Create opportunity, not welfare: Paul Ryan’s new poverty reform plan is a great place to begin a long overdue conversation

After his humbling defeat as the Republican Party’s vice presidential nominee in the 2012 election, Paul Ryan decided to refocus his efforts. He remained the Budget Committee chairman in the House, still producing the annual Path to Prosperity budget request.

But Ryan also dove head first into a project he had wanted to do during the campaign but was denied: visiting inner city neighborhoods to get a first hand account of poverty in America, with the goal of changing how the federal government approaches the problem.

The fruits of that nearly two-year long effort were unveiled in the form of a draft document from his committee called Expanding Opportunity in America, a sweeping anti-poverty reform agenda covering everything from tax credits, criminal sentencing, and occupational licensing.

Ryan unveiled the plan at an event at the American Enterprise Institute on Thursday morning. It’s not perfect, but it is an important first step both in actually tackling the frustratingly stagnant poverty levels around the country and in dismantling the narrative that Republicans don’t care about poor people.

While it is still an outline for federal legislation, in its introduction Ryan makes clear that government alone is not the solution to tackling poverty.

So how do we increase opportunity and upward mobility? No family can get ahead without a strong economy. But there are many factors that affect  upward mobility. On the personal level, growing up in a two-earner  household, completing formal education, and developing a habit and a store of savings are all significantly associated with higher rates of upward mobility. In addition, the Brookings Institution has shown that a combination of familyconditions and patterns of behavior and achievement is the key to joining to the middle class.

And at the neighborhood level, recent research has shown that areas with more two-parent households, a higher level of civic engagement, and fewer high school dropouts enjoy higher average rates of upward mobility. Conversely, people who live in more geographically isolated areas, which often suffer from high levels of concentrated poverty and crime, are more likely to experience lower rates of upward mobility—even those who are not poor or do not engage in such activities themselves may be at increased risk of downward mobility.

In other words, there are many factors beyond public policy that affect upward mobility. But public policy is still a factor, and government has a role to play in providing a safety net and expanding opportunity for all.

Ryan isn’t seeking to have government solve poverty. He just wants to improve its existing limited role in that solution, and in many ways his idea mirrors the recent much-discussed libertarian populist and conservative reform agendas.

Opportunity Grant

The biggest and likely most controversial plank of Ryan’s plan is the Opportunity Grant, which takes his longstanding proposal for Medicaid block grants and expands it to other federal aid programs.

In that spirit, this proposal would create a new pilot project in a select number of states. In participating states, the federal government would consolidate a number of means-tested programs into a new Opportunity Grant (OG) program. The largest contributions would come from SNAP, TANF, child-care, and housing-assistance programs, and the funding would be deficit-neutral relative to current law.

Many conservatives will complain that no spending is being cut, while liberals will complain that no spending is being increased. But as Ryan says, “this is not a budget-cutting exercise—this is a reform proposal.” Higher or lower levels of spending would come later. This program, and the rest of the plan, seek to optimize the current spending levels to make them work better. If they do work, and we find out we need less of them later, they can be reduced.

In proposing any such reforms, the current makeup of the government must be taken into account. Harry Reid still controls the Senate, and Barack Obama is still in the White House. A welfare reform proposal that reduces spending is simply dead on arrival, as Ryan’s annual budgets have shown.

A deficit-neutral plan, on the other hand, at least has a chance in the Senate. If Republicans take back the upper chamber after the November elections, a more ambitious proposal might have a chance. Until then, this at least starts the conversation (and maybe helps get us there).

While the reform itself sounds promising, it comes with a creepily paternalistic caveat: a federal “life plan” and “contract.”

The goal is to make it easier for low-income families to get the assistance they need and to find work. Right now, families must visit a variety of offices and providers to get aid. Under this proposal, they will work with a single provider for all their needs.

In the envisioned scenario providers would work with families to design a customized life plan to provide a structured roadmap out of poverty.  When crafting a life plan, they would include, at a minimum:
• A contract outlining specific and measurable benchmarks for success
• A timeline for meeting these benchmarks
• Sanctions for breaking the terms of the contract
• Incentives for exceeding the terms of the contract
• Time limits for remaining on cash assistance

Creating federal government life planners doesn’t exactly sound like reducing the role of government in people’s lives. If it eliminates duplicative bureaucrats that currently serve the same function, that’s an improvement. But let’s at least find a different, less Orwellian name for it, shall we?

Earned Income Tax Credit

Ryan’s plan also fills a gap in the Earned Income Tax Credit, already one of the simplest, most successful anti-poverty programs. Currently the EITC provides almost no relief for poor adults with no children. With the unemployment rate for young people currently stuck much higher than other demographics, expanding the work-required EITC for these young, childless adults would encourage among those who most need it right now.

