JACOB GOLDSTEIN, HOST:
Hey, it's Jacob Goldstein. Today's show is a rerun. It originally aired all the way back in 2010. It's a good one.
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ALEX BLUMBERG, BYLINE: Hello and welcome to NPR's PLANET MONEY. I'm Alex Blumberg.
CAITLIN KENNEY, BYLINE: And Caitlin Kenney. Today on the show, life at the poverty level. We hang out with a woman named Edith, a single mother who makes $16,000 a year and yet managed to fund a vacation at a Caribbean resort with an interest-free loan from one of the world's largest banks. She is a fascinating woman, and you are going to hear all about her.
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KENNEY: This woman's name is Edith Calzado, and she is perhaps the single most successful and productive beneficiary of government transfer payments you'll ever meet. Transfer payments - think of welfare and food stamps.
BLUMBERG: Some people in the country earn more than they need to cover their basic necessities. And the government taxes those people and gives some of that money to people the government thinks don't earn enough to cover their basic necessities. Those are transfer payments.
KENNEY: And there's obviously a really contentious debate about transfer payments. One argument you hear is that transfer payments just don't make economic sense, that they punish productive work by taxing it and then reward other people for not being productive. Some people argue that it takes away the initiative to go out and get a job if you know you're going to get this money anyway. And so the argument goes that everyone just ends up poor - the rich, the poor - that these payments aren't good for anyone.
BLUMBERG: No, and this is an economic argument, not a moral argument. There is a moral argument that says it's fine if everyone is poor as long as we live in a fair society. So transfer payments make sense just on that. But there is also an economic counterargument as well, that transfer payments, if done right, actually improve the economy in the long run.
And this argument says basically, poverty itself is inefficient. Trying to keep your family fed while living at the margin, it doesn't allow you to develop your human capital. In other words, extreme poverty keeps you from getting the education you need to get a good skilled job that would help make you and the whole society at large richer.
KENNEY: Edith Calzado is the poster child for that second argument. So Alex, you and I met Edith at an antipoverty program that's run by the city. It's called a Financial Empowerment Center. And it's a place where people who live in New York and have low incomes can come in and get free financial counseling and advice. She was there having her first interview with her counselor, Michelle Murio (ph).
BLUMBERG: And at first blush, Edith seemed to be in pretty bad shape. She was a single mother. She had a restraining order against her husband, who'd abused her. And she was earning very little money, as we found out when Michelle asked Edith about her income.
MICHELLE MURIO: How much do you make, roughly, on average, a month?
EDITH CALZADO: This year I make, like, 11,000.
MURIO: No, per month.
CALZADO: Oh, per month? It's like 900.
MURIO: OK. And how much do you spend money on groceries per month? How much do you spend? You don't?
CALZADO: I don't spend.
MURIO: Because you get...
CALZADO: I get food stamps. And also there is some place - they have a food pantry.
CALZADO: And I go there too.
MURIO: And your debt, the stuff that you think you owe out there, what do you think it is around? How much do you think you owe out there, roughly?
CALZADO: Like 2,300.
KENNEY: So initially, this was a pretty grim picture, Alex. We were just sitting here, hearing how little she makes and how much she owes. And it turns out that Edith does have other ways she makes income on the side. She cleans offices and sells baked goods around her neighborhood.
But even with this extra money, she told us she only brings in about $16,000 a year, which - this was pretty scary for me to learn - but apparently, in New York City, that is still considered above the poverty line. It's just barely above the poverty line. But making $16,000 a year puts you above the poverty line for a family of two.
BLUMBERG: And, as she said, she has $2,300 in debt. And that was credit card debt. But as she continued this counseling session, more and more emerged about Edith. And the picture started to change. So for example, she has $900 in savings. She puts away at least 20 to $30 a month. And then that debt, that credit card debt, it turns out it's all interest-free. So Edith is really good at taking those teaser rates from banks - you know, when they say 0 percent interest until January 2011 or whatever. And she milks them for all they're worth.
