Anne Kim is a contributing editor at Washington Monthly magazine and the author of  Abandoned: America’s Lost Youth and the Crisis of Disconnection (The New Press, 2020), winner of the 2020 Goddard Riverside Stephan Russo Book Prize for Social Justice. Her new book, Poverty for Profit: How Corporations Get Rich Off America’s Poor (The New Press), comes out May 28, 2024. It turns out The Privatization of Everything, the book co-authored by In the Public Interest’s executive director Donald Cohen, was an influence on Kim’s work. We asked her a few questions about the new book.

What was the impetus for writing your book?

This book has been in the works almost since the start of my public policy career.

Back in 2002, I co-authored a report investigating the tax prep industry, and we calculated that paid preparers diverted at least $2 billion in refunds from low-income taxpayers every year. Until that report, no one had really noticed the tax prep industry and how damaging it was to working poor Americans.

That got me interested in finding other industries profiting from the poor, either with the help of government programs or because of failures in public policy or both. I didn’t have to look very far because there’s a huge set of industries that make their money this way, though mostly under the radar. I wrote research papers and articles that tackled this problem piecemeal—about the dialysis industry and cash bail, for instance – and then realized there’s a larger argument here about the cumulative impact of all these businesses on the persistence of poverty.

What I call “Poverty, Inc.” has accreted over four decades and infiltrates pretty much every aspect of low-income people’s lives, from housing to nutrition to taxes to job training and more. It’s a story that hasn’t been told but needs to be told if we want to make progress on poverty.

I also wrote this book because I think the policy debate on poverty is stuck–to the extent there is debate these days at all. On the left, the argument is typically about the need for more funding, while conservatives simply want to blame the poor. I think the size and destructive impact of the poverty industry help explain why government anti-poverty efforts haven’t been as effective as they could be. Perhaps naively, I also think dismantling Poverty, Inc. has the potential for bipartisan interest. Scaling back on the poverty industry—or more effectively regulating it—would mean the better use of taxpayer dollars, plus more money in the hands of low-income Americans.

As you know, ITPI explores the privatization of public goods and services—what role does privatization have in profiting from poverty?

Privatization is a prime catalyst in the creation of the modern poverty industry, in my view, and I really credit Donald Cohen and Allen Mikaelian’s book, The Privatization of Everything, for helping me crystallize that insight.

President Ronald Reagan set the train in motion with his embrace of privatization, as Donald and Allen have so ably chronicled, but President Bill Clinton was the one who really stoked the engine of “Poverty, Inc.” with welfare reform. That legislation did three things that accelerated the privatization of social services—and the growth of industries and companies looking to cash in on federal social spending.

First, welfare reform converted the old cash welfare system—Aid to Families with Dependent Children—into a “block grant” for states to administer as they wished, so long as they met broad federal guidelines. Instead of checks going directly from the federal government to needy families, the money was going to states, which could use the money to pay cash welfare but also to pay for services intended to help poor Americans become financially self-sufficient. Second, welfare reform imposed new obligations on recipients, including a five-year time limit and a work requirement. The work requirement meant states now had to provide job training to recipients and track hours, which also meant standing up new bureaucracies to carry out those tasks. Finally, the legislation did away with a federal prohibition on outsourcing key tasks around the administration of welfare, like determining eligibility or performing intake.

These three changes together helped create a market for welfare services literally overnight. Barely a month after Clinton signed welfare reform, the New York Times reported a three-way bidding war among a subsidiary of Lockheed Martin, Andersen Consulting, and Electronic Data Systems to run the Texas welfare system for $563 million. A company called Maximus runs the Texas welfare system now, and its reported 2023 revenues were $4.9 billion.

In reading the book, the phrase “No good deed goes unpunished” came to mind, but as, “No anti-poverty program goes unexploited by the private sector.” You recount so many instances of programs intended to help the most vulnerable, but they don’t do as intended. Is that a function of program design? Is it something that can be fixed, or are you thinking of a deeper systemic change?

