Posted inEditor's Pick

The American Worth Ethic

Bryce Covert | Longreads | April 9, 2019 | 3,374 words

In other countries, “having piles of money” is not the same thing as “labor,” and “being a human who deserves to have their basic needs met” isn’t synonymous with “holding a job.”

Posted inCurrent Events, Story

The American Worth Ethic

Like so many of our lofty ideals, the “American Work Ethic” is actually two different standards — one for the wealthy and one for the poor — with two different interpretations of what work looks like.
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Bryce Covert | Longreads | April 2019 | 13 minutes (3,374 words)

“The American work ethic, the motivation that drives Americans to work longer hours each week and more weeks each year than any of our economic peers, is a long-standing contributor to America’s success.” Thus reads the first sentence of a massive report the Trump administration released in July 2018. Americans’ drive to work ever harder, longer, and faster is at the heart of the American Dream: the idea, which has become more mythology than reality in a country with yawning income inequality and stagnating upward economic mobility, that if an American works hard enough she can attain her every desire. And we really try: We put in between 30 to 90 minutes more each day than the typical European. We work 400 hours more annually than the high-output Germans and clock more office time than even the work-obsessed Japanese.

The story of individual hard work is embedded into the very founding of our country, from the supposedly self-made, entrepreneurial Founding Fathers to the pioneers who plotted the United States’ western expansion; little do we acknowledge that the riches of this country were built on the backs of African slaves, many owned by the Founding Fathers themselves, whose descendants live under oppressive policies that continue to leave them with lower incomes and overall wealth and in greater poverty. We — the “we” who write the history books — would rather tell ourselves that the people who shaped our country did it through their own hard work and not by standing on the shoulders, or stepping on the necks, of others. It’s an easier story to live with. It’s one where the people with power and money have it because they deserve it, not because they took it, and where we each have an equal shot at doing the same.

Because for all our national pride in our puritanical work ethic, the ethic doesn’t apply evenly. At the highest income levels, wealthy Americans are making money passively, through investments and inheritances, and doing little of what most would consider “work.” Basic subsistence may soon be predicated on whether and how much a poor person works, while the rich count on tax credits and carve-outs designed to protect stockpiles of wealth created by money begetting itself. It’s the poor who are expected to work the hardest to prove that they are worthy of Americanness, or a helping hand, or humanity. At the same time, we idolize and imitate the rich. If you’re rich, you must have worked hard. You must be someone to emulate. Maybe you should even be president.

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Trump has a long history of antipathy to the poor, a word which he uses as a synonym for “welfare,” which he understands only as a pejorative. When he and his father were sued by the Department of Justice in 1973 for discriminating against black tenants in their real estate business, he shot back that he was being forced to rent to “welfare recipients.” Nearly 40 years later, he called President Obama “our Welfare & Food Stamp President,” saying he “doesn’t believe in work.” He wrote in his 2011 book Time To Get Tough, “There’s nothing ‘compassionate’ about allowing welfare dependency to be passed from generation to generation.”

Perhaps. But Trump certainly knows about relying on things passed from generation to generation. His self-styled origin story is that he got his start with a “small” $1 million loan from his real estate tycoon father, Fred C. Trump, which he used to grow his own empire. “I built what I built myself,” he has claimed. “I did it by working long hours, and working hard and working smart.”

It’s an interesting interpretation of “myself”: A New York Times investigation in October reported that, instead, Trump has received at least $413 million from his father’s businesses over the course of his life. “By age 3, Mr. Trump was earning $200,000 a year in today’s dollars from his father’s empire. He was a millionaire by age 8. By the time he was 17, his father had given him part ownership of a 52-unit apartment building,” reporters David Barstow, Susanne Craig, and Russ Buettner wrote. “Soon after Mr. Trump graduated from college, he was receiving the equivalent of $1 million a year from his father. The money increased with the years, to more than $5 million annually in his 40s and 50s.” The Times found 295 different streams of revenue Fred created to enrich his son — loans that weren’t repaid, three trust funds, shares in partnerships, lump-sum gifts — much of it further inflated by reducing how much went to the government. Donald and his siblings helped their parents dodge taxes with sham corporations, improper deductions, and undervalued assets, helping evade levies on gifts and inheritances.