KENNEY: She's also really good at getting those store credit cards. You know, when you're shopping in Filene's and they're like, if you sign up today we'll give you a 10 percent discount. She would do that. She would sign up for the store card, use it for the discount and then just pay off the balance and close the card out.
BLUMBERG: Michelle, the counselor, pulled Edith's credit report. And she wouldn't tell us the number on tape. But her credit report was excellent.
MURIO: That's your credit score.
MURIO: Excellent, OK? So let's go over what you got going on here. You have a Sears card that has been closed by you, zero balance, right? Chase, Toys R Us, closed, zero - GAP, closed, zero - Kohl's, zero, and it's open.
KENNEY: So Alex, you and I were sitting there listening to this. And we're thinking this is so different from that story you usually hear about the poor person who is being taken advantage of by all these credit card companies or predatory lenders who are saying hey, we'll give you all this money for a low rate. And then they end up really in debt and they don't know what to do. Edith was taking advantage of those low rates. But then she was paying them off before the companies could even charge her interest. So she was taking their money and not the other way around.
MURIO: Mandy's, zero - Citibank, closed, zero - Children's Place, zero, OK?
KENNEY: I've got to say, Alex, at this point when we're sitting there hearing this, I started to feel kind of bad about my own financial situation.
BLUMBERG: I know, me too a little bit.
KENNEY: Edith just was so savvy. And I was like, we have a lot to learn from Edith.
BLUMBERG: So we decided, let's spend some more time with her. So a couple months after meeting her at this Financial Empowerment Center, we caught up with her again and spent the day with her. And I asked her about all of those teaser-rate credit cards she had opened.
So have you ever had a - have you ever paid an interest rate on a credit card?
CALZADO: No, no way.
BLUMBERG: So you've never paid a bank fee?
CALZADO: No, no, no, no, no.
BLUMBERG: And how much money have you borrowed interest-free, do you think, over the course of your life? How much money have you borrowed...
CALZADO: In total, everything?
BLUMBERG: In total, yeah.
CALZADO: Yeah. It's, like, 13,000.
BLUMBERG: Thirteen thousand?
CALZADO: Yeah, 13,000.
BLUMBERG: So you've borrowed $13,000 from them...
CALZADO: From Citibank.
BLUMBERG: ...For free?
CALZADO: Yeah, for free.
KENNEY: All right. For those of you keeping score at home, that's Edith Calzado, $13,000, Citibank, zero.
BLUMBERG: Well, it's not exactly zero. She does pay a balance transfer fee of 3 percent.
KENNEY: All right.
BLUMBERG: But still, we looked it up. And Edith, a Dominican immigrant on food stamps, is borrowing money more cheaply than the average highly-rated U.S. corporation is. And in fact, just recently, one of these interest-free loans that she got enabled Edith to treat her son, Sammy (ph), to something he had never experienced before, a vacation at a resort in the Dominican Republic.
CALZADO: I pay $103 for my son and I, everything included, from Friday to Saturday. And you are allowed to enjoy the six hotel in the resort. This was awesome - my son say, awesome.
SAMMY: Everything was awesome.
KENNEY: Here's Edith's son, Sammy, who's 9 years old.
SAMMY: And they had four hotels. And there was, like, this little train that would pick you up. And it would take you to any of the hotels you wanted. And then we also went to Ocean World, which - where we got to play with dolphins and sea lions.
KENNEY: Wow, that sounds pretty cool.
SAMMY: Yeah, and I got to dance with a dolphin.
KENNEY: You danced with a dolphin?
KENNEY: Who's a better dancer, you or the dolphin?
SAMMY: The dolphin.
KENNEY: The dolphin?
BLUMBERG: So again, Edith got to do all of this by borrowing money interest-free. So she was able to spread out the cost of this trip into a whole bunch of different installments that she never paid any interest on. Now, the fact that Edith was able to do that as an immigrant from the Dominican Republic living at the poverty level is pretty surprising. But it's even more surprising given Edith's life story, which she shared with us during the day that we spent with her.
