Republicans searching for their next major task after tax reform may have found their answer, and it's not infrastructure.
Over the past few weeks, President Trump has been talking up reform of anti-poverty programs, and House leaders have begun preliminary talks with his administration on what they could accomplish through a welfare overhaul, aides say. The White House, meanwhile, is preparing an administrative reordering of the welfare system regardless of whether congressional Republicans act.
Trump has suggested more than once that welfare reform might be the next big legislative item on his agenda, although he has also indicated that a major infrastructure bill or another attempt at healthcare legislation could be next up on the docket.
For their part, House Republicans would be willing forge ahead on welfare reform. The GOP conference and outside conservative groups share the goal of changing anti-poverty programs to encourage or require work. It’s an ambition that melds the two conservative priorities of lowering government spending and increasing the supply of labor.
In 2016, House Speaker Paul Ryan unveiled an anti-poverty plan for Republicans to run on. It emphasized work requirements and increased the role of state and local governments in administering benefits.
“Last year, Ways and Means Republicans laid out our vision for reforming our nation’s welfare system so Americans can move off of welfare and successfully into the workforce, and we are committed to working with President Trump to turn our vision into a reality,” said Texas Rep. Kevin Brady, chairman of the Ways and Means Committee, which is responsible for most welfare programs.
Ryan’s blueprint would be a “good way to start,” said Rep. Adrian Smith, a Nebraska Republican who chairs the subcommittee responsible for welfare programs and who has been holding hearings on poverty and welfare.
Since losing the 2012 election as the GOP vice presidential candidate, Ryan has pushed welfare reform up his party's list of priorities. He's been warning for years that unreformed spending would produce a completely predictable fiscal train wreck, and the country needs change to put its finances in order. As chairman of the Budget Committee, he toured poor communities guided by Bob Woodson, a black antipoverty activist and founder of the Center for Neighborhood Enterprise. Ultimately his committee rated the effectiveness of the federal government’s patchwork of antipoverty programs in a report, and produced another draft of proposals for reform.
Most of the ideas Ryan endorsed, that are ready to be picked up again when the House GOP is ready, are conservative orthodoxy. They included stiffening work requirements for cash welfare, housing, and food stamps. There are other, safely bipartisan, concepts such as setting up a commission for evidence-based policymaking. This proposal has been carried out and enshrined in law with the help of Sen. Patty Murray, D-Wash. One proposal, a favorite of former President Barack Obama's, was to expand the earned income tax credit, which is “refundable” to families who have no taxable income. It means, essentially, that poor people get a check from the government. The point wouldn’t be to cut spending but, rather, to redeploy resources in a more efficient way.
Ryan’s work won’t be the only reference point for Republicans. Trump has also provided a blueprint for action.
In his fiscal 2018 budget, Office of Management and Budget Director Mick Mulvaney proposed welfare reform that was less surgical and more hard-hitting. It reflected willingness to take an ax to government programs and an ambition to balance the federal budget mostly through cuts to welfare spending, and faster economic growth.
Mulvaney said, unveiling the budget, was a “taxpayer-first” document, which kept in mind the needs and concerns of those who pay taxes, not just those who benefit from welfare programs.
Trump gave Mulvaney little choice, for he campaigned against changes to Social Security and Medicare when running for the presidency. Those two programs, though, account for a large portion of government spending and an even greater portion of future outlays. By taking them off the table while still demanding that Mulvaney balance the budget without raising taxes or cutting defense spending, Trump left him little choice but to cut deeply into welfare.
Accordingly, the budget provided for hundreds of billions of dollars in savings from Medicaid, disability, and low-income tax credits.
Like the Ryan proposal, the budget called for tighter work requirements in programs ranging from food stamps to housing. “We need people to go to work,” Mulvaney said in May. “If you’re on food stamps, and you’re able-bodied, we need you to go to work. If you’re on disability insurance and you’re not supposed to be — if you’re not truly disabled, we need you to go back to work. We need everybody pulling in the same direction.”
Mulvaney’s rhetoric is in line with policies that Republicans have pursued with success at the state level. In 2014, Maine Gov. Paul LePage instituted new work requirements for food stamps that led to the rolls falling by more than 90 percent for able-bodied, childless adults. In Wisconsin, Gov. Scott Walker required people to work for food stamps, and this year extended that requirement to parents of school-age children.
