The case for Upward Bound accounts
The case for Upward Bound accounts
As a means to enable youths from low-income families to promote their own Upward Mobility
I believe that the American welfare state is fundamentally flawed and has been so for the last 60 years. American social programs can be divided into two big categories:
Social insurance programs for retired people, such as Social Security and Medicare
Means-tested programs for the poor and near-poor, such as Medicaid, Food Stamps, CHIP, the ACA Health Insurance marketplace, public housing, etc.
This article only focuses on means-tested programs for the poor and near-poor. The general purpose of these means-tested programs is to make the poor and near-poor more comfortable by substituting for all the things that a typical working-class person gets from a job:
an income in the form of TANF
food in the form of food stamps
housing in the form of public housing and
health care in the form of Medicaid and CHIP.
For those on the Left who want to give everyone a basic standard of living for all, this seems like a fair thing to do. But this is based upon a fundamental misunderstanding of how someone achieves a better life. The American welfare state tries to insulate the poor and near-poor from the negative consequences of not making the right choice.
I believe the main goals of government policy should be to:
Create a prosperous working class
Promote a clear pathway that enables youths from low-income families to enter the prosperous working class.
The welfare state should focus on the latter two goals, but it does not.
Pathway to Success
What the welfare state should be doing is encouraging the poor and near poor to make wise Life Choices while they are young that enable them to get even more of those things by interacting with the progress in the rest of American society. If we organize those Life Choices in chronological order so that youths encounter them in their own personal life, we can call them a Pathway to Success. By following the Pathway to Success, youths put themselves on a life trajectory that maximizes their chances of achieving a successful and happy life.
I believe that a Pathway to Success should consist of the following steps:
Graduate High School.
Complete post-secondary education/job training to learn practical skills that enhance your long-term earning power.
(if you live in an area with few opportunities) Move to a metro area with much greater opportunities.
Work full-time.
(If you have children) Get married and stay married.
Save and invest at least 10% of your income.
Our welfare state should be based on this Pathway to Success. We should establish programs that give youths from low-income families the incentives to follow the Pathway to Success, and we should abolish or radically reform programs that undermine incentives to follow the path. Unfortunately, most social programs for the poor and near-poor fall into the latter category.
In other words, we should offer positive incentives to those who do the right thing rather than negative incentives for those who do the wrong thing. I believe that a modernized welfare state that promotes Upward Mobility should be based on:
Upward Bound accounts based on the Pathway to Success that enable youths from low-income families to make wise Life Choices (explained in this article)
Phasing out all current means-tested programs over the next four years
Upward Bound Accounts
My proposed Upward Bound accounts are debit accounts that:
Create short-term positive incentives for low-income youths to take actions that promote their own upward mobility.
Give low-income youths the capital to pay for those actions that cost money.
The Upward Bound program is designed to encourage youths to follow the Pathway to Success. Upward Bound would function somewhat like Health Savings Accounts and the social funds in Singapore.
Most of you are probably familiar with Health Saving Accounts, which are similar to a typical savings account. The accounts have a debit card associated with them. The main difference is that the HSA debit card can only be used to make purchases related to medical care. This gives the individual a wide variety of choices but still constrains those choices to one category: medical care.
My proposed Upward Bound accounts consist of savings accounts with an associated debit card that would only enable youths to make purchases for products or services that are proven to promote long-term increases in income or wealth. Youths are only eligible for additional payments into their Upward Bound accounts if they stay on the Pathway to Success. They can then use the deposited money to pay for the next step in the Pathway to Success.
Eligibility
All youths from the age of 15 to 29 whose families had below-average income during their teen years would have Upward Bound debit accounts that can only be used for investments that are proven to promote upward mobility. Each month that youths are making reasonable efforts to invest in their future, $400 would be deposited into that account. The youths can then use the debit card to invest further in their success.
Stay on the Pathway to Success, you get another payment into your Upward Bound account. Stray off it, and you do not get another payment. And you can only use the money in the Upward Bound account for purchases that enable you to get to the next step in the Pathway.
The exact purchases that beneficiaries can make with their debit card will vary based on results, but the initial list should be something like this:
Long-acting reversible contraceptives.
Tuition for secondary school or university
Job training and certification programs
Relocation to a city with more economic opportunities
Purchase of a used car
Down payment on a house.
Each of these investments has a significant amount of research documenting their promotion of upward mobility. Without Upward Bound, many low-income youths would not have the capital to make these investments. Many would not even think of them as a possibility.
While means-tested programs reward failure, Upward Bound encourages and rewards success. If a youth decides not to invest in their own future, they will receive little. But if a youth decides to make the necessary short-term sacrifices, they will be assisted by taxpayers.
The American government has proven itself very bad at delivering services, so Upward Bound relies largely on the private sector and individual initiative to achieve its goals. Upward Bound merely gives youths cash that they can spend how they like, as long as it is proven to promote long-term upward mobility.
Combining this with a four-year phase-out of our current means-tested programs will radically change the incentives for poor and working-class persons. Instead of the disincentives that our current programs give, my proposal will give strong material incentives to work full-time, get married, and have children. This is good for the individual, good for their future spouse, and good for their future children.
Combined with my proposed Working Family Tax Credits, this will give youths from low-income families:
A strong economic incentive to invest in their own Upward Mobility
Funding to take steps that are proven to contribute to individual Upward Mobility
A minimum guaranteed standard of living if they take the proper steps.
While the purpose of this reform proposal is to promote Upward Mobility, it also has the benefit of saving hundreds of billions of federal tax dollars every year. If the proposal results in increased labor participation, then the savings will be even more.
See more articles on Upward Mobility:
Why Progress and Upward Mobility should be the goal, not Equality
The Pathway to Success (first article in three-part series)
The case for Upward Bound accounts (this article)
I also will be writing a significant number of excerpts from my forthcoming book: Upward Mobility: A Radical New Agenda to Uplift the Poor and Working Class. Most of these excerpts will only be available to paid subscribers.
Other books in my “From Poverty to Progress” book series:
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