Sen. Rubio Proposes to Kill the Countercyclicality of the Safety Net

January 8th, 2014 at 5:05 pm

…and, if I’m understanding a sketchy proposal, to replace the EITC with a different wage subsidy that will increase working poverty among single-parent families with kids (I suspect it would increase poverty overall–i.e., a poverty measure that correctly includes the value of tax credits–but not sure).

Anyway, Sen. Rubio gave a much touted speech this afternoon on poverty policy wherein he proposed to turn the federal safety net programs over to the states in the form of “revenue neutral” block grants.  This is not a new idea folks.  It’s rehashed Ryan, if not Reagan.

“Revenue neutrality” may sound technical and inoffensive, if not fiscally sound, but what it really means is the safety net will be unable to expand in recessions.  Let’s see the details, but typically under these arrangements, states will be unable to tap the Feds for unemployment benefits, nutritional assistance, and all the other functions that must expand to meet need when the market fails.  This would be a huge step backwards, essentially enshrining poverty-inducing austerity in place of literally decades of policy advancements to meet demand contractions with temporary spending expansions.

In the figure below, note the flat-line response by TANF in the great recession–it was block-granted in the 1990s–compared to SNAP or UI.  That gives you the flavor of what happens when you follow where Sen. Rubio is trying to lead here.

tanf_uncyc

Sources: TANF data from Office of Family Assistance, SNAP data from United States Department of Agriculture, unemployment (continuing claims) and unemployment rate from Department of Labor/Bureau of Labor Statistics.

The other thing that jumped out at me was his idea to replace the EITC–a highly effective, pro-work wage subsidy for low-wage workers in low-income families–with a “wage enhancement” program.

…I am developing legislation to replace the earned income tax credit with a federal wage enhancement for qualifying low-wage jobs. This would allow an unemployed individual to take a job that pays, say, $18,000 a year – which on its own is not enough to make ends meet – but then receive a federal enhancement to make the job a more enticing alternative to collecting unemployment insurance.

Unlike the earned income tax credit, my proposal would apply the same to singles as it would to married couples and families with children. It would also be a preferable means of distributing benefits since it would arrive in sync with a monthly paycheck rather than a year-end lump-sum credit. And it’s a better way of supporting low-income workers than simply raising the minimum wage.

Your first thought, like that of everyone who’s asked me about this today, is probably…um…isn’t the EITC already enhancing the value of work for millions of low-income workers?  Yes, but what Sen. Rubio appears to be up to here is targeting the so-called marriage penalty–the idea that since EITC eligibility is based on family income, combining incomes through marriage can lead formerly eligible workers to lose eligibility.

But it sounds to me like he’s losing the income targeting of the program and will end up shifting current EITC spending away from single parents with kids to married couples with kids (along with childless adults, who get little–too little–from the EITC).  Given that kids in single parent families are already more likely to be poor than those in married families, the only way this idea could not increase child poverty would be if he spent considerably more on it than is being expended on the EITC.  And that’s not likely what he’s got in mind.

There’s other stuff to worry about in here, but those look like the biggies to me right now.  Two big ideas in a poverty speech that look very much to me like they will increase poverty in recession and increase poverty among children.

What’s interesting, albeit disconcerting, here is seeing those with the views of Sen. Rubio address poverty and inequality, as these issues are ascending as deficit and debt reduction recede in the national debate.  On this turf, historically their ideas have largely been “get government out of the way,” block grant, privatize, slash budgets, etc.  I’m glad they’re engaging–it’s the policy conversation we need to have.  But what I’m hearing so far is, unsurprisingly, not inspiring.

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6 comments in reply to "Sen. Rubio Proposes to Kill the Countercyclicality of the Safety Net"

  1. Colleen Nicosia says:

    Thanks for making this clear to all of non-economists. It isn’t surprising but they still aren’t telling us why the government has to subsidize corporate wealth by supplementing low wage workers instead of simply raising wages. These guys are just beyond greedy and heartless even to people who are working and trying to do the right thing. Shameful.


  2. smith says:

    So Rubio’s plan would cut benefits for children? Because EITC is targeted mostly at children and his plan isn’t. I don’t think you even need to point out that it would cut benefits to poor children, because that adds needless complexity to the counter argument. So you want to cut benefits to children? Is there any politician who knows how to play the media and express his outrage at Rubio’s plan? No. Mostly because they are not smart enough, don’t care, and don’t follow this blog.


  3. doverby says:

    It seems so hard for Republicans, some Democrats, and the average American to understand that the deficit should increase while you are in a recession. This has been driving policy for the past 5 years in a negative way. While people have been focused on reducing the deficit, they have ignored the fact that the less fortunate (and the economy, for that matter) need more, not less, money to get by.

    The thing that frustrates me is that there are some conservatives who don’t have terrible ideas. For example, I’d be all for expanding the child tax credit, as Mike Lee insists. This could actually be a decent economic boost. The problem is that he, like many others, is viewing all of these different options as being substitutes as opposed to complements. There always has to be an “offset” to make things “deficit neutral.” I must give the Tea Party credit, because they are a large reason why the debate is framed in this way.


  4. PeonInChief says:

    What becomes clear here is the continuing assault on single mothers with children. I’m one of the rare people who believes that TANF was a very bad idea that did little but impoverish women who were raising children and didn’t get them out of poverty at all. It just enabled us not to have to see it in the federal budget.


  5. Corey Mondello says:

    I have said for decades that conservative ideology has never helped anyone except those in power, who are conservative ideologues. Whether Republican or Democrat, if your concern is not for the most needy, you are a conservative only looking to keep conservatives in power. Now, I am honestly asking if anyone could answer my question: Has there ever been a time in history, in the world and USA, where conservative ideology has actually helped more than harmed the majority of people? The majority meaning those not in government positions, and those not in the small class if the wealthy that tend to be in the same circles as politicians.


  6. Larry Signor says:

    Politicians do politics. Poverty is just another political talking point that will continue on in spite of our peerless leaders best efforts. (That made me cringe as I typed it.)


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