Republicans believe the public supports such policies, and opinion polls appear to support them in this. With unemployment low and heading toward levels not seen since the days of the dotcom bubble, the country needs more people off government programs and in the workforce, it is argued.
“With, hopefully, tax reform teeing up the growing economy, we will need workers,” Smith said. “And I think that, working at the various programs, we want to make sure that we have the most effective programs in place that actually help individuals achieve independence.”
It is true that businesses in many parts of the country face a growing challenge in finding workers. Small businesses surveyed by the National Federation of Independent Business report that the quality of the labor supply is now their second-biggest problem, after taxes, and concerns about finding qualified people are almost as high as they were in 2000.
Tight labor markets are good for workers in that they drive up wages. But Republicans and business owners believe it would help private enterprise if workers weren't tempted to turn down work and take government benefits instead.
“I see it in this industry where people who could work choose not to work because they still get benefits,” said Mike Henderson, president of the Associated Builders and Contractors of Greater Baltimore. “They’re offered jobs and they turn them down because, ‘I don’t have to work now.' That’s just my little world and I see that ... I’m sure it’s a massive problem.”
Henderson’s organization runs a program in Baltimore that finds apprenticeships for people with bad resumes. With labor shortages as acute as they’ve ever been in contracting, the program has become a significant resource for companies eager to find hires, Henderson said. While he believes welfare-to-work could pay dividends, he also noted that the causes of poverty are complex and that a major welfare reform effort could harm some poor people.
Republicans have a message, and they have the beginnings of a plan. But they are hesitating to undertake welfare reform because they worry that the timing is not right.
It would vie for time with infrastructure improvements and another attempt to replace Obamacare. It would also become part of the congressional discussion only after Congress passes legislation to fund the government and decides what to do about the border wall that was Trump’s most concrete campaign promise.
There is uncertainty in the White House about what comes next. “We’re looking at infrastructure as a way to sort of promote growth and welfare reform as a way to sort of reduce spending,” Mulvaney said in a recent appearance on Fox Business.
An infrastructure package wouldn’t be as exciting to the GOP’s base as it would be to business groups. Welfare reform would be more of a priority for conservatives, who still want an Obamacare replacement first and foremost but would settle for conservative policies that could actually pass in the Senate.
Between the push for tax reform and maneuvering over government funding, Republicans haven’t talked over a potential bid for welfare reform, or whatever comes next. If they did turn to welfare reform, they would be starting from nearly a standstill.
“I think we’re ready to get started on it, but I don’t think there’s been a lot of discussion on it,” said Rep. Tom Cole, an Oklahoma Republican.
He also said House Republicans would likely view it as a winning issue. “It’s politically the kind of fight you want to have, but it’s also substantially the sort of thing we ought to be doing,” he said.
In a new paper published by libertarian think tank the Mercatus Center, poverty scholar Ron Haskins provides an intellectual basis for strengthening work requirements.
Haskins, a key Ways and Means aide during the 1996 welfare reform effort and now a fellow at the Brookings Institution, makes the case that government work support programs have proven effective, but that several key government programs could be overhauled to stiffen work requirements.
In Haskins’ view, much of the current federal safety net is working, to the extent that it encourages and rewards work. He noted a 2014 Congressional Research Service report that found that, even in the teeth of the recession, poverty for single mothers and their children was at a three-decade low when income provided by work-support portions of the safety net is taken into account. That includes low-income tax credits and in-kind benefits such as food stamps, which are not included in the calculation of the official poverty rate but benefit the working poor.
While tax credits and food stamps might not immediately come to mind when thinking of welfare, in fact, they constitute much of the safety net. The earned income tax credit provided $64 billion to more than 26 million families in 2016. Refundable child tax credits account for around another $33 billion. The food stamp program paid out $66.5 billion to more than 44 million people.
Yet, in his paper, Haskins concludes that the work requirements for cash welfare, food stamps, and housing assistance “do not appear to be very effective." For example, states have found ways to game the system to loosen work requirements for cash welfare since the 1996 reform, thereby ensuring more federal funds for state executives to use. And in-kind benefit programs such as food stamps, which have grown in importance in recent years, were not designed to feature requirements as stringent as were envisioned for the welfare system in 1996. In his paper, Haskins recommends allowing states to conduct demonstrations to tighten requirements.
“There is a lot of reason to worry about the level of work in the United States, especially among males,” Haskins said, citing the “unprecedented” decline in male labor force participation over the past three decades.
