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Paul Ryan's poverty plan

In 2014, Rep. Paul Ryan (R-WI) released one of the most prominent Republican statements on poverty to date. Here's what he proposed.

What is Paul Ryan's poverty plan?

On July 24, 2014, Rep. Paul Ryan (R-WI) released a paper entitled "Expanding Opportunity in America," laying out proposals designed to address poverty and improve social mobility in the United States.

"A key tenet of the American Dream is that where you start off shouldn't determine where you end up," Ryan wrote. "If you work hard and play by the rules, you should get ahead. But the fact is, far too many people are stuck on the lower rungs."

The paper covers the gamut, including plans to reform the safety net, boost the Earned Income Tax Credit, improve education, tackle mass incarceration, increase testing of social programs, and cut regulations(particularly occupational licensing rules that many economists believe hurt poor people in the labor market). The paper stood out as a major attempt by a Republican politician to develop an anti-poverty agenda, as the issue has traditionally been a priority for Democrats but neglected by the GOP.

Ryan's poverty plan, it should be noted, is distinct from, and in tension with, his budgets. During his many years at the helm of the House Budget Committee, Ryan released a series of budget plans that would cut trillions from programs for low-income people. The poverty plan basically sidesteps the question of funding levels across the government, and Ryan hasn't repudiated his past calls for drastic cuts.

What is Paul Ryan's plan to expand the EITC?

by Dylan Matthews

Ryan proposed greatly expanding the earned income tax credit (EITC) for childless workers, who currently receive very little benefit from the policy. He cited a Congressional Research Service analysis suggesting that while the poverty rate for single parents of two is cut by 16.65 percent by the EITC, and the rate for married parents of two is cut by 26.86 percent, the rate for childless single and married households is cut by 0.14 percent and 1.39 percent, respectively.

Ryan's plan would specifically:

  • Double the maximum credit for childless people, from $503 to $1,005.
  • Double the phase-in and phase-out rates from 7.65 percent to 15.3 percent. That means lower-income workers get bigger benefits but those on the high end of eligible incomes see the credit fall away more quickly.
  • Move up the income at which phase-out begins to compensate for the faster phase-out. Ryan would have the credit start phasing out at $11,500 for single childless people and $17,000 for married childless households, as opposed to $8,220 and $13,720, as is current policy.
  • Decrease the minimum age for childless households claiming the EITC from 25 to 21.

Ryan's plan is less generous than Senate Budget Chair Patty Murray's plan to expand the EITC for childless workers, and unlike Murray's plan does nothing for two-earner households. But Ryan's proposal is almost identical to President Obama's, included in his FY2015 budget; the only difference is that Obama would also increase the maximum age one can claim the EITC from 65 to 67.

Murray and Obama fund their plans by tamping down on tax benefits for corporations and high-income individuals, respectively. Murray would equalize the tax treatment of stock option compensation and wage compensation (the former is currently tax-advantaged) and crack down on the use of corporate tax havens like Bermuda and the Cayman Islands. Obama would close the "carried interest" loophole (which lets hedge fund managers and other professional investors pay lower capital gains tax rates on their income) and the Gingrich-Edwards loophole (which lets self-employed people avoid payroll taxes by classifying their income as profits being distributed to them rather than as wages).

Ryan would instead cut a number of existing safety net programs and other spending to pay for his plan:

To pay for an expanded EITC, this proposal would eliminate a number of ineffective programs, such as the Social Service Block Grant, the Fresh Fruits and Vegetables Program, the Economic Development Administration, and the Farmers’ Market Nutrition Program. It also would reduce fraud in the Additional Child Tax Credit by requiring the use of Social Security numbers.

To make up for any shortfall, this proposal would further eliminate corporate welfare. For example, the Department of Agriculture’s Market Access Program costs taxpayers billions merely to help the interests of a select few businesses. Energy companies also receive a number of subsidies. The Department of Energy, for example, spends billions annually to subsidize corporations’ efforts to commercialize favored energy technologies and sources picked by the Congress and the bureaucracy. Corporate executives and shareholders reap the benefits, and the taxpayer picks up the tab

It's unlikely that Democrats are going to be willing to accept a lot of these proposals. Requiring Social Security numbers for the child tax credit would deny its benefits to many low-income immigrant families, and low income advocates vocally oppose eliminating the social service block grant. While Ryan is not explicit that he wants to cut subsidies to companies investing in green energy, it's doubtful any policy with that effect would go anywhere in the Senate or White House.

