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Never Enough

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Never Enough

Even with President Trump’s reductions, welfare spending is still growing. May 24, 2017
Economy, finance, and budgets

Since welfare reform was enacted in 1996, annual spending on the nation’s anti-poverty programs has more than doubled. For the more than $1 trillion spent overall in 2016, we could have mailed a $20,000 check to every household with below-average income. Yet the Left’s appetite for more spending remains insatiable. A widespread belief holds that, since the Clinton-era reforms, the welfare state “ceased its expansion and began to retreat”; that a safety net “torn to shreds” is “thin and getting thinner.” Proposals in the new Trump administration budget to check the extraordinary and unsustainable growth of welfare spending are “Robin-Hood-in-reverse policies in an unprecedented scale,” the common theme of which is “really hurting the poor.”

What, specifically, are these draconian policies that will inflict such pain on the neediest Americans? The largest change would be to Medicaid, which is funded today through a matching system: states choose how much to spend on the program and receive between one to three federal dollars for every state dollar spent—so Washington incentivizes growth in Medicaid by paying states to spend more. Unsurprisingly, this formula has driven aggressive expansions in state expenditures, and a commensurate federal obligation. Since 1975, more than 90 percent of the growth in safety-net spending (per person in poverty) has gone to health care.

The American Health Care Act passed by the House of Representatives earlier this month, and now the Trump budget, propose to reform Medicaid into a “block grant” that calculates each state’s payment based on the number of recipients, and a per-recipient dollar figure that increases over time. Medicaid spending would continue rising. But whereas the Office of Management and Budget (OMB) forecasts the federal tab growing from $378 billion in 2017 to $688 billion in 2027 under current law, with reform the 2027 total would reach $524 billion.

Other reforms would seek to restrict eligibility or implement work requirements for various assistance programs, targeting food stamps in particular. The Associated Press describes Trump’s proposal as a “whopping $193 billion cut from food stamps over the coming decade—a cut of more than 25 percent.” But while food-stamp enrollment increased from 26 million to 48 million during the weak economy of 2007 to 2013, the rolls shed fewer than 4 million recipients as unemployment fell back below 5 percent. The Congressional Budget Office (CBO) expects enrollment to fall naturally by about a quarter in the coming decade. But with another one-quarter reduction on top, enrollment would still remain above its early-2000s level—even after accounting for population growth.

So, despite the claims from critics that Trump is waging class warfare on the poor, this budget, if fully implemented over two terms, would leave social safety-net spending by 2024 higher than under any president not named Obama.

How, then, are critics defining an acceptable level of anti-poverty spending versus one that is “cruel and short-sighted,” to quote House Minority Leader Nancy Pelosi? The only guiding principle appears to be “More.” If today’s spending were 10 percent higher and the GOP proposed a cut to the current levels that Democrats now defend, that would be “cruel and short-sighted.” Conversely, had spending in the past two decades grown at 3 percent instead of 3.6 percent, leaving it 10 percent lower, staying the course would be a responsible choice.

It is this philosophy of “More” that is truly short-sighted. The deficits it fuels are driving the costs on debt higher. The OMB estimates that, by 2021, we will spend more on interest than on Medicaid. But if interest payments could be held flat this decade, it would save twice as much as the Trump cuts. The philosophy also stifles effective countercyclical policy: ideally, spending would climb during a recession, but conservatives are unlikely to support that strategy if no consensus exists for scaling spending down once growth resumes.

Meanwhile, ever-greater funding has produced no greater results. The poverty rate (an imperfect measure, admittedly) remains within a percentage point of its level from 2005, 1995, and 1985. The 1975 level was a bit lower. Mobility measures are stagnant at best. Obamacare’s enormous expansion of Medicaid has shown no effect on mortality, and one new paper indicates a failure to improve even the self-assessed health of recipients. Yet the default presumption remains: whoever writes the biggest check is the one who cares the most.

The left-leaning Center on Budget Policy and Priorities titled its survey of work-requirement studies “Work Requirements Don’t Cut Poverty, Evidence Shows.” In all 13 instances it examined, welfare programs with work requirements performed as well or better than programs that had no such requirements (often there was no statistically significant difference). The liberal takeaway from this analysis is that there is therefore no reason to impose work requirements, since giving money away no-strings-attached is equally effective. In the worldview of the Left, unconstrained spending is the default action; it is the spending cut, or any semblance of restraint, that must bear the burden of proof.

Photo by William Thomas Cain/Getty Images

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