Hand Outs can be Hand Ups

The one thing that I frequently notice about people that consider themselves conservatives (compassionate or otherwise) is that they are more prone to ideology that’s based more on philosophy or faith than data and experience. This is very frustrating for those of us that argue based on something a bit bit more pragmatic like seeing what works in reality and repeating it.

I’ve said before that voodoo economics, supplyside economics, or Reaganomics–whatever you want to call it–doesn’t work. All you really have to do is look the economic data using economic models and it comes up more than short. However, that doesn’t stop people from saying it’s still valid because that’s what they want to believe. It reminds me of folks that are religious based on what they want to believe rather than what is. As an example, evolution is a well-proved and well-accepted theory (i.e universally accepted truth based on huge amounts of observations and experience via the scientific method.) Still, folks believe what the want to believe and there in lies a huge problem. The pick and choose their facts to fit their fancy and that’s a dangerous behavior. What they believe is harmful and has bad results from society, but they just keep on keepin’ on as if just saying it enough times will make it so.

One of these memes is that people living in poverty are there because of some character defect . The compassionate conservative typically labels the poor as lazy. These folks that believe this have also typically been recipients of huge amounts of government hand outs and hand ups from public schools, to tax incentives, and from government guaranteed students loans to mortgages from an early age to their elderly years. They’ve enjoyed subsidized school lunches in every school, yet to get the school lunch free is some how a dismal display of lack of character on the part of others. It appears that there must be degrees of differences between hand outs and hand ups, but yet, if you look at the facts and the data, there’s not much difference. The results are positive and astounding. How much more economic is it to help children grow up to become productive adults rather than social problems and criminals? I guess that’s what you think if you look at the facts and use your logic rather than think that a lifetime of punishment for some perceived shortcoming is some how just, fair, and compassionate.

If you haven’t heard about conditional cash transfer programs (CCT), be prepared to learn something new about hand outs and hand ups. One of the biggest memes we have is that giving poor people cash means they will spend it on frivolous things. Of course, you may have heard the anecdotal evidence of Katrina cash cards, as an example, being used for strip clubs, guns and porn. My guess is that was a very small number of people that did that, but we heard it all the same. You never heard about the people who got to feed their families because of the generosity of all Americans.

Ronald Reagan made a political career out of telling stories about ‘welfare’ queens and with each telling, his stereotype grew larger than any possible reality. It’s easier to use caricatures than real people when you’re trying to damn an entire group of people to endless suffering. I would like to add that as a recipient of your largess in the form of Katrina cash, I bought a winter coat that I sorely needed, clothing, and food. I think the most adventurous things I bought were flannel pajamas because it’s cold in Nebraska in September and I arrived with not much else than shorts and t-shirts. I was and I continue to be thankful for that because I needed it. (And I needed it because the university messed up my pay checks for nearly 4 months.) Actually, by the time I got them and my food stamp card, the Red Cross had wised up on how to administer the programs. They were a CCT program of sorts. I could use the money at a SuperWalmart or a SuperTarget and it was limited to food items or clothing. Those big box stores could program the cards to check to make certain that my purchases were acceptable to the purpose of the help. You could also get vouchers to get shelter also. I didn’t need that since I preferred staying with my friend Jane to staying in a motel. I also went home to a undamaged, dry house so I didn’t need any thing from that point forward except for the electricity to work in my house.

So, back to why it’s okay to help people under extreme situations and why the data shows that it works in the overwhelming number of cases. The program is based on the idea that you pay people to do the right behaviors. As an example from Brazil, f you’d rather see children in school, than working to support the family, pay the family for a child in school. Other examples include paying mothers who bring their children in for vaccines. Most of these programs help children in poverty.

Here’s a good article about the program in a recent The Economist.

CELIA ORBOC, a cake-seller in the Philippines, spent her little stipend on a wooden shack, giving her five children a roof over their heads for the first time. In Kyrgyzstan Sharmant Oktomanova spent hers buying flour to feed six children. In Haiti President René Préval praises a dairy co-operative that gives mothers milk and yogurt when their children go to school.

These are examples of the world’s favourite new anti-poverty device, the conditional cash-transfer programme (CCT) in poor and middle-income countries. These schemes give stipends and food to the poorest if they meet certain conditions, such as that their children attend school, or their babies are vaccinated. Ten years ago there were a handful of such programmes and most were small. Now they are on every continent—even New York City has one—and they benefit millions.

