Revenue Neutrality Creates Winners and Losers: Paul Ryan Poverty-Plan Version

July 24th, 2014 at 10:37 pm

My CBPP colleague Donna Pavetti makes an interesting point re Rep. Paul Ryan’s new poverty plan.  Ryan tells the story of a single mom, Andrea, who needs a multitude of different services and supports that would, he claims, be more readily provided by his consolidated, block-granted system than by the current safety net (see my critiques of his plan here and here) .

But Donna argues that:

…nothing in Chairman Ryan’s proposal would make it more likely that families in Andrea’s situation would receive that full package of supports unless other needy individuals and families receive significantly less help

Because many anti-poverty programs, including housing, child care, and cash assistance, are significantly under-resourced, it’s already the case that many people–most, in fact–who are eligible for a program do not receive any benefits from it.

Today, just 25 of every 100 poor families receive TANF assistance, only 1 in 7 low-income children who qualify for help paying for child care receives it; and just 1 in 4 low-income households that qualify for help paying for housing get it.

Now, couple these insights with the fact that Rep. Ryan’s plan is revenue neutral, and you see where Donna’s coming from: given a fixed budget that’s already tightly constrained, the only way Andrea’s family gets more services is if someone else’s gets less.

It’s a similar point to the one made in the context of revenue neutral tax reform that pays for a rate cut with a base broadening.  Everyone likes the idea because they think it will lower their taxes.  And, in fact, some people’s taxes will fall (typically those not benefiting from any loopholes).  But the unforgiving arithmetic implies that given revenue neutrality, if somebody’s tax bill goes down, somebody else’s is going to have to go up.

Rep. Ryan, unsurprising, told us a lot today about the alleged winners of this lottery.  He somehow neglected to mention the losers.

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4 comments in reply to "Revenue Neutrality Creates Winners and Losers: Paul Ryan Poverty-Plan Version"

  1. Lloyd Levy says:

    Sounds like this kind of plan is not economically efficient and violates the principle of horizontal equity. Free-marketeers like Rep. Paul Ryan ought to be able to do better at playing their own game.

  2. Jill SH says:

    The real solution to Paul Ryan’s poverty plan is jobs, more jobs, good jobs, living-wage jobs. Indeed, any anti-poverty program depends on that. Once a welfare client were to sign a contract, there would have to be an achievable goal for them — a satisfying job to work at — and the mobility — geographic, economic, whatever– to get there.

    We can always be looking for better, more efficient ways to deliver the support that low-income people need, but with limited, cramped budgets that are capped either in funds allocated or in numbers of people served, we are just playing a shell game.

    That’s why I think the best anti-poverty program we could do right now is raise the minimum wage, and shake some of that cash out of (highly profitable) corporate coffers.

  3. Nathan J Kerr says:

    I agree with the second poster Jill. We do need more jobs, better paying and full time jobs. unfortunately the ACA is hamper on this and the Republicans do not help when they do not push for consumption tax over income tax and in exchange higher minimum wage which is a very efficient model for wealth redistribution verses taxing and then re-purpose it in form of welfare.

    But working for the government for many years, I can tell you that absent the union mindset which robs any initiative and “going above and beyond”, we are in no way as efficient at welfare management than if the government contracted the work out. The pay is usually similar, yet the consequences of poor performance and attitude is more swift with contracting agencies than the bureaucratic federal and state government employee “protections”. This increases efficiency of time, energy, and does lead to massive cost savings.

    • Oakchair says:

      How is the ACA a hamper on jobs? People having more income, people being healthier and having access to health care, and a more efficient health care system all would help with jobs.
      A consumption tax would hit poor and middle class families harder then the current income tax meaning oddly your solution to poverty is to make poor people poorer.