Vice President for Budget Policy and Economic Opportunity
Senator Marco Rubio (R-FL) spoke eloquently yesterday about the aspirations of people living in poverty, but his proposals would represent a significant step backward in efforts to reduce poverty -- weakening the safety net for low-income children, seniors, and people with disabilities and almost certainly increasing child poverty.
This post will address the one of his two main proposals: to block-grant most federal safety net programs. A follow-up post will address his proposal to scrap the Earned Income Tax Credit and replace it with a sketchily outlined "wage enhancement program."
Senator Rubio proposes to end most federal safety net programs -- including unemployment insurance, SNAP (formerly food stamps), Medicaid, and housing assistance -- and replace them with one mega-block grant to states. The plan apparently would set funding for the block grant at what the federal government would spend on these programs under current law. States would have near-total flexibility in using the funds.
This proposal has deep flaws. For example, it would dramatically weaken the safety net's ability to respond to recessions.
Funding for key programs such as SNAP, unemployment insurance, and Medicaid adjusts immediately and automatically when need rises. The recent recession provided powerful proof of the value of this "counter-cyclical" response, as safety net programs averted what would have been a much larger increase in poverty (under an expanded poverty measure that includes the income from these safety net programs), given the doubling of the unemployment rate.
In addition, key safety net programs like SNAP, Medicaid, and unemployment insurance expand and contract at different rates in different localities and states, reflecting variations in economic conditions, changes in population size and job availability, and the like. As a result, they respond effectively to changes in need across the country.
By eliminating the entitlement status of programs like Medicaid, SNAP, and unemployment insurance -- and instead providing a fixed annual amount of money allocated among states under a pre-set formula, based on data that become available only with a lag of months or a year or more -- block-granting sacrifices the timely, effective, and targeted counter-cyclical response that these programs provide.
Indeed, no block-grant proposal has ever been designed for these programs that provides a full, prompt, counter-cyclical response; a block grant simply cannot do that. As a consequence, under the Rubio proposal, hardship would inevitably rise in many areas during recessions -- likely by substantial amounts.
The Rubio proposal also would wipe away important protections in current law that ensure, for example, that all poor children have access to nutrition assistance and health coverage. States could shift federal funds from less popular groups to groups with more political clout, such as from very poor families to families with moderate incomes.
In addition, block-granting key safety net programs could very well lead to funding cuts over time. Politically, it's much easier for policymakers to shrink a block grant that supports a vast array of purposes spread across 50 states -- and claim that states can compensate by improving efficiency or rooting out "waste, fraud and abuse" -- than to cut specific types of assistance for specific groups of people such as low-income children, seniors, or people with disabilities.
The history of recent decades bears this out. Funding for most major block grants focused on low-income households has eroded in inflation-adjusted terms, often by large amounts.
The block grant proposal also allows policymakers to argue that states could expand safety net benefits for certain beneficiaries without having to identify the cuts needed to pay for such expansions.
Senator Rubio suggested yesterday, for example, that states could use their added flexibility to eliminate marriage penalties in Medicaid, presumably by providing Medicaid to couples at substantially higher income levels than current law allows. But he didn't identify any offsetting cuts in Medicaid, SNAP, or other low-income supports to pay for that. (Medicaid already spends far less per beneficiary than private insurance, and SNAP provides less than $1.40 per person per meal, on average.)
To be sure, greater state flexibility could be valuable in certain areas. For example, governors of both parties have suggested that a number of the rules in Temporary Assistance for Needy Families (TANF) are too rigid and make it harder for them to help parents find jobs. But that is a far cry from abolishing virtually every means-tested program and simply putting money on the stump for state politicians to do with it as they please.
With nearly 50 million Americans living in poverty, there is important work to do. But block-granting the safety net would weaken anti-poverty efforts.