Poverty profiteers deserve a lot of credit for their ingenuity if nothing else. Businesses have been very effective in finding opportunities for making money and maintaining their markets. It’s a really tough problem to unravel because they’re more nimble than government and will always be a step ahead.

Some of the excess profit-making results from the privatization of social services, so the “simplest” way to end some abuses would be for government to reclaim some of the functions it’s given away. In the alternative, better, tighter oversight of contracting would help.

But in a lot of instances, the growth of the poverty industry is the result of deeper, systemic problems that create opportunities for exploitation. For instance, dialysis companies earn the bulk of their revenues from Medicare, which pays for most dialysis treatments in America. Dialysis patients are disproportionately low-income and minorities because kidney disease and other chronic conditions are more prevalent among these populations. And that’s the result of generations of systemic disparities in access to health care and treatment. The solution here isn’t to eliminate dialysis, obviously, but to reduce the inequities that have led to a situation where a disproportionately poor, Black patient base is propping up the profits of the dialysis industry.

The same could be said of bail bondsmen, who exploit a broken justice system that is deeply unfair to poor defendants. Many jurisdictions still rely on cash bail, and if you can’t afford bail, you have no choice but to turn to a high-priced bondsman if you want your freedom. The commercial bail industry compounds the inequities that already exist. When Maryland eliminated cash bail in most instances, the industry also mostly disappeared.

The presence of poverty-dependent industries is both a symptom and an amplifier of deeper systemic failures that have gone addressed for decades. We’re also talking about multiple structural problems in different spheres of poor Americans’ lives, which means there isn’t a single solution that can fix the problem.

One of the programs you write about is the Earned Income Tax Credit, which is often seen as one of the anti-poverty programs that has been effective. Can you talk about the problems you see with it?

On the one hand, the EITC is an ideal anti-poverty program because (in theory), it sends cash refunds directly to the working poor taxpayers who need them. It’s also been great politically because there’s no direct appropriation of money by Congress to the program, which means no annual fights over funding, etc. Instead, it’s a tax “expenditure” that seems invisible to taxpayers. (The same can be said for the home mortgage interest deduction, which costs the federal government about $30 billion a year in foregone revenues.)

Nevertheless, the tax code isn’t a great place to house anti-poverty programs because it adds to the complexity of the code. The result, as I’ve noted above, is that pricey for-profit tax preparers are often the middlemen brokering this benefit to poor families because families can’t claim it on their own.

This complexity is also intentional, which makes the consequences all the more galling. As I write in the book, another important strand of poverty politics in America is this insistence on aiding only “the deserving poor.” That’s the rationale for the work requirements and time limits enacted during welfare reform. The EITC is similarly restrictive because Congress wanted to ensure that the benefit was only available to working poor families with dependent children, and they wanted to ensure the benefit wasn’t so generous that middle-class Americans would resent it. The result is 44 pages of instructions and ten pages of tax tables that people must decipher if they want to claim the credit. Paid preparers claim to cut through this complexity—but at a very high price.

It’s the perfect case study of how the trade-offs in designing a program to make it politically palatable can create openings for opportunistic industries to arise. That’s a fairly recurrent theme throughout the book.

You mentioned that President Clinton was at least as much responsible for where we are as President Reagan. Why does allowing the private sector to profit so handsomely off of poverty have such bipartisan support?

I don’t know that there’s bipartisan support for the excesses of poverty-dependent industries—I hope not!  But there’s certainly enduring bipartisan support for privatization, as your readers well know.

It’s universally fashionable among politicians to bash “big government,” and Democrats have been forced to embrace “business-friendly” ideas to fend off attacks of “big government liberalism.” That’s why “reinventing government” —including through privatization—was a core pillar of President Bill Clinton’s campaign as a “New Democrat.” He declared that the “era of big government is over” to differentiate himself from Michael Dukakis, Walter Mondale, and other unpopular candidates smeared with the “big government’ label. He also genuinely believed—as many New Democrats did at the time—that the innovative spirit of business could in fact revitalize government and make it more efficient. There was less thought, I think, to the consequences of embracing the private sector’s entry into human services. So Poverty, Inc. was the result.


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