Paul Ryan's poverty plan is a big step in the right direction for the Republican Party. There are some very good ideas in there, including expanding the Earned Income Tax Credit and reforming sentencing laws and occupational licensing regulations.
But it's also got some big problems. Some of those problems are conceptual: they go to the basic ideas in the plan. Some of them are technocratic: they go to the specific construction of the plan, and could be addressed with tweaks or safeguards. And some of them relate to credibility: the poverty plan flatly contradicts the budgets Ryan has spent years pushing, which raises the question of which of Ryan's plans we should believe.
Ryan has been very clear that he sees his plan as the beginning of the discussion, not the end of it. So let's discuss.
1) Why should anyone trust Ryan's plan?
Paul Ryan's budgets can be summed up in a single sentence: Cut the deficit by cutting programs for the poor. The Center on Budget and Policy Priorities estimated that fully two-thirds of Ryan's cuts came from programs to the poor. Meanwhile, Ryan refused to raise even a dollar in taxes. Politics is about priorities, and Ryan's priorities — lower deficits, no new taxes, steady defense spending, no near-term entitlement changes — meant programs for the poor got hammered.
Ryan's budgets and his poverty plan aren't merely different. They're flatly contradictory. They cannot be implemented in the same universe at the same time. His budget, for instance, cuts deep into the funding stream that powers the Earned Income Tax Credit. His poverty plan sharply increases spending on the Earned Income Tax Credit. His budget cuts deep into food stamps and other income-support programs. His poverty plan holds their spending constant.
This made the rapturous reception to Ryan's poverty plan in conservative circles a little odd: the same people who cheered Ryan's budget and its huge cuts to programs for the poor every single year cheered his poverty plan with its explicit disavowal of those cuts.
This matters because Ryan's poverty plan can be seen either as an effort to move the Republican Party forward on poverty or as a Trojan Horse-like effort to achieve his budget's goals by other means. "The food stamp block grant proposal in his last budget had $135 billion in cuts," says Bob Greenstein, president of the Center on Budget and Policy Priorities. "It was dead on arrival. If the strategy in this plan is to remove the program's entitlement status, convert it to block grants and, over the decades, let the funding erode — well, that is is a much cleverer and more sophisticated strategy to get to the same goal."
Ryan has spent much of the last year learning about poverty — both as a policy issue and as a human issue. If that project has changed his thinking on his budget than that's an admirable example of a politician changing his policies in response to new information. But Ryan's not actually said that yet. So far as we know, he believes in both his budget and his poverty plan.
That's a consequential ambiguity: imagine Paul Ryan runs for president. Which Paul Ryan should we expect will govern? The one who wrote the budgets? Or the one who wrote the poverty plan? (This is a question I would like to put to Ryan, but his office declined a request for an interview.)
Greenstein proposes a simple test: "What happens, particularly if Republicans take the Senate, if they do a budget next year? Does the budget no longer have big cuts to low-income programs in it? And if the budget does have those cuts does Ryan refuse to support it?"
2) The problem with block grants
The centerpiece of Ryan's plan is the Opportunity Grant, which combines the funding for 11 anti-poverty programs into a block grant that gives states more flexibility.
The upside of block grants is the flexibility they give state and local officials. The downside of block grants is the flexibility they give state and local officials. (For more on how block grants work, see Danielle Kurtzleben's excellent article.)
"When you make a block grant this broad and sweeping to states it is virtually inevitable some of the block grant dollars will replace current state dollars," says Greenstein, "and so the total amount of money going to poor people goes down. It's not that you're directly using the federal dollars for a highway or a tax cut. You use the federal dollars for services to poor people. But maybe for every $3 states take from food stamps and put into services, they reduce state funding for those services by $1 and take that dollar and use it somewhere else in the budget.
"This is not hypothetical. It happened on a large scale in the Temporary Assistance for Needy Families block grant. And it's well known that it's almost impossible to stop this from happening. People thought about it in the TANF block grant. They wrote into the law maintenance-of-effort clauses to try to prevent it. And they weren't effective. It's just almost impossible to stop."
Finally, there's the possibility for croneyism to infect the process. Greenstein gives the example of the pull real-estate developers often have over state and local funding decisions. "Under this grant, state and local officials and service providers would have potential access to big chunks of this money where they could shift funding from food assistance and rental assistance to other things such as giving big contracts to real estate developers who are also big campaign contributors," he says. "As long as you say you're promoting jobs or enterprise or opportunity in low-income areas you can do all kinds of commercial development."
3) The problem with block granting food stamps
One of the 11 programs included in the Opportunity Grant is not like the others: food stamps, which is structured as an entitlement program, and so responds to rises in need automatically.