If you’re rich, you must have worked hard. You must be someone to emulate. Maybe you should even be president.

Even the money that was made squarely owed a debt to the government. Fred Trump nimbly rode the rising wave of federal spending on housing that began with the New Deal and continued with the G.I. Bill. “Fred Trump would become a millionaire many times over by making himself one of the nation’s largest recipients of cheap government-backed building loans,” the Times reported. Donald carried on this tradition of milking government subsidies to accumulate fortunes. He obtained at least $885 million in perfectly legal grants, subsidies, and tax breaks from New York to build his real estate business.

Someone could have taken this largesse and worked hard to grow it into something more, but Donald Trump was not that someone. Much of his fortune comes not from the down and dirty work of running businesses, but from slapping his name on everything from golf courses to steaks. Many of these deals entail merely licensing his name while a developer actually runs things. And as president, he still doesn’t seem inclined to clock much time doing actual work.

That hasn’t stopped him from putting work at the center of his administration’s poverty-related policies. In the White House Council of Economic Advisers’ lengthy tome, it argued for adding work requirements to a new universe of public benefits. These requirements, which up until the Trump administration only existed for direct cash assistance and food stamps, require a recipient not just to put in a certain number of hours at a job or some other qualifying activity, but to amass paperwork to prove those hours each month. The CEA report is focused, supposedly, on “the importance and dignity of work.” But the benefits of engaging in labor are only deemed important for a particular population: “welfare recipients who society expects to work.” Over and over, it takes for granted that our country only expects the poorest to work in order to prove themselves worthy of government funds, specifically targeting those who get food stamps to feed their families, housing assistance to keep roofs over their heads, and Medicaid to stay healthy.

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The report doesn’t just represent an ethos in the administration; it was also a justification for concrete actions it had already taken and more it would soon roll out. Last April, Trump signed an executive order that ordered federal agencies to review public assistance programs in order to see if they could impose work requirements unilaterally to “ensure that they are consistent with principles that are central to the American spirit — work, free enterprise, and safeguarding human and economic resources,” as the document states, while also “reserving public assistance programs for those who are truly in need.”

The administration has also pushed forward on its own. In 2017, it announced that states could apply for waivers that would allow them to implement work requirements in Medicaid for the first time, and so far more than a dozen states have taken it up on the offer, with Arkansas’s rule in effect since June 2018. (It has now been halted by a federal judge.) In that state, Medicaid recipients had to spend 80 hours a month at work, school, or volunteering, and report those activities to the government in order to keep getting health insurance. And in April 2018, Housing and Urban Development Secretary Ben Carson unveiled a proposal to let housing authorities implement work requirements for public housing residents and rental assistance recipients. Trump pushed Congress to include more stringent work requirements in the food stamp program as it debated the most recent farm bill, arguing it would “get America back to work.” When that effort failed, the Agriculture Department turned around and proposed a rule to impose the requirements by itself.

These aren’t fiscal necessities — they’re crackdowns on the poor, justified by the idea that they should prove themselves worthy of the benefits that help them survive, that are not just cruel but out of step with real life. Most people who turn to public programs already work, and those who don’t often have good reason. More than 60 percent of people on Medicaid are working. They remain on Medicaid because their pay isn’t enough to keep them out of poverty, and many of the low-wage jobs they work don’t offer health insurance they can afford. Of those not working, most either have a physical impairment or conflicting responsibilities like school or caregiving.

Enrollment in food stamps tells the same story. Among the “work-capable” adults on food stamps, about two thirds work at some point during the year, while 84 percent live in a household where someone works. But low-wage work is often chaotic and unpredictable. Recipients are more likely to turn to food stamps during a spell of unemployment or too few hours, then stop when they resume steadier employment. Many of those who are supposedly capable of work but don’t have a job have a health barrier or live with someone who has one; they’re in school, they’re caring for family, or they just can’t find work in their community.

Work requirements, then, fail to account for the reality of poor people’s lives. It’s not that there’s a widespread lack of work ethic among people who earn the least, but that there’s a lack of steady pay and consistent opportunities that allow someone to sustain herself and her family without assistance. We also know work requirements just don’t work. They’ve existed in the Temporary Assistance for Needy Families cash-assistance program for decades, yet they don’t help people find meaningful, lasting work; instead they serve as a way to shove them out of programs they desperately need. The result is more poverty, not more jobs.

