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We should pass a law to make poverty illegal. Should be easy, right?
After all, President Joe Biden is proposing increasing the federal minimum wage to $15 an hour. Rep. Chellie Pingree claims doing so would “lift 32 million workers out of poverty.”
As always, let’s do the math. The Census Bureau’s metrics say that, in 2019, 34 million Americans lived in poverty. So, if Pingree is right, simply raising the minimum wage will effectively eliminate poverty in the United States.
Who knew it was so easy?
If something sounds too good to be true, it probably is. Eliminating poverty will take quite a bit more than signing a piece of paper in Washington.
The task is not unique to us. Some of the countries which are most lauded for their poverty reduction are the so-called “Nordic” nations. Sweden, Norway, Iceland, Denmark — they all have poverty rates of less than 10 percent.
Do you know what their minimum wage rates are? Zero. Nada. Zip. Bupkis.
Now, that does not mean they are laissez faire libertarian utopias. There are a lot of cultural and policy approaches responsible for this result. But it does show that combating poverty can be done through things other than a $15 minimum wage imposed by a central government.
Our own cultural and historic characteristics reveal an American approach to overcoming poverty.
Biden has thrown out his $1.9 trillion — or $1.9 million million — “American Rescue” plan. He and congressional Democrats, with Maine’s Rep. Jared Golden excepted, appear ready to push it through with parliamentary maneuvers.
However, as Sen. Susan Collins and other Republicans have pointed out, there are areas where agreements can be reached. Most notably in several tax credit expansions proposed by Biden.
For example, the “Earned Income Tax Credit” is an echo of a policy proposed by Richard Nixon; a “negative income tax.” It provides a way for those making “earned income” — wages and working, not investments — to reduce their tax burden. It is an anti-poverty policy championed by left and right alike.
There are numerous others. And if an “American Rescue” is really on the docket, then a near evenly-divided Congress’ should dive in on real reforms.
But it can also help us eliminate the minimum wage.
The reason the Nordic nations have no minimum wage in law is because their society has approached the problem differently. In their world, “trade unions” negotiate wage rates with business associations; there is less focus on the individual worker or any particular small business.
Our culture is different. There is an entrepreneurial spirit baked into the American character. Giving Americans freedom to choose their own path offers a way forward for all of us.
It starts with a “negative income tax.” Or a “freedom dividend.” Or a “basic income.” Whatever you call it, the strategy has been key to our COVID economic response. We have direct payment programs to citizens meeting certain requirements; you know them as Social Security and unemployment.
The entire idea of “stimulus checks,” or the “unemployment booster,” or the Paycheck Protection Program was to keep the economy moving along through the pandemic. If people maintain their income, they can pay bills and buy necessities. But we’ve also seen some industries capture massive growth. Snowmobile, boat, and ATV dealers had phenomenal seasons. Pet stores have boomed.
As those industries do well, they can keep paying their rent or mortgage. Employees keep working. Capital is generated for reinvestment, whether in new ventures or improvements to existing infrastructure. And, yes, some business owners even generated a profit.
The economy is a really complex thing. Poverty is a Gordian knot. Yet we are in a unique moment. COVID has highlighted which programs and strategies can really work. Congress is balanced on a knife’s edge, creating an opportunity for real, true bipartisan reform.
Hopefully this opportunity won’t pass them by.
Michael Cianchette is a Navy reservist who served in Afghanistan. He is in-house counsel to a number of businesses in southern Maine and was a chief counsel to former Gov. Paul LePage.