"It's really important right now that if there's a recession and you lose your job and need food stamps you can get them," says Greenstein. "You are immediately eligible. You're not on a waiting list." Ryan's Opportunity Grant would end the role food stamps play as an automatic stabilizer during recessions.
Ryan is working off of the welfare reform model here: this is more or less what the federal government did to the welfare program (or TANF) in 1996. But that just goes to prove the point: welfare's role as an automatic stabilizer has been gutted by the reforms. The welfare reforms were successful at cutting welfare rolls — not at making welfare better at helping the poor, particularly during recessions.
This graph from the Center on Budget and Policy Priorities tells the tale. When welfare reform passed, during a boom economy, the program was helping 68 out of every 100 families with children in poverty. Thirteen years later, during the deepest recession since the Great Depression, it was helping fewer than 30 of every 100 families with children in poverty.
It's hard to argue that setting food stamps on the same path would help poor families. Arguably, welfare reform is part of the reason that food stamps need to remain an automatic benefit with an entitlement structure (which means that the money is guaranteed barring a new act of Congress rather than up-for-grabs in each new budget).
"When the welfare block grant was being drafted in the House Ways and Means Committee in 1995 and Democratic members raised concerns about poor children and poor families losing access to basic benefits," recalls Greenstein, "the Republican reply was that's not a valid criticism because we are retaining the entitlement nature of the food stamp program as a basic benefit. So whether welfare reform was a success, the conversion of TANF into a block grant, which has made it largely disappear as a safety net for poor families, going from serving 68 families in poverty in 1990 to 25 in 100 today, makes the entitlement nature of food stamps all the more important."
4) The Medicaid problem
Medicaid isn't explicitly mentioned in Ryan's plan. But its shadow falls over the entire enterprise. The basic argument Ryan is making is that state and local officials are more capable and committed to helping their neediest than the federal government is. That's going to be a tough sell to anyone who has watched Republican governor after Republican governor refuse to accept the Medicaid expansion in recent years.
Many Republican governors have refused to let the government pay 90 percent of the cost of fully insuring everyone who makes less than 133 percent of the poverty line. They've literally just refused the money. And it's not been because they have a better idea: they've just let those people go uninsured. And they've done it while their residents are paying higher taxes to support the Medicaid expansion. It's been a breathtakingly cruel, stupid, and irresponsible policy tantrum.
It's also been stark evidence against the idea that state officials always put the wellbeing of their neediest ahead of party politics and ideological crusades. And it's going to make it much harder for Ryan to convince Democrats that state and local governments will do so much better of a job managing these programs.
5) The paternalism problem
An oddity of the politics around Ryan's plan is that it's left Republicans enthusiastically arguing for a massively paternalistic, bureaucratic approach to poverty policy. Ryan is proposing taking some lightweight, cash-grant programs like food stamps and replacing them with a system in which the poor have to work with some "provider" to come up with a life plan that includes measurable benchmarks for success, a clear timeline for meeting the benchmarks and leaving public assistance, punishments for failing to meet the timeline, and so on. Ryan's plan is very vague on what happens if these goals aren't met.
It also raises the possibility that Republican governors and states will go further: routine drug tests are a popular idea, and it's not a large leap to things like home inspections. Being poor, in this world, becomes a lot like being on parole. Using government assistance become so humiliating and difficult that people prefer to just languish because the costs of aid are so miserable.
As Annie Lowrey (disclosure: my lovely wife) writes, "middle-class families don't need to justify and prostrate themselves for tax credits. Businesses aren't required to submit an 'action plan' to let the government know when they'll stop sucking the oxygen provided by federal grant programs. The old don't need to show receipts demonstrating their attendance at water aerobics in order to get Medicare. Nope, it's just the poor who need to answer for their poverty."
Reihan Salam answers this by saying, in effect, yes! "Conservatives hate nanny-statism, and are always railing against the regulations that get in the way of entrepreneurs. When it comes to the poor, however, most conservatives lose their live-and-let-live attitude. The basic idea here is that if you're going to get help from the taxpayers, the taxpayers should have a say in how you use it."
Even if you support the idea, the bureaucracy needed to effectively administer it is vast. To do this, and do it well, will be a tremendous undertaking. The old line goes that programs for the poor are poor programs. That's one reason there's a lot of interest among poverty fighters in direct cash grants: there's less creaky (and occasionally corrupt) bureaucracy and there's good evidence that the poor are perfectly capable of figuring out how to spend money. So even if it would be better to have the poor developing these life plans and working with these providers, what makes Ryan confident that this won't just turn into another massive, inefficient government bureaucracy that does as much harm as good for the poor?