With the good comes the bad, of course. Ryan proposes to bundle the EITC in paycheck withholding rather than with annual tax filing, because he wants to make it a much clearer reward for work. However, there is a growing consensus on the right that withholding in general is one of the main problems with federal policy.

Taxes come out of taxpayers’ paychecks, they never have to manually pay them, then they usually get a refund back at the end of the year, so the process of paying federal taxes is completely painless.

However, EITC is a tax credit, a deduction from the taxes you owe throughout the year, so in this case it would be a reduction of withholding, or even a periodic refund on every paycheck if you owe less than $0 total taxes for the year. It would mean more takehome pay for low-income taxpayers each month, but it would only further the federal tax collection process.

Education

While some conservatives and libertarians propose to eliminate the federal Department of Education and end Washington’s role in funding schools completely, Ryan’s plan calls for reform of a dozen education funding and aid programs covering preschool (block grant Head Start) to college (simplify FAFSA, reform accreditation). The current education bureaucracy is a maze of grants, vouchers, loans, and credits at all levels of schooling. Much of the proposed reforms call for block granting, consolidating, and experimenting with state level programs to figure out what works best.

While it does shift some responsibility from the federal to state and local levels, there doesn’t appear to be an overall reduction in the federal role in education, so even the most fundamental reforms will probably fall of deaf ears with conservatives.

Job Training

Ryan identifies 50 different federal job training programs spread among 9 departments and agencies. He proposes to consolidate these largely duplicative programs into — you guessed it — state block grants.

Curiously, only three of these 50 programs would be automatically consolidated into the general Opportunity Grant. States could then request consolidation of three additional programs. The plan then eliminates outright 15 of them that overlap others. To my count, that leaves 29 federal job training programs. Ryan’s plan is certanly an improvement over the 50 existing programs, but it could do better.

Criminal Justice

The fifth section of Ryan’s plan is probably the most important. While reforming and streamlining programs that aid citizens is always good, reforming those that physically oppress them is even more vital, especially at the lower ends of the income spectrum.

Sentencing reform is the first plank of Ryan’s criminal justice reform. He endorses the bipartisan Smarter Sentencing Act that has been introduced in both the House and Senate as a way to reduce and give flexibility for mandatory minimum sentences for certain drug crimes. It would also retroactively reduce sentences for many already serving time for these type of offenses.

For those already in the criminal justice system, Ryan also endorses another existing bipartisan, bicameral proposal to create incentive-based programs in federal prisons to reward inmates who participate in education, training, and treatment programs that seek to reduce post-release recidivism by rewarding them with additional privileges while still in the system.

Ryan has also studied state and local reforms of probation, prison funding, and crime prevention programs and would use his plan to figure out which of those programs works best and assist them better do their job where they started and spread them to other areas.

Regulations

Ryan tackles regulatory reform from two main areas: regressive regulation and occupational licensing.

This proposal does not call for comprehensive regulatory reform. Rather, it focuses on regulations that disproportionately burden low-income households. And it holds regulatory agencies accountable by requiring them to explain to the public — in layman’s terms — how new regulations will affect the most vulnerable among us.

Reform of the entire regulatory system is necessary, but too large and unfocused a task for this anti-poverty program. There is no explanation of what qualifies as a “low-income household” for the purposes of this regulatory requirement, but it would presumably be some multiple of the official poverty measure.

Occupational licensing is a huge barrier to starting a new business and thus creating jobs and in most cases are more about the safety of existing, larger businesses than the public or potential customers. Ryan suggests that states and municipalities review these requirements and eliminate unnecessary ones, though his proposal includes no specific action.

Research

Finally, Ryan proposes creating a congressional commission (red flag!) “of leading economists, statisticians, program administrators, and privacy experts to advise Congress on” data about federal programs with the ultimate goal of creating an easy way to find waste, fraud, and abuse to make it easier to reform even more of the bureaucracy in the future.

But that’s really the problem with many reform proposals, and this one to some degree. It creates new bureaucracy in order to eliminate bureaucracy. It has worked before, especially with welfare reform in the 1990s. But it has also failed spectacularly, like with President Bush’s No Child Left Behind education reform and the monstrosity that is ObamaCare’s health industry reform.

Ryan’s sweeping plan, call it  “War on Poverty II,” has many fantastic ideas, a few terrible ones, and absolutely no hope of being passed unless Republicans control the Senate next year. But it’s better than what we have now and at least a good place to start the discussion of how to refocus the federal government’s limited role in fighting poverty in America.

 


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