Editor’s note: In the following post, Oren Cass, Governor Mitt Romney’s Domestic Policy Director in the 2012 presidential campaign and author of “The Height of the Net,” a call for a new conservative approach to fighting poverty, addresses two central aspects of Congressman Paul Ryan’s new anti-poverty proposal.
Congressman Paul Ryan is out today with a series of anti-poverty proposals. (See Callie Gable’s summary.) Here I focus on the first two – the creation of “Opportunity Grants” and reform of the Earned Income Tax Credit (EITC).
Underlying Ryan’s approach are four principles that are quickly becoming central to the conservative approach to anti-poverty policy. (I wrote about these principles and offered a set of proposals in National Review last fall and Senator Marco Rubio has built his own platform around similar proposals that advance these principles as well.)
1. Anti-poverty policy is not budget policy. Until recently, the conservative approach to anti-poverty programs has been to target them for budget cuts while asserting that such cuts would actually make the programs more effective. (See, e.g., Medicaid block-granting.) Spending reductions in such programs may indeed be necessary as a component of broader budget reforms, but they do not amount to an affirmative approach to the challenges faced by America’s poor. Ryan’s new proposal is deficit-neutral, which allows him to focus on the question of how to most effectively structure assistance to the poor independent of the question of how much we can afford to spend on those efforts.
2. Direct assistance is necessary. The free-market, supply-side impulses of conservative policymakers have often led them to emphasize anti-poverty solutions that directly strengthen the economy and only by implication provide increase opportunities for the poor (i.e., “You know what would really help the poor? Deregulation.”). Such reforms are necessary, but they are not sufficient. The Ryan proposals, by contrast, embrace the centrality of direct government assistance as a critical weapon in the War on Poverty and one where fresh conservative ideas are needed.
3. The safety net must be untangled. Accepting that direct assistance is necessary, the first reaction is often to propose some new form of direct assistance, or to choose an existing program to improve. But it is the endless tangle of federal programs working at cross purposes with inconsistent rules and goals that have made the safety net so ineffective in the first place. Thus, Ryan rightly focuses his reform up a level, at changing the structure of assistance altogether. His proposed “Opportunity Grants” would allow states to receive all of their federal anti-poverty spending as a lump sum rather than through a multitude of narrow programs. The flexibility created by such grants will give states the room to pursue more specific reforms with the potential to deliver results.
4. Cash is king. Conservatives have long paid lip-service to the merits of the EITC as a poverty-fighting approach. While most assistance actually discourages self-sufficiency by providing support that declines as the recipient earns increasing wages, the EITC is tied directly to those wages and amplifies the incentive to work. And because the EITC is a direct tax credit it puts cash into the pockets of those in need, rather than passing it through a network of poorly designed bureaucracies. But the EITC is expensive and so actually expanding it is rarely contemplated. Ryan explicitly calls for an expansion of the EITC, with the specific and important objective of increasing its support for childless workers (whereas the EITC today goes almost entirely to those with children).
Comparing the various proposals that work from these principles also highlights some of the debates that will be critical going forward – for instance, I see a few areas where his proposal could be improved upon:
1. What about healthcare? Ryan excludes Medicaid from his Opportunity Grants. But truly untangling the safety net requires disassembling Medicaid and allowing that funding to be reallocated, either to new healthcare programs or in some instances to different ends entirely. Our current allocation of spending across healthcare, housing, nutrition, training, etc. is an arbitrary artifact of separate legislative authorizations and bureaucracies evolving over decades. We should not be segmenting healthcare (which is as large as all the other buckets combined) as somehow untouchable, especially when it is not where someone in poverty would likely want to spend a marginal dollar. Ryan may have other plans for Medicaid, but there are plenty of policymakers with other ideas for housing, and nutrition, and training, too. If states are to have a chance at succeeding with alternative approaches, they need to be given the full range of tools and resources.
2. How much federal oversight? Ryan’s Opportunity Grants come with a number of requirements and reviews attached, to ensure that states use their newfound flexibility effectively. But this presumes a default that the federal government should be in charge, with states receiving permission to chart a different course only at the pleasure of an HHS bureaucrat. Nothing in the federal government’s track record provides a basis for such a presumption. To the contrary, such strings impose not-necessarily-correct policy preferences on states while inviting politicization and manipulation by an Administration.
3. What form and size of wage subsidy? Ryan proposes reforms to the EITC that bring it closer to a wage subsidy (e.g., tying it directly to each paycheck), but for reasons unclear does not go the final step of simply replacing one with the other. More problematic, the expansion he proposes is small in both scope and scale – the result of funding it only through the cancellation of a potpourri of small programs. For a work-incentives-led approach to be effective, funding to a wage subsidy needs to expand far more dramatically – ideally by reallocating it from existing anti-poverty programs that already go to those who work.
But any of the proposals working from these principles is a major improvement both on what conservatives have offered in the recent past and on the never-changing more-programs-more-spending approach from the other side. As more policymakers work from these principles toward innovative reforms the proposals will only get stronger.