Ezra Klein: You've looked Paul Ryan's budgets closer than just about anybody - maybe even including Ryan. So what did you think of his poverty plan?
Bob Greenstein: So the positive is that unlike his past budgets this doesn't explicitly have massive cuts in low-income programs. One caveat there is that it doesn't mean he's entirely walked away from those cuts: the biggest cuts in his budget are to Medicaid and there's nothing on Medicaid in this plan. But there are particular positives in this plan like his proposal to expand the Earned Income Tax Credit and his criminal justice reforms.
Having said that I nevertheless have a large sense of disappointment and dismay. What he seems to be presenting as the centerpiece of his plan is a proposal called the Opportunity Grant that merges 11 programs into one block grant. It would effectively destroy one of the most important parts of the safety net: the entitlement nature of the food stamp program.
It's really important right now that if there's a recession and you lose your job and need food stamps you can get them. You are immediately eligible. You're not on a waiting list. What he does here is merge food stamps with a bunch of non-entitlement programs into a mega grant and bie states a fixed dollar amount for a year. That poses all sorts of problems.
One is it would not respond to increases in need. One of the advantages of food stamps - and also of rental vouchers, which would also be in this grant - is they give basic assistance directly to substantial numbers of low-income people. Instead, under this grant, state and local officials and service providers would have potential access to big chunks of this money where they could shift funding from food assistance and rental assistance to other things such as giving big contracts to real estate developers who are also big campaign contributors.
EK: To do what, exactly?
BG: What this does is it combines things like food stamps and rental vouchers with community development block grants. The community development block grants are a place where local officials often work together with developers. As long as you say you're promoting jobs or enterprise or opportunity in low-income areas you can do all kinds of commercial development that benefits developers who are really just powerful campaign contributors. Under no circumstance should we be letting state and local officials merge funding streams like that.
That's the problem here. We'd lose the automatic response of food stamps in recessions. We'd lose the entitlement nature of food stamps. We'd let state and local officials get their hands on a big stream of money that is now going into nutrition and rental assistance and use it for things where political pressures are greater.
And while Ryan says this money has to be used for poor people, the history is very clear. When you make a block grant this broad and sweeping to states it is virtually inevitable some of the block grant dollars will replace current state dollars and so the total amount of money going to poor people goes down. It's not that you're directly using the federal dollars for a highway or a tax cut. You use the federal dollars for services to poor people. But maybe for every $3 states take from food stamps and put into services you reduce state funding for those services by $1 and take that dollar and use it anywhere you want in your budget. This is not hypothetical. It happened on a large scale in the Temporary Assistance for Needy Families block grant. And it's well known that it's almost impossible to stop this from happening. People thought about it in the TANF block grant. They wrote into the law maintenance of effort clauses to try to prevent it. And they weren't effective. It's just almost impossible to stop.
The final concern is also a place where there's a very clear history dating back 30 or 40 years. We have a long history where programs are consolidated into block grants and when that is done the sponsors say they're not trying to cut the programs, they're trying to give more flexibility to state officials and improve administration. But the history is that when you consolidate programs providing a variety of services into a very broad block grant, in most instances over the decades federal funding goes down very dramatically. The reason is that it's no longer an entitlement tying funding to need, you competition in the federal budget once you're outside the entitlement sphere, and you no longer have metrics where you can determine what's the right amount of money you need. Right now everyone can estimate pretty easily how many dollars you need to serve the same number of people under section 8 rental vouchers as you did last year? But there's no similar metric under these block grants.
So put all these factors together: you don't get an automatic increase when poverty rises such as in recession, states could take funding going directly to poor people and plug it into other purposes some of which may not be so directly related to helping low-income people, states could and almost certainly would in many cases use a portion of the federal funds to substitute for state and local dollars going to the same people and so the total state and local dollars involved would decline, and fourth, the strong likelihood from history suggesting total funding would decline. When I put all that together the strong conclusion I come to is that the likely result over time would be increased poverty and hardship and reduced resources for poverty programs.
EK: So let me push on this from two directions. An interesting decision Ryan makes in the plan is to present the Opportunity Grants as a pilot program in a limited number of states rather than a national policy to be implemented tomorrow. So why isn't it a good idea to try this out, study the results, and then if things go badly, pull back?
BG: Several things. First off I don't see anything in the document that says it's a pilot in a few states. The document is purposefully vague about how many states it would be. You can't tell if the document would give this to 30 states if 30 states wanted to sign up. It's very clear in reading it, I think, that there's great rhetoric about testing and evaluation but the real model seems to be that we do it in a number of states first, we build a broad base of support, and then we expand it nationwide. It's what they did with welfare in the 90s.
