Rubio Proposes Anti-Poverty Reforms

Written by . Posted in 2016 Campaigns, Issue Watch

Published on January 14, 2014

Fresh off of a rough 2013 stemming from a conservative backlash against his comprehensive immigration reform plan, Florida Senator Marco Rubio is attempting once again to get Republicans out in front on an issue by proposing major overhauls to federal anti-poverty programs.

In a speech fittingly given in the U.S. Capitol building’s Lyndon B. Johnson room, Rubio presented what he termed “the most fundamental change to how the federal government fights poverty and encourages income mobility since President Johnson first conceived of the War on Poverty fifty years ago.”

Though many of the details of the plan have yet to be fleshed out, the most fundamental aspect is the replacement of many federal anti-poverty programs with a revenue-neutral Flex Fund. Federal agencies entrusted with dealing with anti-poverty, dispersed throughout government, would be consolidated into one agency. The funds would be transferred to the states, with the amounts increasing or decreasing based on need. Each state would then design its own anti-poverty programs using the money. The Earned Income Tax Credit would be replaced with a wage subsidy for low-paying jobs.

This proposal is intended to enact two conservative ideas in one. First, it is more in line with federalism than current policies. States would presumably be more in touch with their own citizens and therefore have a better idea of what works for them than Washington. The success of recent state-level reforms from governors like Bobby Jindal and Scott Walker indicate that this theory is well-founded. Additionally, Rubio offers the example of welfare reform in 1990s as a model for such a proposal’s success.

Second, whereas the Earned Income Tax Credit favors parents and thereby might encourage having children to increase the size of the check from government, Rubio’s wage subsidy encourages parents and childless alike to seek employment. While the increase in income from a welfare check to a paycheck is often unenticingly small, Rubio suggests that a wage subsidy would make a low-paying job attractive, give the employee a chance to develop skills and keep him or her at a living wage in the meantime.

His plan does have its critics on left, as well as on the right, however – for example, The Heritage Foundation’s Robert Rector. From Buzzfeed:

Rector contended that giving states power to create their own programs would simply enable local bureaucracies, particularly in liberal states, to undermine reforms.

“The idea that what you want to do is collect money at the federal government level and hand it out to states is the exact wrong way to produce conservative policies,” he said.

Rector went on to argue that the success of the 1996 welfare reforms — which he played a key role in crafting — was due to the federal requirement that “states run aggressive work programs.” He worried Rubio’s plan would give too much money to states without strict guidelines as to how it can be used.

The New Republic’s Jonathan Cohn praises Rubio for acting on the issue, but contends that if the EITC is replaced with a wage subsidy and parent thereby are less favored in order to support workers, more children will likely end up in poverty. (The Daily Beast’s Jamelle Bouie argues the same thing.) His one suggestion to avoid this is to supplement the EITC instead of replace it – in other words, pump in more funds.

As is typical from the Left, Cohn offers no idea as to where these funds will from. Presumably he thinks that more taxes and/or more borrowing is not a problem, in spite of our massive debt. That aside, Rubio will still have to deal with the question whether his proposal takes away money from children, at a minimum for political purposes.

However, the American Enterprise Institute’s James Pethokoukis does defend certain aspects of the plan. Rubio is right, he says, that “getting more low-income Americans working is critical to social mobility.” Pethokoukis goes on to say:

“The proposal gets some big things right. It doesn’t confuse poverty fighting with budget cutting, though spending will drop if poverty falls. It tries to raise the ceiling for work rewards rather than lower the floor for income support. It takes advantage of states as laboratories of policy innovation while still maintaining a federal funding role. It recognizes how globalization and automation are transforming the American labor market and changing the nature of modern work.”

I, for one, have my own questions. For example, who determines the amount of money needed by each state? Surely it won’t be the states, many of which will likely overstate their need. Further, federal funds for such a program are necessarily redistributive: states will be given money based on their need regardless of their ability to pay more or less. Otherwise, why not leave the raising of the funds to the states? The implicit worry is that some states won’t spend much on their poorest citizens.

Whatever the answers Rubio has for his critics, he has at least gotten out in front of a crucial issue, offering a plan that recognizes the need to shrink the federal government, as well as the importance of incentivizing employment for people’s welfare. For those reasons alone, his plan should be considered, debated and perhaps refined.