Economics

No, Paul Ryan’s new budget wouldn’t ‘hurt the poor’

Here’s how Washington Post funnyman Dana Milbank sums up Rep. Paul Ryan’s new budget plan:

Such a coupling — tax cuts that disproportionately help the rich and spending cuts that overwhelmingly hurt the poor — makes Ryan’s budget a political loser. His patronizing justification — that he is cutting support for the poor and the old in order to help them — adds insult. “If we have a debt crisis, then the people who get hurt the first and the worst are the poor and the elderly,” he reasoned.

Ryan’s Path to Prosperity would cut the growth in Medicaid spending by $770 billion over ten years vs. President Obama’s budget, still spending $3.5 trillion overall on the program. Ryan would convert the federal share of Medicaid spending into a block grant to the states – indexed for inflation and population growth — giving them the flexibility to design programs that best suit their needs. He would also convert the Supplemental Nutrition Assistance Program into a block grant indexed for inflation and eligibility beginning in 2016 and make aid contingent on work or job training. There is also a goal of “devolving other low-­income assistance programs to the states.”

The goal here isn’t just to cut spending growth, but to create a culture of empowerment rather than dependency. Here is the model of success Ryan points to:

Bipartisan efforts in the late 1990s transformed cash welfare by encouraging work, limiting the duration of benefits, and giving states more control over the money being spent. The evidence presented above suggests that welfare reform has made even the most vulnerable single mothers economically more self-sufficient and that this pattern continued during and after the 2001 recession. Welfare caseloads continued to fall throughout that downturn, possibly because industries such as retail sales and health care, which employ many low-skilled women, remained relatively strong (Blank 2006). Opponents of these policy changes argued that welfare reform would lead to large increases in poverty and despair. Instead, the opposite occurred. The Temporary Assistance for Needy Families (TANF) reforms cut welfare caseloads in half as poverty rates declined. In stark contrast to critics’ fears, child-­poverty rates fell 1 percent per year in the five years following the passage of TANF in 1996.

Does Ryan have his facts right? He does. A 2008 study by the San Francisco Fed looked at what happened after passage of the the Personal Responsibility and Work Opportunity Reconciliation Act, which replaced the 1930s-era Aid to Dependent Children Program with TANF:

The Aid to Dependent Children program was created in 1935 by the Social Security Act. The original intent of the program was to provide a social safety net for impoverished mothers whose husbands were absent due to death or abandonment. The program was created on the premise that mothers with young children should not be expected to work. In many states benefits were reduced dollar-for-dollar for any earnings, removing the key incentive to take jobs.

For its first 30 years, the program remained relatively small and captured little public attention. By the late 1960s, however, AFDC rolls had begun to rise, boosted by an inflow of mothers who had never been married and may never have worked. Meanwhile, in sharp contrast, married women with young children were moving into the labor market. The change in the composition of welfare recipients and the growing acceptance of working mothers put a spotlight on the AFDC program, prompting two decades of policy and academic research on how to better integrate poor single mothers into the workforce.

In 1996, PRWORA was passed, completely replacing the AFDC system with TANF, a new state-based, work-oriented program. Key reforms included shifting control of federal funds to states while requiring states to meet federally determined goals such as employment targets, imposing a five-year lifetime limit on benefits, and requiring beneficiaries to perform certain kinds of work, look for a job, or receive vocational training within two years of enrollment in order to continue qualifying for aid.

The evidence presented [in the above chart] suggests that welfare reform has made even the most vulnerable single mothers economically more self-sufficient and that this pattern continued during and after the 2001 recession. Welfare caseloads continued to fall throughout that downturn, possibly because industries such as retail sales and health care, which employ many low-skilled women, remained relatively strong.

Also have read of this 2006 congressional testimony by Ron Haskins of the Brookings Institution:

It has been ten years since the welfare reform law was signed by President Clinton amid predictions of disaster from the left. Thanks to provisions in the legislation itself that provided millions of dollars for research, to an unprecedented level of research sponsored by foundations, to data reported by states to the federal government, and to national data collected and reported on a routine basis by the Census Bureau, a tremendous volume of information bearing on the effects of the legislation has been produced. In fact, there is probably more information about the effects of the 1996 welfare reform law than any other piece of social legislation enacted in recent decades.

The pattern is clear: earnings up, welfare down. This is the very definition of reducing welfare dependency. Most low-income mothers heading families appear to be financially better off, although work expenses and Social Security taxes consume part of their earnings, because the mothers earn more money than they received from welfare. Taxpayers continue making a contribution to the well-being of these families through the EITC and other work support programs, but the families earn a majority of their income. This explosion of employment and earnings constitutes an enormous achievement for the mothers themselves and for the nation’s social policy.

Not to mention that the tax reform in the Ryan plan would boost economic growth, incomes, and jobs. That’s a pretty powerful poverty-fighting agenda.

6 thoughts on “No, Paul Ryan’s new budget wouldn’t ‘hurt the poor’

  1. As has always been said, there are statistics and there are damn statistics. Please present your arguments with data, not from 2001 or even 2006, but 2009 or 2010 or even 2011. Are earnings up in the more relevant periods? Are there industries TODAY employing higher levels of women with low skills. Get real and compare the effects of the Ryan proposal with the situation as it stands now, not the high flying days BEFORE the financial crash.

  2. The government safety net is for those who are experiencing life circumstances that are outside of reasonable expectation. Having a family at a young age does not match that criteria. In fact, there are few pursuits that are more predictable. Subsidizing a persons regret of having a family encourages the behavior. Unplanned pregnancy is a difficult circumstance that is easily avoided. Single motherhood is not an illness, it is an economic hardship that is made more difficult by a slow economy. Therefore, a vigorous economy is the best and only way to help single parent families.

    • Very good book by that same title which basically shows you can pretty much prove anything you want through the manipulation of statistics.

  3. “Welfare caseloads continued to fall throughout that downturn, possibly because industries such as retail sales and health care, which employ many low-skilled women, remained relatively strong”.

    Caseloads continue to fall because of the 5 year time limit on benefits and because those that are not eligible for TANF abandon their children to the grandparents. The grandparents qualify for unlimited public assistance cash payments and are not counted in the “welfare” caseload so the numbers are deceptive. I would guess these caretaker grants exceed the cost to taxpayers of the old AFDC program.

  4. trickle down economics has never worked and will never work… in ryans budget cutting and modifying social programs without altering defense, while increasing “subsidies” / “tax breaks” for corporations will not spur investment here – it will only promote lower wage jobs in other countries see – http://redd.it/r7yke

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