He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under the first President Bush. He is a graduate of Harvard College and Harvard Law School. He is author of The Obamacare Disaster, from the Heartland Institute, and President Obama's Tax Piracy, and his latest book: America's Ticking Bankruptcy Bomb: How the Looming Debt Crisis Threatens the American Dream-and How We Can Turn the Tide Before It's Too Late.
Latest posts by Peter Ferrara (see all)
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Last week, the Washington Establishment, from the Congressional leadership to the national media, was surprised and shocked when the House actually voted down the 5 year farm bill renewal. That alone, even if the Congress never gets around to passing a farm bill this year, would not kill the spending in the bill. But as the Boston Tea Party in 1773 triggered the events that led to the American Revolution, the little understood farm bill takedown last week could be the first shot in a welfare policy revolution that could finally at long last lead to elusive victory in the War on Poverty.
The lumbering farm bill was a fat target on the floor of the House, scored at costing nearly a trillion dollars ($940 billion) over 10 years. That was 50% more than the last 5 year farm bill passed by Congress in 2008, but vetoed even by big spending President Bush as costing too much.
This year’s bill was misnamed as a “farm bill.” It was really a food stamp bill, with 80% of its spending going for the food stamp program (officially renamed now SNAP, or Supplementary Nutrition Assistance Program). Annual spending under the bill would average $80 billion, double the spending on the program just 5 years ago.
Rejection of the bill was bipartisan, and pan-ideological, with 62 conservative Republicans joined by 172 liberal Democrats in voting down the bill on a final vote of 234 to 195. The rejection came after the Republican majority approved an amendment cutting just $2 billion a year from the bloated food stamp program. The media reported that it was that negligible cut that turned urban liberal Democrats against the bill, as they could not abide any cut in the exploding, runaway program.
But the true, inside story was more complicated, and more revealing concerning the coming revolutionary reforms. The $20 billion in cuts over 10 years had actually been approved in the Agriculture Committee, and so that was no surprise to anyone. The Democrats were still expected to join Republicans in approving the House bill.
According to the ranking Democrat on the House Ag Committee, Rep. Collin C. Peterson (D-MN), what really killed the bill was an unexpected, last minute amendment on the House floor raised by Rep. Steve Southerland (R-FL), which was supported by the Republican House leadership and adopted with a majority of 226 Republicans and 1 Democrat. That amendment provided for a pilot program that would empower states to choose to adopt work requirements for food stamp recipients, like the work requirements adopted in the 1996 welfare reforms for the old Aid to Families with Dependent Children program (AFDC), now renamed Temporary Assistance for Needy Families (TANF).
Under the amendment, states would have the automatic right to opt in to the pilot program, with no discretionary waiver from the Feds required. Food stamp benefits are funded 100% by the federal government, with states financing administration of the program within their borders. Under the pilot program, states would use their own funds to administer a food stamp work requirement of 20 hours a week, less than TANF requires for families with children over 6. In return, states in the pilot would be able to keep 50% of any savings in food stamp expenditures resulting from the work requirement.
That can add up to an enormous return on what the states spend to administer the work requirement. Under TANF (reformed AFDC), states were able to reduce the rolls by two-thirds within a couple of years with their administration of the work requirement. With $80 billion a year now to be spent on food stamps, that can add up to nearly $25 billion for the states each year (with nearly another $25 billion in resulting savings for the Feds, at a time of continuing budget crisis). The pilot could only reduce federal food stamp spending, not increase it under any circumstances, because the states would put up the extra funding to administer the work requirement.
The idea came from a body called the Secretaries Innovation Group (SIG), which is a network of state human service secretaries, and labor and workforce secretaries, from 19 different states. It is chaired by Eloise Anderson, Human Services Secretary for Wisconsin Governor Scott Walker. The Executive Director is Jason Turner, who served as welfare administrator for former New York City Mayor Rudy Guiliani, sharply reducing the City’s welfare rolls during his tenure through work policies.
The idea was developed from a promising reform trend overseas, most notably in Great Britain, which involves private work contractors receiving cash rewards for welfare dependents that they successfully move into long term work. Both these reforms, and the SIG pilot proposal, would consequently involve a market of incentives where work entrepreneurs would be rewarded with a portion of the government spending savings that they achieve by helping to move current welfare dependents to work. That success would benefit the poor as well, who would gain income from regular, sustained work in the private market, as they add experience and skills over time. These same reforms can and should be extended to all means tested welfare programs.
But the House Democrats could not abide the idea of a work requirement for food stamps. They insisted that food stamp dependents should not be required to work in return for their benefits, even just part-time for 20 hours a week. (As with TANF, child care would be provided for single mothers with no one to care for their kids while they worked). Under the Democrats’ philosophy, if food stamp dependents wanted to sleep until noon, and watch cartoons with their kids all afternoon, they should have the complete right to do that, undisturbed, at taxpayer expense. So they overwhelmingly switched to vote down the entire farm bill in response to the pilot work program amendment, along with 62 conservative Republicans for whom the scored $2 billion per year in food stamp spending cuts under the bill were not enough to rein in runaway spending on the program.
