Economy & Business

Restoring Federalism to the Fight against Poverty

President Lyndon Johson shakes hands with a resident of Appalachia in 1964. (Cecil Stoughton/LBJ Presidential Library)
We must give states the leeway to innovate in bettering their citizens’ lives.

Editor’s Note: The following piece originally appeared in This Way Up: New Thinking About Poverty and Economic Mobility, a compilation of essays by the American Enterprise Institute. It is reprinted here with permission.

President Lyndon B. Johnson’s War on Poverty got some things right and has had some important successes. But it got a least one thing very wrong — a mistake still haunting us today.

You don’t have to be a constitutional lawyer — I am not — to know that certain rights, such as freedom of speech and religion, are protected by federal authority through explicit language in the Constitution. Minimum income and health care, in contrast, are not constitutional rights, and they do not enjoy the same kind of protection. Some people believe they should be, but they aren’t.

This is the original sin of President Johnson’s Great Society: applying an approach appropriate for civil rights to a sphere where the invocation of “rights” does not fit and does not work. And it has led over the years to a misguided effort to use Congress and federal courts to impose uniform anti-poverty policies in every state.

Today, the federal role in anti-poverty policies is huge but uneven. Vast federal spending and the coercive powers that come with it give federal officials a decisive influence over anti-poverty policy in every state. Medicaid, food-stamp benefits — now renamed the Supplemental Nutrition Assistance Program (SNAP) — the earned-income tax credit, disability assistance, cash welfare, child-support enforcement, child care, and housing all, to varying degrees, involve significant federal involvement in the lives of citizens in every state.

I’ve seen the consequences firsthand — when I was a state official overseeing social services in New York. Technically, I was employed by the state of New Yok and Governor George Pataki, but in reality, I worked for the federal government. Washington paid the bulk of my salary, and in countless ways, on most of the details of governing, I took my direction from federal officials.

The best approach is to allow states to reach the correct outcomes on their own, without federal intervention.

What the experience taught me: Federalism, properly understood, respects the responsibilities of the states and limits the use of federal power. The best approach is to allow states to reach the correct outcomes on their own, without federal intervention. But in some cases, a combined approach can work — when the federal government outlines desired outcomes but leaves the means to achieve those outcomes to the discretion of people in the states.

This approach worked well in New York in the wake of welfare reform — the bipartisan 1996 legislation mandating dramatic changes to cash welfare and enforcement of child support. Congress provided substantial funding for both programs and broad guidance to state officials but allowed each state to determine the details of their programs on their own. Importantly, the federal government holds the states accountable for outcomes — but not process.

The cash-welfare program — what was Aid to Families with Dependent Children and became Temporary Assistance for Needy Families (TANF) — is funded by a fixed block grant and comes with a firm federal requirement that states move a fixed percentage of participants from welfare to work. But the program leaves much to states’ discretion in how they achieve this end.

Less well-known, the child-support-enforcement program has more open-ended funding, but a significant portion of it is provided through incentive payments tied to five federal outcome measures — including the percentage of cases with a formal order of support and the percentage of ordered support that is collected. The better states do in achieving these measures, the more money they receive from Washington.

While there is certainly room for improvement, since 1996 both child support and TANF have made significant gains in achieving the goals they are designed to meet. Many more single-parent households receive payments from absent fathers. TANF, by requiring work, increased work levels and reduced poverty for never-married mothers.

Contrast this with the other two large federal programs in which Washington plays a much more prescriptive role: Medicaid, which provides health care for the poor, and SNP, intended to combat hunger. In both cases, the federal government is more heavily involved in the details of every state’s program, and funding is not tied to substantive outcomes — less hunger or better health.

Some people believe that more federal involvement has led to gains in SNAP and Medicaid. Certainly, more people benefit — enrollment for both programs has grown dramatically. But is that really the goal? There is not a lot of evidence that Medicaid enrollment leads to better health. And while SNAP enrollment soared during the recession — perhaps understandably — the percentage of households with what researchers call very low “food security” remained high even as the economy rebounded.

Bottom line: We’re raising enrollment but not improving outcomes. It’s the opposite of success: The goal of welfare is to help people become more independent, not more dependent. Increased enrollment without improved outcomes is losing the battle and the war.

Faith in the states, or in federal officials, generally breaks down along party lines, with Republicans more willing to defer to states, while Democrats push for federal mandates. But not always.

President Trump wants to move more authority to the states. The administration is encouraging states to ask for relief from federal authority in Medicaid and SNAP, and many people in the states — from both parties — appear to want to take on more responsibility, so long as there is adequate funding.

It’s a good sign — and it will be a great experiment. Over the next few years, we’ll see which approach works better at improving health and reducing hunger, not just boosting coverage and increasing enrollments.


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