So I'm all for testing and improvement. But I think there have to be some fundamental guidelines. One of the greatest successes in social policy over the last 60 years was what we now call SNAP but used to call the food stamp program. We used to have nutrition-related diseases akin to third-world countries. It's largely food stamps and its entitlement nature that got rid of that. And that's why Richard Nixon actually made it a national entitlement. Before that you had some states in the South limiting stamps to people below 50 percent of the poverty line. Here the incentive to do that would be much greater because states could use the money for other things.
We then have more recent research comparing, as the food stamp program went national in the 60s and 70s, comparing children in counties that had the food stamp program to children in countries that didn't. The results were spectacular. An 18 percentage point higher high school graduation rate. Dramatically lower rates of metabolic syndrome and other health programs in adulthood among the children who had access to food stamps growing up. I am not for testing anything that takes the money from food stamps and makes it a wide open funding stream for state officials who have a lot of parochial and political pressures. There were years of battles, many of them bipartisan led by people like Bob Dole, and my single biggest problem with the Ryan plan is it puts that achievement in jeopardy. I don't see anything that could justify a pilot test of moving money from basic food for poor children to local officials and developers building shopping centers, which is what this effectively would allow.
EK: One lurking theme here is that Paul Ryan believes welfare reform was a huge success and its basic structure should be replicated across all kinds of other government programs. I get the sense you do not.
BG: I don't think, frankly, that my view of his plan is that affected by that. The welfare reform block grant wasn't anywhere near as broad and sweeping as this would be. Plus, when the welfare block grant was being drafted in the House Ways and Means Committee in 1995 and Democratic members raised concerns about poor children and poor families losing access to basic benefits the Republican reply was that's not a valid criticism because we are retaining the entitlement nature of the food stamp program as a basic benefit. So whether welfare reform was a success, the conversion of TANF into a block grant, which has made it largely disappear as a safety net for poor families, going from serving 68 families in poverty in 1990 to 27 in 100 today, makes the entitlement nature of food stamps all the more important.
EK: What do you think of Ryan's proposal to expand the Earned Income Tax Credit? It seems very similar to Obama's, with the exception of the offsets.
BG: The details of the proposal, if you put the offsets to the side, are striking similar to what the Obama administration put forward. I would be in favor of sacrificing ineffective programs for a higher EITC. The problem here is some of the programs he uses are not ineffective. I'm not saying all his offsets are bad. But one of them would eliminate the child tax credit for many children who are citizens but in immigrant families as well as dreamer children. Those children are eligible for the child credit today. He characterizes this as fraud, not waste. But it's not fraud. He just doesn't like the law. And I'm troubled by taking the child credit, which provides income that researchers shown is effective, and taking it from these kids.
Another thing is the Opportunity Grant says what we need is more services with flexibility for helping families. We have that now. It is a block grant and it gives massive flexibility to states. It's called the Social Services Block Grant. He would eliminate it. There's a blatant inconsistency between cutting that program and creating the Opportunity Grant. The SSBG was set up by Republicans in the 70s arguing that we have too many of these programs and let's just consolidate them into a block grant at the same funding level. it's the same purpose as his block grants but now Ryan is proposing to eliminate it.
One of the other programs he would eliminate is this smallish program that provides food and vegetables to schoolkids in low-income areas. I'm not aware but I'd be a little surprised if there was research showing that program is ineffective or a failure.
EK: What do you think of the broader pivot Ryan makes in this plan? His budgets have all relied on huge cuts to programs for the poor, and they've justified those cuts with this idea that the problem the poor have is government dependency, and so take away the programs they're dependent on and they'll ultimately be better off. This plan seems like a big pivot away from that.
BG: Certainly it's better that he came out with a plan that doesn't have massive cuts than one that does. But I wouldn't render a final verdict even on the funding part. What happens, particularly if Republicans take the Senate, if they do a budget next year? Does the budget no longer have big cuts to low-income programs in it? And if the budget does have those cuts does Rysan refuse to support it?
So I'm in a wait-and-see mode on that. I do view it as a positive that he's now come out for an EITC for childless workers. But I don't view the Opportunity Grants as a big shift. I view it as a continuation of his fascination with big block grants and ending the entitlement status of food stamps. The food stamp block grant proposal in his last budget had $135 billion in cuts. It was dead on arrival. If the strategy in this plan is to remove the program's entitlement status, convert it to block grants and, over the decades, let the funding erode - well, that is is a much cleverer and more sophisticated strategy to get to the same goal. I'm not saying that's what he's looking for but I don't view this as a big positive development. I view it as him doubling down on his effort to unravel one of the most successful anti-poverty programs of the last few decades.