Pethokoukis, Economics, U.S. Economy

What Rubio’s big anti-poverty plan gets right

Gage Skidmore (Flickr) (CC-BY-2.0)

Gage Skidmore (Flickr) (CC-BY-2.0)

Declaring peace on the US safety net differs greatly from accepting the status quo. Senator Marco Rubio’s new anti-poverty plan offers a dramatic, even radical revamp of the American welfare state. The Florida Republican’s proposal accepts government’s role in helping raise incomes at the bottom, but utterly rejects the “big government” manner in which that help is now delivered.

The Rubio plan’s core policies flow from three central insights. First, getting more low-income Americans working is critical to social mobility. Second, the income gap between work and non-work is too narrow or even non-existent in some cases. The higher that society defines a basic standard of living, the more rewarding entry level jobs need be. Third, the safety net would be more efficiently and creatively run and designed by Austin or Topeka or Madison rather than Washington.

Rubio’s “Flex Fund” would replace federal anti-poverty programs with a single funding stream back to the states at current dollar levels eventually adjusted for population, poverty rates, and inflation. The senator has yet to define exactly which programs would be folded into this mega-grant. But the idea’s author, former Romney policy adviser Oren Cass, tells me that “in principle, all of them” would be included — including Medicaid, SNAP (food stamps), SSI (disability), jobless benefits, and TANF (temporary assistance). States already manage much of the federal anti-poverty effort, Rubio just wants to stop “beltway bureaucrats picking and choosing rigid nationwide programs.” Cass puts it this way: “If you want to get effective reform you have to have the same people who make the implementation decisions be the people who have the accountability and the funding authority.”

The other big, new idea in the Rubio plan is to use Flex Fund dollars to replace the lump-sum Earned Income Tax Credit with a broader wage subsidy to workers with or without kids delivered by employers through paychecks. Rubio: “This is real money being put back directly into the pockets of lower income working Americans, incentivizing their work and creating opportunity for upward mobility.”

Again, keep in mind the point here is reestablishing that income gap between entry level jobs and the dole. As Cass says, “The most promising way to do that is to start to take money that is currently spent on something like food stamps for people who are working and people who are not working and say we are only going to leave enough money to use food stamps for people who are not working. If you are working you’re going to get more money in your paycheck.”

There is much to recommend the Rubio plan. Policy analysts on the left and right should take it seriously while highlighting its pluses and minuses. The proposal gets some big things right. It doesn’t confuse poverty fighting with budget cutting, though spending will drop if poverty falls. It tries to raise the ceiling for work rewards rather than lower the floor for income support. It takes advantage of states as laboratories of policy innovation while still maintaining a federal funding role. It recognizes how globalization and automation are transforming the American labor market and changing the nature of modern work.

Add in other pro-middle class/anti-poverty ideas such as expanding the child tax credit and reforming jobless benefits, and what emerges perhaps is much of the foundation of a 21st century center-right economic agenda for greater economic mobility, and prosperity and human flourishing.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

4 thoughts on “What Rubio’s big anti-poverty plan gets right

  1. You will pardon me if I suspect that average attentive job creators will figure out in about a minute and half how to turn a wage subsidy to their advantage rather than workers’. Countries such as Finland and Canada have decidedly mixed results using wage subsidies. And those experiments have been limited to targeted groups, like older workers or disabled workers. No one as yet has told high schoolers, ‘Hey, quit now and I’ll pay you $10/hr or you can graduate and I’ll pay you …. $10/hr!”

    Makes you wonder why corporate interests want to scrap EITC, which works, for yet another iffy corporate welfare program. OK. Never mind.

      • And employment will explode: Burglar bars, prison guards, ER attendants, gravediggers. Just for a change, Paul, how about offering up a solution that might actually be doable on planet earth.

  2. Rubio’s “Flex Fund” would replace federal anti-poverty programs with a single funding stream back to the states at current dollar levels eventually adjusted for population, poverty rates, and inflation“…

    LMAO!

    Yet another corruption stream potential, crony capitalist salavating at the possibility…

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