KENNEY: Edith explained to us that she's 1 of 12 children from a big Dominican family. She came to the U.S. in 1997, when she was in her early 30s. And she lived, along with six of her sisters and one of her brothers, in her mother's tiny, one-bedroom apartment.
CALZADO: We were living and sleeping two and three in twin bed because my mother didn't have a lot of money, you know.
BLUMBERG: So when you first got to this country, you were - there was eight of you. And you had to - there was two and three in one bed?
BLUMBERG: In a twin bed?
CALZADO: Yeah. You imagine this small.
BLUMBERG: Three people in a twin bed? So in your twin bed, it was you and one other sister or two other?
CALZADO: One other sister. The other was three, and my mother was two.
BLUMBERG: How did you get to be the lucky one with only two?
CALZADO: Because my other sister is fat. And I was skinny. (Laughter). Nobody can fit in the bed. (Laughter).
BLUMBERG: It was actually this mattress situation that introduced Edith to her future abusive husband. The story is that she was over at a friend of her sister's house. And this friend was a little bit better off. And she said, hey, I have an extra mattress for you guys, you won't have to double up. Why don't you just take it? At first, Edith tried to protest. But the friend insisted.
CALZADO: She didn't give me another option - like, took my bed - went and said, oh, we have car service around here. Let me call, and they will send somebody who has a station wagon or minivan. The father of my son come.
BLUMBERG: And he was the driver?
CALZADO: He was the driver. And he's still driving by that time. How I tell you - sometime - now I'm more careful. You know, now I'm more careful. I am already almost three and a half - two and a half year no man around me, you know? I'm more careful because sometimes sweet word that sound like honey is like poisoning.
KENNEY: Edith talks to us a lot about her ex-husband, how she'd fallen for him in the beginning and how he turned on her. And she told us that he never gave her any money for her or their son. So she was forced to go around to the neighborhood food pantries and just try to put together whatever she could for her and Sammy to eat.
BLUMBERG: Even though her husband made pretty good money.
KENNEY: Yeah. She said he kept all the money for himself. Eventually, three years ago though, she did succeed in getting away from him. She got a restraining order. And her and Sammy were able to move to a different place.
BLUMBERG: And this is one of these things that I always think about, Caitlin, is that when you go to talk to somebody as a journalist or whatever, you're just meeting them at a particular moment in their life. And you don't know how their life is actually going to turn out. And so I keep thinking, like, if we had met Edith a couple of years ago when she was still with her abusive husband and working at a McDonald's, we would have thought, like, man, what is going to happen to her and, especially, what's going to happen to Sammy, her son. It seems like they're really trapped in this situation. Today, it feels very different.
KENNEY: And the reason Edith's life is so different today than what we might have pictured had we met her back then is that she's gotten a lot of help from the government. She is a huge recipient of transfer payments. We sat down with her and totaled up all the things that she's gotten over the years. And she told us that up until Sammy was 5, she got free food from the government under the WIC program. She also had her child care paid for under the New York City child welfare program.
BLUMBERG: And up until today, almost all her expenses are defrayed or paid for entirely by a government program. Food, for example, she gets food stamps. Her health insurance is covered under Medicaid. When she left her husband, her legal fees were paid for by a government program to help victims of domestic abuse. And just recently, she got off the waiting list for a subsidized apartment in a Bronx housing project. So she was paying $950 a month in rent.
KENNEY: And I remember when she told us that. And we're sitting there doing the math in our heads, being like, wait a minute. She just told us she only makes $900. Like, how is she doing this? How is she getting by?
BLUMBERG: Right, I know. It was almost all of the money that she made. And it was for a tiny apartment where she and Sammy shared a bedroom. Now she only pays $271 for a much bigger place.
CALZADO: It's wonderful. It's a - I said that God was in the middle of this blessing because I had big apartment. My son has his own bathroom - you know? I don't pay gas. I don't pay electricity. I can have my washing machine at home, you know? I can have an air-condition in all the rooms, you know? I pay less rent. This is the more important thing.
