty are not encouraging. Poverty was about 13-1/2 percent when the administration began; it is now at about 15 percent. So, we are not getting good results, and we need to look at what we’re doing and try to come up with a better way of doing things. I said I had three rules. The second rule is about a way of going about things, and the second rule suggests that individual choice and individual responsibility are better ways of going about things, and they always lead to better results. My friend Ron Haskins and Belle Sawhill have this book on poverty where they talk about the three ways to bring down poverty. What are those three ways? You have to finish school. You have to -- Belle’s looking at me very carefully, so I’m not going to get these wrong. (Laughter) You have to -- in fact, she wants to get up and say this. MR. HASKINS: She’ll get you. MR. TROY: You have to finish school; you have to work full time; and you have to have children inside marriage -- or not have children out of wedlock is another way of putting it. I got the three right, right? Those are the three things. And those three things -- they sound very simple, but those three things will bring down your likelihood of falling into poverty from about 12 percent to about 2 percent. Now, that, ladies and gentlemen, I will suggest is a good result. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 POVERTY-2012/12/05 8 And could you imagine if we can get the poverty rate down to 2 percent? That would be tremendous. Now, I’m not just saying it’s easy to do or we snap fingers and make it happen, but I am saying that we need to look at policies that lead to those kinds of results. For too long we had the old AFTC program, which -- Ron Haskins, also Tommy Thompson, the governor of Wisconsin -- also Hudson Institute, where I work, were instrumental in helping bring about change in that old AFTC program that actually discouraged marriage. There is an incentive against marriage within the program. Now we have the follow-–up -- the TANIF program -- and we’ve seen some better results. There’s more work to be done, but there are better ways of doing things, as we’ve seen, as I said, in crime, in welfare policy. There are changes that have to be made and that can be made and ones that really promote individual responsibility and individual choice. I mean, you should also think about the shape of our policies. The two fastest growing sectors of the economy are in health care and in education. Lord knows, we spend a lot of money in both of those areas and not always with good results, going back to the first rule. If you look at D.C., D.C. consistently has the most money spent per student on education here, but we don’t necessarily get the best results from D.C. schools. In fact, they’re often near the bottom. But in these two areas, areas where you really have a lot of economic growth and a lot of -- a generation of revenue, too often the revenue goes to bureaucratic establishments that are helping middle-class professionals rather than actually helping the poor. In education, for example, the number of education administrators rivals the number of teachers. So, our programs are not necessarily helping the people that we want to help. So, it seems to me that these two rules suggest that we need to look at a different way, and I appreciate the work of Ron Haskins and other Republican thinkers on ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 POVERTY-2012/12/05 9 this who have been making these suggestions for a long time, and we need to keep pushing on those fronts. Now, I said I would mention a third rule, and this is one that has come up relatively recently, but it relates to the debt crisis that we face, and the rule is in a crisis the poor get hurt first and worst. This is an unfortunate situation, of course, but we face an overwhelming debt problem. We have a $16 trillion debt problem. In fact, there was this incident before the election where President Obama went on the David Letterman show, and he was asked what the size of the national debt was, and he said he didn’t know. Now, I told this story for two reasons. One is that I just find it flabbergasting that he said that. Second of all, I’m working on a book right now about presidents and pop culture. So, there is kind of an episode in the book that shows the President going out there, and the President really had a heavy focus on soft media before the election, not focusing on -- sometimes to the chagrin of the White House Press Corps, who didn’t get the interviews they wanted. But the President was going out there (inaudible) not really expecting questions like the one Letterman presented him with. But when he was presented with it, he needed to present the answer, and I’m sure he did know the answer, which is, as I said, $16 trillion and growing by over a trillion dollars a year. Our Medicare deficit is greater than the annual deficit in Greece, and we all know what’s going on in Greece. And our debt per capita is greater than Spain, Italy, and Greece. This is a real significant problem, and as my rule suggests, the poor, if this thing blows up, if we have an economic collapse as a result or a downgrading of our fiscal situation, the poor will get hurt first and worst. And there are three reasons for this. Number one is that economic opportunity dries up in a financial crisis. The jobs at the lower rungs will be the first ones ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 POVERTY-2012/12/05 10 to go. The people who -- when they are consolidating they look for the low-wage jobs first. Those are supposedly the easiest ways -- or they’re definitely first ways -- I’m not saying they’re the best ways, but the first places, the first jobs to go when economic opportunities and jobs dry up, this hurts the poor more. The second is with respect to social programs, and I talked a fair bit about doing things a different way, having a better way of doing things. But if we have this kind of fiscal collapse where we need to make cuts fast, we won’t be looking at a better way, and if you look at what the Democrats are saying versus what the Republicans are saying -- the Democrats are saying let’s continue to spend on these programs at continually higher rates. More is better is the approach. We won’t be able to do that, so you’ll have cuts. But you won’t be able to do the Republican approach either, which is smart-targeted reforms. You will just have indiscriminate cuts, and those indiscriminate cuts won’t serve either party’s rhetoric, but they won’t serve either party’s interests nor will they serve the poor. I think they will be disastrous, and they are something I am very worried about. The third reason that the poor get hurt first and worse in these situations is the wealth gap. The poor have -- it’s like the old Fitzgerald Hemmingway line that the rich are different than you and me -- yes, they have more money. Well, the poor are different also, because they have less wealth. They not only have less income, but they have less wealth. In fact, there’s a study by the Federal Reserve. It’s just that the people in the lowest economic quintile have under $10,000 of wealth. It’s not much of a cushion to fall back on should there be an economic crisis, should jobs dry up, and then should social programs be cut indiscriminately in a way that nobody want to happen. So, these are the three really iron-clad rules, as I see them, of how to deal with social policy. And we need to start getting smart and thinking about them. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190