The programmes have spread because they work. They cut poverty. They improve income distribution. And they do so cheaply. All this has been a pleasant surprise: when they were introduced or expanded, critics feared they would either make the poor dependent on hand-outs or cost far too much. In fact, they are cheap (Brazil’s, the biggest, costs 0.5% of GDP). And they show income transfers can work nationally: in the past, middle-income countries usually left income-transfer programmes to local governments—if they bothered at all.

These CCT programs are now popping up every where including New York City. (You’ll have to mind my links from now on out because they will point to research articles.)

In 2007, New York City’s Center for Economic Opportunity (CEO) launched Opportunity NYC: Family Rewards, an experimental, privately funded conditional cash transfer (CCT) program to help families break the cycle of poverty. CCT programs offer cash assistance to reduce immediate hardship and poverty but condition this assistance—or cash transfers—on families’ efforts to improve their “human capital” (typically, children’s educational achievement and family health) in the hope of reducing their poverty over the longer term. Inspired by Mexico’s pioneering Oportunidades program, such programs have grown rapidly across lower- and middle-income countries, and evaluations have found some important successes. Family Rewards is the first comprehensive CCT program in a developed country. The program was targeted toward families who lived in selected community districts and who had incomes at or below 130 percent of the federal poverty level. It ties cash rewards to prespecified activities and outcomes in children’s education, families’ preventive health care, and parents’ employment. Two national, New York-based nonprofit organizations

Again, these programs tend to be behavior-based and usually have goals in three areas: education, health or work. The results from the New York program are reported in the above research article. Here is just one of the positive outcomes noted.

In this area, Family Rewards substantially improved families’ economic position in its first two years. Counting the value of the reward payments, it boosted average monthly income for the program group by $338, or about 21 percent relative to the control group’s income. It reduced the proportion of families with household income at or below the federal poverty level by 11 percentage points, and cut “severe poverty” (defined as having income less than 50 percent of the federal poverty level) by nearly half, reducing it from 30 percent of the control group to 17 percent among the program group. (All impacts discussed in this summary are statistically significant unless otherwise noted.)

If you’d like a more global perspective, here is a World Bank publication that talks about programs around the world. This particular papers looks at programs in Mexico, Jamaica, Brazil, and Colombia. Some of the “hand outs” include school supplies, savings accounts that accumulate money and are granted to the child upon graduation, nutrition supplements, and health and wellness education. Most of these things are very basic like food and cash incentives for children that attend school. The World Bank finds these programs are worth continuing.

CCT programs have shown considerable achievements under a variety of circumstances. They are at the forefront of a new thinking on social protection, which reexamines the presumed trade-off between equity and efficiency by considering the long-term social and economic costs of uninsured risks and unmitigated inequalities and the potential role of safety nets in addressing these issues. By providing incentives to parents to invest in the long-term human capital development of their children, they have promise for addressing issues of deep-seated exclusion and the inter-generational transmission of poverty.

Here again, is more information from The Economist on the program in Brazil called Bolsa Familia.

By common consent the conditional cash-transfer programme (CCT) has been a stunning success and is wildly popular. It was expanded in 2003, the year Luiz Inácio Lula da Silva became Brazil’s president, and several times since; 12.4m households are now enrolled. Candidates for the presidency (the election is on October 3rd) are competing to say who will expand it more. The opposition’s José Serra says he will increase coverage to 15m households. The ruling party’s Dilma Rousseff, who was Lula’s chief of staff, says she is the programme’s true guardian. It is, in the words of a former World Bank president, a “model of effective social policy” and has been exported round the world. New York’s Opportunity NYC is partly based on it.

Much of this acclamation is justified. Brazil has made huge strides in poverty reduction and the programme has played a big part. According to the Fundaçao Getulio Vargas (FGV), a university, the number of Brazilians with incomes below 800 reais ($440) a month has fallen more than 8% every year since 2003. The Gini index, a measure of income inequality, fell from 0.58 to 0.54, a large fall by this measure. The main reason for the improvement is the rise in bottom-level wages. But according to FGV, about one-sixth of the poverty reduction can be attributed to Bolsa Família, the same share as attributed to the increase in state pensions—but at far lower cost. Bolsa Família payments are tiny, around 22 reais ($12) per month per child, with a maximum payment of 200 reais. The programme costs just 0.5% of gdp.

It’s time to change in those policymakers that wish to punish the poor based on some nightmare fallacy they’ve gotten from a demagogue to more compassionate and reality based politicians. These programs work and are cost efficient. It is much cheaper to help a child when you can than to pay for a failed adult. It is time we trade a future in our now profit-seeking private prisons for hand outs and hand ups.