Thirty years ago, Bill Clinton and Newt Gingrich hammered out their differences on policies to best support Americans in poverty. The result was the Personal Responsibility and Work Opportunity Reconciliation Act, which Clinton signed in August of 1996.
Support for the act was not universal; in fact, three officials at the Department of Health and Human Services resigned in protest, saying that the changes would push more children into poverty. But as Politico later reported, “Welfare and poverty rates both declined during the late 1990s, however, leading some observers to view the legislation as a success.”
Now there are growing calls for another overhaul of the system, which a recent report from Utah’s Sutherland Institute says has turned into a labyrinth of disconnected payments and credits that contribute to a problem known as the “benefits cliff” — a point at which people lose the incentive to work because they are better off financially by not doing so.
As described by the National Conference of State Legislatures, “This happens when families receive benefits through a public assistance program, earn a raise and then become ineligible to continue receiving benefits despite being unable to sustain their household. Sometimes the cliff effect looks more like a slope or plateau. When lost benefits outpace a wage increase, many families ‘park’ or fall off the cliff’s edge, stalling progression in their jobs and careers.”
It’s a problem that’s troubled both families and policymakers for years. But Paul Ryan, the former speaker of the House from Wisconsin, believes it can be solved with innovative programs by states using Blockchain technology and other technological advances.
Becoming self-sufficient
“We now finally have the ability to design the welfare system we always wanted, which is one that is focused at getting at the root causes of intergenerational poverty and getting people to live lives of independence and self-sufficiency,” Ryan, founder of the American Idea Foundation, said in an interview.
Ryan’s foundation is working to promote what they call “RISE pilots” — pilot programs developed and administered by states that would revolutionize the distribution of benefits by making them digital and connected, similar to an Apple Wallet on an iPhone.
The pilots are similar to what Sutherland Institute has proposed: “empowerment” accounts that would consolidate multiple government benefits into a single account, with funds “delivered monthly, tied to work or training, and designed to phase out gradually as earnings rise rather than collapsing at a cliff.”
Utah Rep. Blake Moore is also involved in the effort, as co-sponsor of legislation called the Upward Mobility Act, which would authorize states to develop and launch initiatives like Sutherland’s empowerment accounts.
As the federal deficit continues to grow, 1 in 6 dollars in the federal budget goes to support families in poverty, which adds an urgency to efforts to ensure that safety-net money is well spent, analysts say. Can artificial intelligence and other technology solve the problem that has bedeviled policymakers for decades? And how can proponents of these ideas win over people who believe that universal basic income is the solution to poverty?
What is the social safety net?
What’s known as the social safety net began with programs initiated by President Franklin D. Roosevelt after the Great Depression. These programs, which included unemployment insurance, Social Security and assistance for families with children, were expanded in the 1960s with President Lyndon Johnson’s “War on Poverty.”
Today, more than 80 discrete benefits are available to assist struggling Americans, including the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps), Temporary Assistance for Needy Families (cash payments and other services) and Medicaid, as well as assistance for childcare, utilities and housing.
In most states, these benefits are distributed and managed through separate programs; Utah’s “One Door” initiative has been lauded because it not only helps people obtain public assistance but also helps with job training and placement. (Ryan says it’s probably the best in the nation when it comes to how it administers benefits.)
The problem, according to Nic Dunn, vice president of strategy at the Sutherland Institute, is that historically, policymakers tend to focus on one government at a time. “But that’s not how families experience the safety net. It’s pretty common for families to be participating in multiple programs at a time. And so if families experience it holistically, we need to design it holistically.”
If someone were to set out to design a social safety net for Americans today, he added, it would look nothing like what we currently have. An empowerment account, he said, would “braid all those dollars together into a single account, a single program.”
This would enable families to have more flexibility and autonomy in how they use the benefits, and cut down on the amount of time they spend navigating different agencies. There would still be accountability and oversight, Dunn added.
The proposal is modeled on a similar one developed by the Texas Public Policy Foundation.
Under Sutherland’s proposal, participants would be required to work for a minimum of 20 hours a week or 80 hours a month (excepting children, elderly, pregnant women or those caring for a child under 14, or those otherwise unable to work). They would receive a lump sum of benefits on something similar to a debit or Health Savings Account card, and would keep any unspent money.
Participants would opt in to the program.
Unlike universal basic income, which gives money to a person with no strings attached, empowerment accounts would have “guardrails in the form of work participation requirements, approved spending categories, and possibly time limits,” a policy paper said.
Most significantly, the goal of these accounts would be to help people become self-sufficient.
What is a RISE pilot program?
The RISE pilot program promoted by Ryan is similar to Sutherland’s empowerment accounts, but wouldn’t require congressional approval because states can apply to the federal government for waivers that allow them to experiment with different ways of delivering benefits.
“Innovative governors can lead these efforts by creating small-scale RISE (Resources for Independence, Stability, and Employment) pilots to test what a modernized, work-focused safety net can make possible for low-income Americans,” a policy paper prepared by the American Idea Foundation said.
Such programs would have clear phase-out plans, personalized case management and “reasonable” work requirements, the paper said.
A key component in the plan is that each pilot would be evaluated alongside existing programs in randomized controlled trials to test whether it actually performed better. That, Ryan said, is how to convince skeptics.
“Let’s not just say our ideas are better. Let’s prove and demonstrate that our ideas are, and that, to me, is how you get to bipartisanship. ... And when you have such evidence that can lead to a better conversation. Ideologues are just going to put their blinders on and do their thing. But most people are in the middle of the bell curve in politics.”
Dunn, who recently featured Ryan on the Sutherland Institute podcast “Defending Ideas,” said that one benefit of multiple states trying different means of delivery, while assessing the results via random controlled trials, is that everyone benefits from the collective effort over time.
“If we can lean on the ingenuity and ability of the 50 states, we could see some really powerful solutions that we haven’t thought of yet,” he said.
How Americans feel about the safety net
According to research from Sutherland and Y2 Analytics conducted in May, majorities of Republicans, Democrats and independents say that benefit cliffs are a large or medium problem.
Respondents differed by political leanings, however, when asked why the current system is a problem. Democrats were more likely to say that individuals and families might not receive all the help they’re entitled to because the system is too difficult to navigate, while Republicans were most likely to say that the process was too confusing and time-consuming and made it harder for them to focus on getting back to work.
A majority of respondents, both in Utah and the U.S., said that the federal government should give the states more discretion and flexibility in how they administer safety-net programs.
That is one goal of the Upward Mobility Act, introduced this year by Moore and Sen. Jon Husted of Ohio. The bill, which is still making its way through various committees, would authorize five states to launch pilot programs with the aim of helping families get out of poverty while reducing the benefit cliff. Dunn hopes that if the legislation is passed, Utah could be one of the states and test a version of the proposed empowerment accounts.
Dunn likens the task of helping struggling individuals and families to helping a friend who falls on hard times and comes to you asking for help. If you let the friend sleep on the couch for a while and help himself to your groceries, you don’t say, “I solved his poverty.”
“You would also say, what else can I do to help you? Can I drive you to a local employment office? Can I connect you with someone I know who is hiring? Can I take a look at your resume and see if I can help somehow? And then, not until that person was employed and able to move into their own place and earn enough to cover their basic needs would you say, mission accomplished.”