If this country were so concerned about helping people who might face barriers to working get jobs, we might not be the second-lowest among OECD member countries by percentage of GDP spent on labor-market programs like job-search assistance or retraining. The poor in particular face barriers like affordable childcare and reliable transportation, and could use education or training to reach for better-paid, more meaningful work. But we do little to extend these supports. Instead, we chastise them for not pulling on their frayed bootstraps hard enough.

We also seem content with the notion that a person who doesn’t work — either out of inability or refusal — doesn’t deserve the building blocks of staying alive. The programs Trump is targeting, after all, are about basic needs: housing to stay safe from the elements, food to keep from going hungry, healthcare to receive treatment and avoid dying of neglect. Even if it were true that there was a horde of poor people refusing to work, do we want to condemn them to starvation and likely death? In one of the world’s richest countries, do we really balk at spending money on keeping our people — even lazy ones — alive?

We also know work requirements just don’t work. They’ve existed in the Temporary Assistance for Needy Families cash-assistance program for decades, yet they don’t help people find meaningful, lasting work; instead they serve as a way to shove them out of programs they desperately need. The result is more poverty, not more jobs.

Plenty of other countries don’t do so. Single mothers experience higher rates of destitution than coupled parents or people without children all over the world. But the higher poverty rate in the U.S. as compared to other developed countries isn’t because we have more single mothers; instead, it’s because we do so little to help them. Compare us to Denmark, which gives parents unconditional cash benefits for each of their children regardless of whether or how much they work, on top of generously subsidizing childcare, offering universal health coverage, and guaranteeing paid leave. It’s no coincidence that they also have a lower poverty rate, both generally and for single mothers specifically. A recent examination of poverty across countries found that children are at higher risk in the U.S because we have a sparse social safety net that’s so closely tied to demanding that people work. It makes us an international outlier, the world’s miser that only opens a clenched fist to the poor if they’re willing to demonstrate their worthiness first.

Here, too, America’s history of slavery and ongoing racism rears its head. According to a trio of renowned economists, we don’t have a European-style social safety net because “racial animosity in the U.S. makes redistribution to the poor, who are disproportionately black, unappealing to many voters.” White people turn against funding public benefit programs when they feel their racial status threatened, particularly benefits they (falsely) believe mainly accrue to black people. The black poor are seen as the most undeserving of help and most in need of proving their worthiness to get it. States with larger percentages of black residents, for example, focus less on TANF’s goal of providing cash to the needy and have stingier benefits with higher hurdles to enrollment.

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The CEA’s report on work requirements claimed that being an adult who doesn’t work is particularly prevalent among “those living in low-income households.” But that’s debatable. The more income someone has, the less likely he is to be getting it from wages. In 2012, those earning less than $25,000 a year made nearly three quarters of that money from a job. Those making more than $10 million, on the other hand, made about half of their money from capital gains — in other words, returns on investments. The bottom half of the country has, on average, just $826 in income from capital investments each; the average for those in the top 1 percent is more than $16 million.

The richest are the least likely to have their money come from hard labor — yet there’s no moral panic over whether they’re coddled or lacking in self reliance. Instead, government benefits help the rich protect and grow idle wealth. Capital gains and dividends are taxed at a lower rate than regular salaried income. Inheritances were taxed at an average rate of 4 percent in 2009, compared to the average rate of 18 percent for money earned by working and saving. When investments are bequeathed, the recipient owes no taxes on any asset appreciation.

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In fact, government tax benefits that increase people’s take-home money at the expense of what the government collects for its own coffers overwhelmingly benefit the rich over the poor (or even the middle class). More than 60 percent of the roughly $900 billion in annual tax expenditures goes to the richest 20 percent of American families. That figure dwarfs what the government expends on many public benefit programs. The government spends more than three times as much on tax subsidies for homeowners, mostly captured by the well-to-do, than it does on rental assistance for the poor. The three benefit programs the Trump administration is concerned with — Medicaid, food stamps, and housing assistance — come to about $705 billion in combined spending.

