Economy

The ‘Magical Thinking’ Behind The GOP Plan To Cut Programs For The Poor

CREDIT: AP/J. Scott Applewhite

Reps. Paul Ryan (R-WI), Jeb Hensarling (R-TX), and Tom Price (R-GA)

On Tuesday, House Republicans released a budget proposal that, among other things, promises to reduce spending on the Supplemental Nutrition Assistance Program (SNAP, or food stamps) and Medicaid by using a favorite budgeting gimmick that could wind up cutting millions off from the support they need. Then on Wednesday, Senate Republicans are expected to release a budget that would do something very similar.

The aim is to save the federal government money while still serving the needs of the poor. Overall, the House budget purports to save $5.5 trillion in spending while still “ensur[ing] assistance is provided to those in need.” But Republicans plan to do this in part with something called block granting, which significantly changes the way programs are funded. But as past experience with block granting shows, the poor will suffer if these programs are reformed this way.

Currently, Medicaid and SNAP are cost-sharing partnerships between states and the federal government. If need and enrollment increase for these programs — say, during a severe financial crisis where more families struggle to afford food and need food stamps to get by — then the government shares that increased cost. If these programs were to be block-granted, on the other hand, it would mean the federal government would give states a fixed amount of money to pay for them that wouldn’t change even if demand changed. In return, states are promised more flexibility in how they implement the programs.

This relies on “some magical thinking that states know how to [run these programs] and no one is letting them,” said Mark Schmitt of the New America Foundation. The House budget document says that when it comes to food stamps, “the core challenge is that while states have the responsibility of administering the program, they have little flexibility to ensure it is well run,” but that block-granting it would give them the room to “administer the program in ways that … achieve better results.” Of Medicaid, Republicans claim the change would “give states greater freedom to build the most effective programs for their communities … to better cut down on waste, fraud, and abuse.”

As Schmitt pointed out, however, states can already ask for waivers to experiment with new ideas. But it’s unlikely they can find so much innovation as to be able to provide the same assistance with less money. Instead, these budgets are meant to show Republicans are interested in cutting federal spending. There are only two ways to do that. “Either you cut specific benefits … that people can see and you’re naming them, or you have some kind of magical thing, a balanced budget amendment, something else,” he said. Block-granting avoids the details: it’s a way to do it without cutting specific benefits because states supposedly have a better way to administer the program. “It’s dodging the specifics,” he said.

Instead, states would have to grapple with the details. Given the freedom that usually comes with block grants, they could make many choices in implementing them. But ultimately the reform would mean a severe cut, if past experience is any guide.

The last major anti-poverty program that was block granted was welfare in 1996, at the time called Aid to Families with Dependent Children (AFDC) and now called Temporary Assistance for Needy Families (TANF). The government froze the amount of money it gives to states to run their welfare programs, which was $16.5 billion at the time of reform and hasn’t been increased or updated since, therefore losing 28 percent of its value over time. The number of people served has at the same time decreased dramatically, falling from a peak of 5.1 million people to just 1.9 million by 2010 and today reaching just 26 percent of the low-income families who are typically eligible, compared to 72 percent in the 1990s. States are incentivized to reduce their roles, not reduce poverty.

Things only get worse when the economy sours. Unlike SNAP, which was able to rise to meet increasing need during the heights of the financial crisis, TANF couldn’t keep up.

Other programs that have been block granted over the years haven’t fared any better. Of the 11 major programs created with block grants in recent decades, eight have shrunk. Some of the declines are severe: Title 1 funding, or Education for the Disadvantaged, has fallen 115 percent since it was created, while the Social Services Block Grant has fallen 87 percent and the Community Development Block Grant, Home Investment Partnership Program, and the Training and Employment Services Block Grants have all seen declines around 60 percent.

The Republican budgets aren’t the first time conservative lawmakers have floated the idea of block-granting anti-poverty programs. All three versions of Rep. Paul Ryan’s (R-WI) budgets sought to block-grant SNAP and Medicaid. He also proposed block grants in his audit of the country’s anti-poverty programs.

But while none of these documents specify exactly how much would be cut and how many people would be affected, estimates still exist. Block-granting Medicaid and SNAP would kick many people off of both programs. Ryan’s Medicaid plan would have meant federal spending on the program would get cut by $810 billion, or 22 percent, over a decade, dropping between 14 million and 27 million from the rolls by 2021. It would also slash SNAP by $137 billion, or 18 percent, over a decade, kicking millions of people out of the program.

And while states were in favor of welfare reform in the 1990s, their support is unlikely now. That’s because welfare reform was “a complete windfall,” Schmitt said. States were promised they could lock in the amount of money the federal government was giving them at the peak of AFDC enrollment, even after enrollment had started to decrease, giving them an extra infusion of cash. “It was just an incredibly good deal for governors,” he noted. “They had no reason to oppose it.” But as the numbers show, states aren’t going to get a windfall from block-granting Medicaid and SNAP today. Instead, they’ll be stuck with reduced funding and the job of figuring out where to make actual cuts.