BLUMBERG: So here is the question. How should we think about all these transfer payments that Edith is getting? Now, obviously, like, you know, we liked Edith. And we're happy that she is doing better. But again, leaving aside the morality of the argument, is this a good investment? Will it pay off? And with Edith, it could go either way. She could eventually start earning a lot more money. Maybe she'll go back to school.
Maybe she'll end up, you know, earning as much money as she's received in transfer payments. But when you think about her son, Sammy, it really starts to look like a pretty good investment. If you just think about his life, without the food stamps, the WIC, the government money to pay for his child care, his life would have been much different.
KENNEY: Yeah, and my image of that life is pretty scary. You know, Alex, I recently went to Haiti with Adam. And we went into this very small village in the town of Latibonit. And we saw these families and their kids. And immediately, when they see - the first thing they say is, we're hungry. We're hungry. Do you have any food? And they're living in these really small handmade huts, one room. And the parents are just struggling to get through every day.
Sometimes they have to pull their kids out of school because they need them to work or they can't afford the school fees. And every day is just such a struggle to survive. There's no time to think about the future or education because you're just like, what am I going to feed my kid tomorrow? Like, what are we going to do if I get sick or my child gets sick?
BLUMBERG: And, you know, child development experts will tell you that, you know, if you are not getting the proper nourishment, if you're not getting the proper medical care or you're not getting the proper stimulation when you're a very little kid, you might end up with a permanent skill deficit as an adult. Like, what happens when to you when you're a little baby can have, you know, sort of long-term consequences on your future life. And of course, that has economic consequences.
The more people in a society without skills, the worse off the economy is going to be. But, of course, Sammy is sort of the opposite picture of that because of government transfer payments. He had steady food. He had a place to live - again, both provided by the government. Instead of focusing on survival, his mom was able to focus on his education. She got him into this gifted program, where he's thriving. He's in fourth grade but reading far above his grade level. He's one of those kids who already seems destined for college.
SAMMY: I'm on level U.
KENNEY: What's level U?
SAMMY: It has hard books, though.
KENNEY: What books are hard?
SAMMY: Well, sometimes, when I just feel like I want to read something harder than my level, I read levels, like, X and Z. And sometimes the level Z books are hard for me. So I go down the letters. And right now, I have an X book in my book baggie, and it looks really interesting because I read the blurb. And it's, like, very interesting.
It's about a boy that - he had a pet deer. And his family has to fight off wolves because they live in the wilderness. And they have to fight off wolves and moose and other creatures in the wild. And then one day, they have to part with the deer because they're, like, going to move to a city or something. And you don't see anybody in the city with a pet deer, so they have to part with it. And it ends it right there.
BLUMBERG: It sounds good. What's it called, do you remember?
SAMMY: "The Yearling."
KENNEY: If you're looking at Sammy, it looks like our taxpayer investment in Edith is going to pay off. Of course, there's still lots of hurdles ahead for him. But if Sammy gets a degree and a good job, he'll pay in taxes more than he has received in transfer payments.
BLUMBERG: So you would think that the way Edith thinks about transfer payments is pretty straightforward. But we talked to her about it. And it's not straightforward at all. On the one hand, she recognizes and is grateful for all the help that the government has given her. She thinks that's a good thing. But then she'll start talking about other types of transfer payments that the government is giving to people that she knows or in her community. And she can sound a little like Ronald Reagan in the '80s talking about welfare queens.
CALZADO: It's true that the government cannot control the personal life of the person. But if you say that you don't have a husband or you have three kids, why next year you come with four? Where you got the other one? It's, like, routine.
BLUMBERG: It becomes - welfare becomes a routine.
CALZADO: A routine for the people who are in there, like a routine.