In last week’s column, I discussed the enormous success of the 1996 welfare reforms of the old AFDC program, based on fixed, finite block grants to each state for the federal share of funding for the program, replacing the old federal matching funding formula which effectively paid states to spend more on the welfare program. That enormously benefitted the poor as well as the taxpayers, as two-thirds of those formerly on AFDC left government dependency for work, with their incomes documented to increase by 25% on average as a result. After 10 years, that saved taxpayers 50% of the annual cost of the program as compared to where it would have been based on prior trends.
This same reform should be extended to all of the nearly 200 federal means tested welfare programs, with federal funding for those programs sent back to each state in fixed, finite block grants, effectively providing powerful incentives for each state to reduce welfare dependency for work. States would then be empowered under these reforms to redesign these welfare programs however they thought would be most effective within their state to eliminate poverty and reduce dependency. With these programs collectively expected to spend more than $10 trillion over the next 10 years, the potential savings for the taxpayers would be truly historic.
But what would be even more historic is what states could do to help the poor with all this new power, under incentives to reduce dependency and promote work. Indeed, I would recommend to the states that they replace the current welfare system, which as I showed in my column last week has promoted poverty, and counterproductive non-work, family break up and out-of-wedlock births, entirely with all public assistance for the able-bodied poor tied to work. I contend that such a system would ultimately eliminate poverty in America entirely, achieving the original goal of the War on Poverty, by replacing incentives for counterproductive actions and conduct, with incentives for productive actions and conduct.
Under this new system, those able-bodied poor who needed public assistance and showed up at their local welfare office before 9 am would be assured a work assignment for 8 hours that day. They would be paid at the end of the day the minimum wage for that work in cash. If they needed more, they could come back the next day and work again. This is only for the able-bodied poor. The disabled who could not work would be served by other programs designed for them, which can provide generous assistance on top of Social Security disability payments without requiring work.
The local welfare office would attempt to place those seeking assistance in a private sector job, like private temp agencies do all across America every work day. Indeed, ideally the local welfare offices would be contracted out to private temp agencies, which would be paid a fee based on successful placements of those seeking assistance in private sector jobs. But all those who showed up needing assistance would receive some 8 hour work assignment for the day paying the minimum wage, even if it was just to spend the day cleaning up the local public parks.
Those who needed child care while they work would bring their kids with them to an on-site child care facility. All other public assistance for the able-bodied would be provided only in return for those who showed up for work in these job assignments. That would include Medicaid vouchers for private health insurance for those who showed up for enough days of work each month to qualify.
Here is why such a system would actually eliminate poverty entirely. At the current federal minimum wage, one parent working full time for the year, when combined with the current Earned Income Tax Credit (EITC) and the current Child Tax Credit, would earn enough to bring every possible family at least up to the poverty line.
So this system alone would mean no more poverty, or at least involuntary poverty. If some do not want to work, that should be their choice, as long as their children do not suffer from neglect. That means victory at last in the decades long War on Poverty.
At the same time, the Census Bureau estimates that we currently spend on public assistance for the poor 4 times what would be necessary to bring every poor family up to the poverty level. So this system would produce enormous savings for the taxpayers, while eliminating poverty in America entirely.
What is most fascinating is how this system would eliminate all the perverse, counterproductive incentives of welfare. The incentives for family breakup and illegitimacy are eliminated entirely. No free benefits are handed out any longer for bearing a child out of wedlock. If the mother has a child without a husband, then the mother must go to work to support the child.
Moreover, there is nothing to be gained under this system by avoiding marriage or by couples splitting up. No benefits are provided to the mother for being unmarried. A government welfare check does not become a substitute for a working husband. If the father has to work to support himself anyway, and will be charged for child support, then he has no economic incentive to stay away from the family either. So this system does not discourage marriage or encourage family break up.
The incentives for nonwork are reversed as well. There is nothing to be gained under this system by not working. No free benefits are passed out to those who choose not to work. Rather, the incentive is to take whatever private sector job is available, since the able bodied will have to work to support themselves in any event, and in the private sector the worker will gain skills, raises, promotions, and new opportunities over time. Instead of taxpayers paying the bottom 20% of income earners not to work, as under the current system, private employers would be paying them to work, and so contribute to the economy. You won’t see under this new, work safety net system 50 million people show up for these job assignments every day, for years and years, as you see under the current food stamp program, and other current public assistance programs.
I call this win-win entitlement reform, where the poor, or seniors in the case of age tested entitlements, are actually better off under the reform than under the current unreformed programs, stuck in the mud Democrats to the contrary notwithstanding. Such win-win entitlement reform is possible for every entitlement program, from welfare, to Obamacare, to Social Security, to Medicare. But will Democrats give up their domestic Breshnev Doctrine?
[First Published by Forbes.com]