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Opportunity in America: The Problem with the Paul Ryan Plan

Stephen Menendian

Last week the House of Representatives Budget Committee Chairman Rep. Paul Ryan issued a report on opportunity and poverty in America that has sparked an important national conversation. As a putative Presidential contender for 2016, Rep. Ryan’s report will help shape a discussion that will frame future election cycles as well as the direction of our country. In many ways a thematic sequel to the earlier Ryan-helmed report on the 50th Anniversary of the War on Poverty, issued a few months ago, this new report explicitly frames the question, as the title of the report suggests, of whether our programs are “expanding opportunity in America?”

This is exactly the right question to be asking. The Ryan report has received plaudits from progressives, including Berkeley scholar Robert Reich, for seriously engaging this question. Rather than propose a series of cuts, the report offers a series of somewhat innovative policies organized around the realities of upward mobility and opportunity in American life.

For example, the proposal would create a case-method system (called an “opportunity plan”) tailored to help families and individuals with specific needs, such as lack of child care, inadequate housing, financial illiteracy, or limited access to transportation, rather than cookie-cutter solutions indifferent to the realities of everyday life. The report aptly recognizes that people are situated differently, and draws distinctions between situational and generational poverty with hypothetical examples (see “Andrea” and “Steven” on page 21-23) that illustrate differential needs.

The report, much like the earlier War on Poverty report, canvasses the array of federal programs designed to reduce poverty and proposes consolidating them into a single “Opportunity Grant” program that would create flexibility and synergy for programs that may be working at cross-purposes. For seeking coherence across the panoply of federal and state anti-poverty programs, this report deserves credit as well.

Some critics, including Jared Bernstein, a former chief economist to vice President Joe Biden, and Andrew Flowers, an analyst at Nate Silver’s shop, fivethirtyeight.com, have pointed out that the block-grant approach would not have the flexibility that some anti-poverty measures require, such as SNAP, to help more families in economic recessions, when need is greatest.  Yet, in a limited scope, Ryan addresses this problem by suggesting counter-cyclical options, such as contingency thresholds that would trigger additional block grant disbursements or set asides to reserve for economic downturns (see page 18).

The report, however, suffers from a few fundamental conceptual flaws. First, although it purports to advance policies that expand opportunity, and even pays lip service to building “careers” rather than simply reducing unemployment, the report too often conflates opportunity with anti-poverty measures (a problem reinforced by many of liberal critics and commentators cited above).  Although related, reducing poverty is not the same thing as expanding opportunity.

To put this difference in stark relief, safety-net programs such as Social Security dramatically reduce poverty for the elderly, but are not primarily designed to expand economic opportunity.  They may have that effect by relieving middle-aged adults of the necessity of supporting their parents, and thereby directing those resources to their own children instead, but that is not the program’s focus.  The report repeatedly conflates safety-net programs with those that are designed to foster economic opportunity.  For example, the report hints at waste or inefficiencies in the safety net because not all programs are tailored to that goal.  Yet that is not their purpose or their function.

Moreover, many if not most of the poverty reduction programs discussed in the report focus primarily on adults, and connecting job-seekers to employment.  In contrast, the brilliant and innovative research at the Equality of Opportunity Project conducted by Raj Chetty, Nathanial Hendren, and UC Berkeley scholars Emmanuel Saez and Patrick Kline, and their report released earlier this year, strongly suggests that upward mobility is largely shaped by resources and inputs that accrue before individuals have access to labor markets.  This research demonstrates, for example, that access to higher education and the health of labor markets (indicated by such factors as employment demand or economic growth) are not significant in terms of upward mobility. This oversight is especially puzzling since the Ryan report cites the Chetty, et al paper, even drawing its first chart from their data. In other words, opportunity as measured by upward mobility is mostly defined by resource inputs targeted at children and teenagers.

This leads to the second fundamental flaw. The Ryan report conceives of government in a very narrow way with respect to opportunity. The report repeatedly describes government as the “rearguard” and that opportunity is ultimately about “families, neighborhoods, and community groups.”  Ryan seems to take the view that opportunity is primarily about getting government out of the way (as his useful proposal to reduce state occupational licensure or certification requirements, which hurt low-income families, suggests). The research conducted by the Equality of Opportunity Project researchers suggest that this view of the role of government vis-à-vis opportunity is, at best, overly simplistic.

If anything, this research and my own ongoing research on upward mobility, at the Haas Institute for a Fair and Inclusive Society, suggests that opportunity is really best understood as a series of collective resource inputs, and that government plays a critical — if not central — role in generating human capital, in providing education for citizens and preparing students for civic, cultural and economic life, with neighborhood and municipal services, and in supporting economic opportunities with investment in infrastructure, access to credit and finance, and research and development.

This is not an ideological position, but an empirical one. The geographic variation observed in the Chetty, et al. report illustrates that high-investment municipalities and regions seem to have better rates of upward mobility and greater opportunity than those that have less public investment.

To the extent that the Ryan report mentions critical findings identified by Chetty et al report, such as the percentage of two-parent households or racial and economic segregation on upward mobility, it misconstrues these forces as “factors beyond public policy” (p. 6).  On the contrary, as scholars such as Patrick Sharkey, Robert Sampson, and Richard Rothstein among many others, have consistently shown, these patterns flow from public policies such as jurisdictional fragmentation, exclusionary zoning, and reverse-redlining.  The Ryan report completely ignores the role of public policies historical and present in fostering economic and racial segregation, and the resultant concentrations of poverty.

Third, the report also repeats some of the errors in the earlier report in its assessment of both the causes and calculation of poverty.  Ryan argues that the official poverty measure overstates the degree of poverty in America. Rather than overstate the degree of poverty in America, the official poverty measure understates the degree of poverty by relying an outdated formula developed some 50 years ago by Molly Orshanksy. For an alternative view, see a Haas Institute report published last year, which addresses flaws in the current poverty formula.

The Ryan report is a welcome conversation starter on expanding opportunity, and there is much to commend in it.  In particular, it calls for more research along the lines developed by the Equality of Opportunity Project.

But by not seriously taking on the concept of opportunity, Rep. Ryan’s “Expanding Opportunity in America” too easily conflates essential concepts and slips back into conventional thinking around issues that require a more critical frame of mind.

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