What's Paul Ryan's plan to cut back on mass incarceration?

by Dylan Matthews

Ryan's ideas on prison reform fall into three categories:

  • Increasing judicial flexibility on federal sentencing.
  • Increasing prisoner enrollment in rehabilitation programs meant to reduce recidivism, which low-risk inmates could use to serve part of their sentence outside of prison.
  • Working with states and municipalities to reduce incarceration at those levels.

On the first point, Ryan endorsed the Smarter Sentencing Act, a bipartisan proposal by Sens. Mike Lee (R-Utah) and Dick Durbin (D-Illinois) and Reps. Raul Labrador (R-Idaho) and Bobby Scott (D-Virginia). The bill proposes cutting existing mandatory minimum sentences for federal non-violent drug offenses by half, increasing the "safety valve" allowing judges to give sentences below mandatory minimums, and makes the Fair Sentencing Act (which reduced the sentencing disparity between crack and powder cocaine and eliminated a five year mandatory minimum sentence for possessing crack) retroactive by allowing prisoners convicted of crack offenses to petition the courts for lighter, FSA-compliant sentences. David Dagan has a good explanation of the legislation here. The bill has passed the Senate Judiciary Committee and is awaiting further action.

On rehabilitation, Ryan associated himself with a proposal by Sens. John Cornyn (R-Texas) and Sheldon Whitehouse (D-Rhode Island) and Reps. Jason Chaffetz (R-Utah) and Bobby Scott, which would have federal prisons classify inmates according to their risk of reoffending and according to their programming needs, which could include cognitive-behavioral therapy, prison jobs, education, drug treatment, and so forth. Inmates with lower risk levels would earn privileges like phone time and also time in non-prison custody, such as ankle monitoring or home confinement or a halfway house. The plan is meant to create an incentive for prisoners to achieve lower risk assessments, thereby triggering these benefits. Like the Smarter Sentencing Act, this proposal has passed the Senate Judiciary Committee; you can read about both bills in Vox's explainer on federal prison policy.

Ryan didn't actually endorse any federal action to encourage states and localities to reduce their prison populations, but expresses support for state efforts in Georgia and Texas and specific plans like Hawaii's HOPE proposal, which makes punishment less severe but more certain, and has been shown to reduce recidivism. It's worth noting that federal prisons are a small drop in the bucket of the total incarceration picture, as 90 percent of prisoners are in state or local facilities, so all the actual bills Ryan endorsed would do little to cut into the overall incarceration numbers.

What's Paul Ryan's plan for education?

by Libby Nelson, Andrew Prokop, and Dylan Matthews

Most of Ryan’s proposals for early childhood and K-12 education center around block grants, which he argues allow for more state experimentation. Ryan proposed block granting nearly all federal education spending, including funding for low-income schools and Head Start. Funding for low-income students would be portable — meaning that the money could also flow to charter schools if parents choose to send their children there.

He'd also combine the existing Child Care and Development Fund block grant with the Opportunity Grant he's proposing to replace food stamps, housing assistance, and the like. As well as block granting Head Start, Ryan wants to create a number of pilot projects at Head Start sites and state-run pre-K facilities to test the effectiveness of different program models. (Here's more information on what block granting Head Start could mean in practice, and the questions a block grant would raise, from an education consulting firm.)

Ryan proposed requiring states to test students in reading and math each year from third through eighth grade, as well as once in high school — the same standardized testing regimen as No Child Left Behind. But he'd get rid of federal infrastructure around defining "adequate yearly progress." Instead, states would be able to set their own definition of progress. They would be required to report to the Education Department on how poorly performing schools would improve. That's a significant rollback of the federal role in school accountability.

Ryan's higher education plan has two key features: changing the Pell Grant from a semester-by-semester program into a well of money that students can draw on throughout their education, and reforming the accreditation process. He would also cap the amount that parents and graduate students can borrow, and change income-based repayment programs.

Normally, students get a new Pell Grant award each year they're enrolled in college. Ryan's plan would instead let students know early how much they can expect in Pell Grants throughout their college years. Students could use that money at their own pace — to continue their studies in the summer, for example. (Pages 18 through 21 of this white paper from the National Association of Student Financial Aid Administrators, which has proposed such a program, give a better idea of how it might work.)