BLUMBERG: As we're talking to Edith, she has a more nuanced view then your average person about transfer payments in America because obviously, she is much more in the center of it all. And because of that, I think, she actually embodies both of the views about transfer payments that we outlined at the top of the show. One view is that they are good. They help build your human capital.
Other people say that they're bad because they rob initiative and take money from taxpayers and give it to people who are less productive. Edith definitely sees both sides of this. And because of this nuanced view, Edith saw distinctions in the welfare system that I wasn't very aware of. For example, the word welfare itself - she told us, with great pride, one thing I never did - I never went on welfare.
KENNEY: Right, she kept saying that over and over, like, I've always worked. I took food stamps. I did these other things. But I was never on welfare. And that's because welfare, to her, is this one specific program. It used to be called AFDC, Aid to Families with Dependent Children.
Then it went through welfare reform. And how it's called TANF, Transitional Aid to Needy Families. It's money that's given to families with children. And it's not specifically targeted towards food or day care. It's just cash that's given to families. And in Edith's mind, it's not always used well.
CALZADO: What they do with that money? Enjoy the life.
BLUMBERG: And can you really...
CALZADO: Look my shoes. I bought these shoes when I come here in 1997. The bottom of the shoes was damaged. I took it to my country when I was over there now. And I fixed this over there for - maybe for $2. And I use the shoes. You think they use their shoes? No, please.
BLUMBERG: Do you know people who do that?
CALZADO: Of course.
BLUMBERG: What do they say? What do you mean, what...
CALZADO: Of course. Or I have somebody that - she is in welfare. And she has, I think it was three kids. I don't know if she is pregnant now. Go to my country. You will see what she have over there.
BLUMBERG: Big house?
CALZADO: Yes, beautiful house, you know, beautiful house.
KENNEY: And Alex, you and I also talked to a social scientist named Katherine Newman who studied the working poor a lot, especially the working poor up in Harlem. And she says this attitude that Edith has towards welfare is pretty common. In her experience, if anything, people like Edith who work but then receive some type of government assistance, they're even less forgiving of welfare recipients than the public at large.
BLUMBERG: And it makes sense when you think about it. If you think about Edith, who is getting help but also working so hard and denying herself so much, someone who just collects government money and doesn't work - it's really infuriating. And for her, it's not like an abstraction. To Edith, welfare cheats are very real. And they're are all around. You know, they're her relatives. They're friends. They're neighbors.
CALZADO: Yeah, in front of me there is a woman. She is in welfare. She is in welfare. She makes her hair, like, blonde. And you see the nails. To keep this nail good, you have to go every week to the nail parlor - nail store, you know? Twenty-three or something like that, it depends what you want. This is money.
BLUMBERG: That's our tax dollars paying for those nails.
CALZADO: And from where that - the money come from? Your money. The tax you pay, my...
KENNEY: OK Alex, so let's try to put this in context. How much, exactly, of our federal tax dollars are actually going to transfer payments? How much of the taxpayer money is going to Edith and, of course, Edith's neighbor also?
BLUMBERG: All right, so let's first - let's say up front, if you actually look at the government figures, the transfer payment that Edith has the most problems with - what she called welfare, which is just cash payments to income families - that is a very small number, just 0.6 percent of your tax bill. Less than 1 percent of your tax bill goes to that program.
KENNEY: But if you look at other programs, like food stamps and Medicaid, it's a much bigger number. Almost 10 percent of our federal tax bill is going to pay for Edith and Sammy's health care and food. And then when you add in state and local taxes, it's a little more.
BLUMBERG: And just to compare - the transfer payments we pay to Edith and other poor people are dwarfed by transfer payments we pay to another group, the elderly - Medicare and Social Security. That is a little under half of our tax bill.
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GOLDSTEIN: You can email us at firstname.lastname@example.org or get in touch with us on Facebook or Twitter. The show today was originally reported by the great Caitlin Kenney and Alex Blumberg. It was originally produced by Jess Jiang. Elizabeth Kulas produced today's rerun. I'm Jacob Goldstein. Thanks for listening.
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