Robert Rector, a poverty expert at the Heritage Foundation, worried that congressional Republicans would waste time and effort on Ryan-favored initiatives he sees as ineffective, such as block-granting funds to states or consolidating programs. “What they really need to do is change the welfare system by putting work requirements on all the means-tested requirements,” he said, in addition to removing marriage penalties embedded in programs.
Much of the work-requirement agenda could be undertaken via administration action.
Trump’s staff has already prepared an executive order on welfare reform, White House Domestic Policy Council Deputy Director Paul Winfree said at a November event on poverty at the Heritage Foundation. The order would mimic ones Trump has signed relating to the financial system, setting out principles for welfare reform and requiring agencies to report back proposals for meeting the principles.
Conservatives would expect Trump to increase work requirements for food stamps and Medicaid via the pen, reversing the work of Obama.
“That’s a way to actually help people,” said Nicholas Horton, research director for the Foundation for Government Accountability, a Florida-based conservative think tank. “I’ve called it the new welfare reform frontier.”
The 2009 stimulus bill temporarily increased benefits for the Supplemental Nutrition Assistance Program, as food stamps are now known, and during the time of soaring unemployment, the administration gave many states waivers to ease work requirements for able-bodied adults. The rolls soared from under 27 million before the financial crisis to nearly 48 million in 2013.
“We had a big shift in the Obama era toward dependency,” Horton said. He included in that analysis the expansion of Medicaid included in Obamacare, which he noted has significantly increased the share of able-bodied adults.
Horton encouraged the Trump administration to avoid approving waivers loosening food stamp work requirements, and to issue waivers allowing states to institute work requirements for Medicaid.
In fact, it’s expected that at least some red states, under pressure from conservatives and seeking to lower costs to state governments, will be seeking work requirement waivers soon, and getting them.
“This administration is very clearly saying: ‘We’re definitely going to entertain this and actively approve state approaches” for adding work requirements for Medicaid beneficiaries, said Matt Salo, executive director of the National Association of Medicaid Directors.
Salo noted that allowing work requirements in certain red states could actually increase public support for the low-income health insurance program thereby increasing the perception that aid is going toward needy and deserving recipients. Forcing it on big blue states such as New York and California, though, would be wrong, he said.
He also cautioned that the category of “able-bodied” adults could obscure the realities facing Medicaid recipients, such as people struggling with addiction, near-disability, or caring for ailing parents. “You’ll want to think about it in a more nuanced way than just, ‘hey, all you lazy people, go out and get jobs!’” he said.
But there's a downside to diving into welfare reform now. By sequencing welfare reform after a $1.5 trillion tax cut, Republicans would feed into the Democratic criticism that they are cutting taxes for the rich with the intention of then making up the difference by cutting benefits for the poor.
“The tax bill is going to create large deficits and they’ve been pretty explicit ... in saying once they do this, they’re going to move to what they’re saying is welfare reform, but I think in our view is really going to be cuts in benefits,” said Judy Solomon, vice president for health policy at the Center on Budget and Policy Priorities, a left-of-center think tank that studies antipoverty programs.
Adding work requirements to Medicaid without also increasing job training provisions or providing other services to help beneficiaries actually find jobs would result in people simply losing their coverage, she said. Often, Solomon argues, people facing the onerous paperwork and administrative complexities involved in maintaining benefits while also holding down a job let their benefits lapse. “Taking away health coverage does nothing to allow them to be healthy and be part of the workforce,” she said.
House Republicans have been careful to couch their ambitions for the safety net in terms of getting people back to work, and to avoid reverse-class warfare rhetoric.
Smith, the chairman of the Human Resources subcommittee, said he doesn't want to sacrifice poor people for the sake of the budget. It’s about “getting people back to work versus arbitrary cutting,” he said, adding that “we need to be very, I think we just want to be smart about this, about how we can effectively help people get back to work.”
Trump has not been as circumspect.
Welfare reform is “becoming a very, very big subject, and people are taking advantage of the system,” Trump said at an Oct. 16 Cabinet meeting. “And then other people aren't receiving what they really need to live, and we think it's very unfair to them. But some people are really taking advantage of our system from that standpoint, and we are going to be looking very, very strongly there for welfare reform.”
Whatever Trump’s motivations, it’s an idea that he sees as a good one for his administration, his adviser Winfree said.
“This is something the president is absolutely committed to, he is very excited about doing,” Winfree said. “Gotta get tax reform done first, but we will end up pivoting to welfare very quickly.”