Yesterday, House Budget Committee Chairman Paul Ryan (R-Wis.) unveiled his long-awaited plan to fight poverty, called “Expanding Opportunity in America.” And while Ryan’s new proposals serve to distance his ideas from the more draconian aspects of his annual budget proposals, as well as 2012’s Romney-Ryan presidential campaign, this new plan serves as further evidence that Ryan fundamentally misunderstands the nature of poverty in the United States.
Drifting in Ryan’s ocean of misunderstanding is some flotsam of good policy ideas. Chief among them, Ryan does not advocate the shredding of the social safety net to further the goal of deficit reduction, as he did in his most recent budget proposal, which cut $3.3 trillion from low-income support programs over 10 years. Instead, in “Expanding Opportunity,” he emphatically states that his new treatise “is not a budget-cutting exercise.” Moreover, by calling for an expansion of the Earned Income Tax Credit (EITC) for childless workers, Ryan is moving away from prior rhetoric that belittled Americans with little or no federal income tax burden.
An expanded EITC isn’t Ryan’s only proposal that would help truly alleviate poverty—he also advocates prison sentencing reform and programs to try to reduce recidivism, helpful in the fight against poverty because the incarceration rate and long duration of sentences have led to prison becoming a “poverty trap,” especially for poor African-American men and their families.
As for the EITC, Ryan’s proposal is very similar to one backed by President Obama; Ryan would increase the maximum benefit to childless workers by just over $500, to $1,005, allow workers to receive the benefit until they hit an income of $18,070 (compared to the current cutoff of $14,790), and allow workers as young as 21 (as opposed to 25) receive the credit. Ryan would also aim to have the credit applied to paychecks monthly, rather than requiring completion of complicated forms during tax season, which can be magnets for shady tax preparation outfits.
However, Ryan proposes paying for the expansion with cuts to other income support programs, such as the Social Service Block Grant, which provides services like child care assistance and community-based care for the elderly and disabled for 23 million people, half of whom are children.
This fixation with ridding the social safety net of programs not tied to a work requirement gets to the biggest problems with Ryan’s proposals. The first section of “Expanding Opportunity” is devoted to replacing food stamps, housing vouchers, traditional welfare benefits, and other low-income supports with a one-size-fits-all “Opportunity Grant”—a proposal that is problematic for myriad reasons.
First, transforming much of the safety net into what House Budget Committee Ranking Member Chris van Hollen (D-Md.) called “nothing more than a block grant gussied up with some bells and whistles,” is mostly a tried and true recipe for having spending levels atrophy over time (see what happened to cash welfare, currently known as Temporary Assistance to Needy Families after it was block-granted in 1996). It would also be less responsive to recessions, with the amount of benefits not increasing enough to meet needs during severe downturns (as SNAP, the food-stamp program, currently does). This lack of counter-cyclical stimulus inherent in the proposed Opportunity Grant program is a concern that Ryan mentions, but does not alleviate.
Second, there is tremendous bureaucratic complexity involved in the proposed grant program. Recipients of aid must select a state-based provider who will “conduct a comprehensive assessment of that person’s needs, abilities, and circumstances” and will help “develop a customized plan to address the recipient’s needs.” Thus, federal benefits that have set formulas to determine whether someone qualifies for aid would be replaced by a localized army of case-workers—as if the government determining the direction of a person’s life is fine, as long as the government in question isn’t based in Washington, DC.
Lastly, and most onerously, the program would “require all able-bodied recipients to work or engage in work-related activities in exchange for aid.” This is where Ryan’s misunderstanding of the nature of poverty and the real constraints to job growth come in. Though there is indeed a theoretical work disincentive represented in the implicit tax rate when getting a job and thus no longer qualifying for public assistance, it’s certainly not the case that this is the only factor keeping people out of work, nor has it been a cause of the current protracted labor market weakness, even as benefits increased during and after the Great Recession. Indeed, our labor market is functioning poorly not because there isn’t an adequate supply of workers, but rather because businesses have insufficient demand for them—there are still more than two job seekers for every job opening. Moreover, Ryan demands nothing from the nation’s employers to take actions that would make it easier for low-income people to work, like offering affordable child care or predictable work schedules. Almost needless to say, he does not call for an increase in the minimum wage, but rather repeats tired tropes about how the minimum wage costs jobs—ironic because this week is the fifth anniversary of the last minimum wage increase. Similarly, there is nothing to encourage employment in the public sector, where the “jobs gap”—what employment would be if trends from prior to 2009 continued through today—is still 1.5 million.
In his new anti-poverty proposals, Paul Ryan shows that he’s at least looking in some of the right places for solutions to our persistent poverty problems. But “Expanding Opportunity in America” is, at its core, misguided about the roots of poverty and joblessness. And—seeing as how it came from a party that’s set to vote later today to cut the Child Tax Credit for single mothers on the minimum wage by $1,725 a year—it’s, sadly, not a surprise.