Sunday, July 22, 2012

How Obamacare WORSENS Poverty, Part II

Earlier today, we analyzed and summarized some of the points made in testimony before a Ways and Means subcommittee hearing by the Urban Institute’s Gene Steuerle — namely, that current welfare policies impose a “poverty trap” on low and middle-income families, a trap that Obamacare will both extend and worsen.  But another point worth highlighting in Steuerle’s testimony is the way in which current welfare policy discourages — and actually penalizes — marriage among working-class families:

Essentially, when moderate-income couples marry, their marginal tax rate moves up from, say, 25 percent, to the 50 and 80 percent ranges shown above.  For instance, a moderate income male marrying a working mother with children can easily cause her to lose EITC, SNAP, Medicaid, and other benefits as well….Someone looking at our system from Mars would conclude that we don’t want moderate income families with children to marry, since we penalize them, but we do want older households (at ages when children are likely to be gone) to marry, since we subsidize them….

Marriage penalties or subsidies are assessed primarily for taking wedding vows, not for living together with another adult.  Those who do not feel morally compelled to swear fidelity in religious or public ceremonies for the most part do not suffer the penalties.  Our tax and welfare system thus favors those who consider marriage an option — to be avoided when there are penalties and engaged when there are bonuses.  The losers tend to be those who consider marriage vows to be sacred.

Yesterday’s New York Times included a very compelling article, entitled “Two Classes, Divided by ‘I Do,’” that speaks to this very point.  The article examines two families in Michigan — one headed by a single parent struggling to make ends meet, the other headed by a married couple able to live a more affluent lifestyle on two incomes.  The article notes that among higher-income households, marriage tends to perpetuate affluence, whereas in lower-income families, the lack of marriage can exacerbate poverty:

Estimates vary widely, but scholars have said that changes in marriage patterns — as opposed to changes in individual earnings — may account for as much as 40 percent of the growth in certain measures of inequality.  Long a nation of economic extremes, the United States is also becoming a society of family haves and family have-nots, with marriage and its rewards evermore confined to the fortunate classes.  “It is the privileged Americans who are marrying, and marrying helps them stay privileged,” said Andrew Cherlin, a sociologist at Johns Hopkins University.

About 41 percent of births in the United States occur outside marriage, up sharply from 17 percent three decades ago.  But equally sharp are the educational divides, according to an analysis by Child Trends, a Washington research group.  Less than 10 percent of the births to college-educated women occur outside marriage, while for women with high school degrees or less the figure is nearly 60 percent….While many children of single mothers flourish (two of the last three presidents had mothers who were single during part of their childhood), a large body of research shows that they are more likely than similar children with married parents to experience childhood poverty, act up in class, become teenage parents and drop out of school.

Sara McLanahan, a Princeton sociologist, warns that family structure increasingly consigns children to “diverging destinies.”  Married couples are having children later than they used to, divorcing less and investing heavily in parenting time.  By contrast, a growing share of single mothers have never married, and many have children with more than one man.  “The people with more education tend to have stable family structures with committed, involved fathers,” Ms. McLanahan said.  “The people with less education are more likely to have complex, unstable situations involving men who come and go.”

She said, “I think this process is creating greater gaps in these children’s life chances.”

At a time when our current welfare policy penalizes marriage — and when a growing trend of sociological studies show that marriage patterns among lower-income families are exacerbating poverty and inequality — what does Obamacare do?  It imposes yet another marriage penalty on low and middle-income households: “Two individuals who make between $61,600 and $91,200 in 2014 will not benefit from [health insurance subsidies] if they decide to marry, but both individuals can qualify for the tax credit if they remain unmarried or if they decide to divorce.”

As yesterday’s New York Times article demonstrated using real-life examples, marriage and stable two-parent households can mean the difference between relative comfort and the struggles of poverty.  Yet current government policy discourages marriage — and Obamacare makes these bad policies worse.  It’s one more reason why the law will actually harm those it intends to help, by perpetuating the cycle of poverty and dependence in America.