While the administration has been concerned with what it can do to compel the poor to work, it’s handed out more largesse to the idle rich. Its signature tax-cut package, the Tax Cuts and Jobs Act, offered an extra cut for so-called “pass-through” businesses, like law or real estate firms. But the fine print included a wrinkle: If someone is considered actively involved in his pass-through business, only 30 percent of his earnings could qualify for the new discount. If someone is passively involved, however — a shareholder who doesn’t do much about the day-to-day work of the company — then he gets 100 percent of the new benefit.

Then there’s the law’s significant lowering of the estate tax. The tax is levied on only the biggest, most valuable inheritances passed down from wealthy parent to newly wealthy child. Before the Republicans’ tax bill, only the richest 0.2 percent of estates had to pay the tax when fortunes changed hands. Now it’s just the richest 0.1 percent, or a mere 1,800 very wealthy families worth more than $22 million. The rest get to pass money to their heirs tax-free. Those who do pay it will be paying less when tax time comes due — $4.4 million less, to be exact.

Despite the Republican rhetoric that lowering the estate tax is about saving family farms, it’s really about allowing an aristocracy to calcify — one in which rich parents ensure their children are rich before they lift a single finger in work. As those heirs receive their fortunes, they also receive the blessing that comes with riches: the halo of success and, therefore, deservedness without having to work to prove it. Yet there’s evidence that increasing taxes on inheritances has the potentially salutary effect of getting heirs to work more. The more their inheritances are taxed, the more they end up paying in labor taxes — evidence that they’re working harder for their livings, not just coasting on generational wealth. Perhaps our tax code could encourage rich heirs to experience the dignity of work.

* * *

Trump’s CEA report is accurate about at least one thing: Our country has a history of only offering public benefits to the poor either deemed worthy through their work or exempt through old age or disability. An outlier was the Aid to Families with Dependent Children program, which became Temporary Assistance for Needy Families after Bill Clinton signed welfare reform into law in the ’90s. But the 1996 transformation of the program took what was a promise of cash for poor mothers and changed it into an obstacle course of proving a mother’s worth before she can get anywhere close to a check. It paved the way for the current administration’s obsession with work requirements.

Largesse for the rich, on the other hand, has rarely included such tests. No one has been made to pee in a cup for tax breaks on their mortgages, which cost as much as the food stamp program but overwhelmingly benefit families that earn more than $100,000. No one has had to prove a certain number of work hours to get a lower tax rate on investment income or an inheritance. They get that discount on their money without having to do any work at all.

We haven’t always been so extreme in our dichotomous treatment of the rich and poor; throughout the 1940s, ’50s, and ’60s, we coupled high marginal taxes on the wealthy with a minimum wage that ensured that people who put in full-time work could rise out of poverty. The estate tax has been as high as 77 percent. As Dutch historian Rutger Bregman recently told an audience of the ultrawealthy at Davos, we’re living proof that high taxes can spread shared prosperity. “The United States, that’s where it has actually worked, in the 1950s, during Republican President Eisenhower,” he pointed out. “This is not rocket science.” It was during the same era that we also created significant anti-poverty programs such as Social Security, Medicare, and Medicaid. In fact, this country pioneered the idea of progressive taxation and has always had some form of tax on inheritance to avoid creating an aristocracy. But we’ve papered over that history as tax rates have cratered and poverty has climbed.

Instead, as Reaganomics and neoliberal ideas took hold of our politics, we turned back to the Horatio Alger myth that success is attained on an individual basis by hard work alone, and that riches are the proof of a dogged drive. Lower tax rates naturally follow under the theory that the rich should keep more of their deserved bounty. And if you’re poor, coming to the government seeking a helping hand up, you failed.

The country is due for a reckoning with our obsession with work. There are certainly financial and emotional benefits that come from having a job. But why are we only concerned with whether the poor reap those benefits? Is working ourselves to the bone the best signifier of our worth — and are there basic elements of life that we should guarantee regardless of work? It doesn’t mean dropping all emphasis on work ethic. But it does require a deeper examination of who we expect to work — and why.

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Bryce Covert is an independent journalist writing about the economy and a contributing op-ed writer at The New York Times.

Editor: Michelle Weber
Fact checker: Ethan Chiel
Copy editor: Jacob Z. Gross