Changing how colleges are accredited would allow students to get federal financial aid at a wider variety of educational providers — such as online courses or job training. Ryan also proposes getting employers involved in the accreditation process. This would be a fundamental transformation for what has traditionally been a system of quality control focused on what colleges themselves value in education.

What Paul Ryan's plan on occupational licensing?

by Matthew Yglesias

Paul Ryan's plan for expanding economic opportunity in America includes a discussion of occupational licensing — rules that restrict entry into professions ranging from haircare to interior decorating to selling yachts. By restricting entry and reducing competition, occupational licensing rules raise prices for consumers which is bad for the poor and for everyone else too. But Ryan's proposal focuses more on the idea that licensing rules hurt the poor by reducing employment opportunities.

But despite Ryan's criticisms of these rules, his plan does not actually contain any specific measures to curb them. Occupational licensing is overwhelmingly a state issue (with some involvement by cities) that the federal government has limited influence over. But in theory, the federal government could tackle occupation licensing through some kind of incentive program.

Ryan, however, opts to do nothing, simply remarking instead that "state and local governments should begin to dismantle these barriers to upward mobility."

If states take Ryan's advice, the impact could be substantial. Morris Kleiner and Alan Krueger have found that strict regulatory barriers to entry push wages up for incumbents by about 18 percent. Lowering barriers to entry, then, would reduce incomes for many currently employed workers. But it would also create more job opportunities for many workers who are currently jobless or stuck in very low-wage occupations with little chance of upward mobility. In the aggregate, removing these barriers would be good for employment and economic growth and would almost certainly reduce poverty. But the overall magnitude is hard to ascertain.

What's Paul Ryan's plan for regulations?

by Matthew Yglesias

Paul Ryan has a plan to require a distributional analysis of all new proposed federal regulations that would make it dramatically more difficult to tackle climate change or other long-term environmental problems.

Ryan proposed a multi-step process. First, any regulatory agency proposing a new rule would be required to do a distributional analysis of the impact. If the regulation was determined to have a disproportionately large impact on low-income households or low-wage jobs, then the regulation would be considered regressive. An agency seeking to impose a regressive regulation would be asked to determine if the rule addresses "an immediate risk to public health or safety."

In the absence of an immediate risk, the agency would need to seek Congress' approval to impose the regulation.

Because high-income households save a much larger proportion of their income than low-income households, almost any regulation that raises the cost of any class of consumer goods is regressive in its distributive impact. At the same time, many problems are inherently long-term in nature, rather than posing immediate threats. Under Ryan's plan, it would be extremely difficult for the EPA to act against climate change, for the USDA to act against antibiotic-resistant bacteria, or for financial regulators to act to reduce the risk of catastrophic financial crisis. No matter how severe the problem or how small the cost to consumers, no new rule could be written without the concurrence of congress drastically undermining regulatory agencies' ability to comply with their missions.

What is Paul Ryan's Opportunity Grant proposal?

by Danielle Kurtzleben

Paul Ryan proposed putting up to 11 programs for needy families, including the Supplemental Nutrition Assistance Program (food stamps) and Temporary Assistance for Needy Families (TANF), into one funding stream. States could opt into the plan if they like, and, after submitting a plan for how they'd use the money, spend it as they see fit on those areas. The goal, he says, is to "encourage innovation among the states" in fighting poverty.

That sum of money would not represent a cut from current funding levels, but it would allow states to spend more or less on any given program as they see fit.

States would then provide aid themselves or enlist local nonprofit or for-profit service providers, who would compete to help provide aid.

Ryan claimed the goal is to create accountability, not only among assistance providers, but among users. Participants will have to complete a "life plan," which would involve creating a contract listing goals (like completing job training or getting counseling), as well as laying out timelines for reaching those goals, consequences for not fulfilling the contract, and incentives for fulfilling the contract. The life plan would also lay out time limits for how long the person could stay on government assistance.

The ultimate goal, Ryan claimed, is to make sure the social safety net encourages work. Completing the contract would mean the person is on the path to self-sufficiency.

What's Paul Ryan's proposal to assess the effectiveness of antipoverty programs?

by Andrew Prokop

Ryan proposed creating a new Commission on Evidence-Based Policy Making, which would advise Congress on managing data to better evaluate antipoverty programs. It would explore whether to merge data from several different programs, and how to improve longitudinal data that explores effects on people over many years — while protecting individuals' privacy in both cases. This is the vaguest of Ryan's proposals, but wonks on both sides will have a hard time arguing against better data.

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