Repairing the Social Safety Net

The Path to Prosperity’s major proposals to repair the safety net:

  • Return power over public-assistance programs to the states, directing assistance to those who need it most, and strengthening federal education and job-training programs to help Americans get back on their feet.
  • Give states the freedom and flexibility to tailor a Medicaid program that fits the needs of their unique populations.
  • Focuses other low-income assistance programs, including food stamps, on those who need them most, realigning incentives to ensure these programs can best meet their critical missions.
  • Ensure that higher-education assistance programs are put on a sustainable funding path, better focusing aid on those in need and better addressing the root drivers of tuition inflation for all students.
  • Consolidate dozens of overlapping job-training programs into accountable career scholarships so that workers have the tools to thrive in the 21st century global economy.

Q: Does the budget cut benefits for low-income individuals?

A: The President’s failed policies have accelerated the unraveling of the social safety net, and failed to ensure that assistance programs for society’s most vulnerable deliver on their critical promise. The Path to Prosperity modernizes government’s benefits for those in need by converting the federal share of spending on these programs into block grants to the states – just like the government did with welfare in the late 1990s. The allotment would grow to account for inflation and population. This would allow states to tailor their programs to their low-income populations, allowing state governments to exercise maximum flexibility in focusing their benefits on the specific needs of their states.

By refusing to address the drivers of the debt, the President’s budget guarantees a debt-fueled economic crisis, inflicting devastation on society’s most vulnerable. The consequences of America’s looming debt crisis – accelerated by the President’s budget – will hit the poor the first and the worst.  The Path to Prosperity lifts this crushing burden of debt and makes possible America’s promise of ever-expanding opportunity for all Americans.

Q: How will this budget affect the disabled and people in nursing homes?

A: Freeing states from one-size-fits-all federal mandates will allow them to better allocate Medicaid dollars on their most vulnerable populations. Rather than micromanage Medicaid from Washington, states will have the freedom to ensure the disabled and those in nursing homes receive the quality care they deserve. Political attacks that question the House Republican budget’s commitment to society’s most vulnerable are rooted in a belief that a distant federal government can better allocate safety net spending than elected leaders closer to the people.

Q: Why do we need to reform the Medicaid program?

A: Medicaid’s financing structure suffers from the same flaws that plagued cash welfare prior to the bipartisan 1996 reforms. The federal government provides an open-ended match on what the states spend on Medicaid, which gives states a perverse incentive to grow the program and little incentive to save. The federal government pays an average of 57 cents of every dollar spent on Medicaid. Expanding Medicaid coverage during boom years can be tempting for state governments since they pay less than half the cost. Conversely, to restrain Medicaid’s growth, states trying to rescind a dollar’s worth of coverage only save their budgets 43 cents.

Moreover, states are not given adequate flexibility to achieve savings – although many governors have asked for a new approach. One-size-fits-all federal mandates limit innovative coverage options, and many times the only way states are allowed to achieve savings is through formulaic cuts to medical providers.  Many doctors are refusing to treat Medicaid patients, because states have reduced their reimbursements below what it costs to treat them.

Q: How would repealing the new health care law affect Medicaid?

A: The new health care law would force an additional 20 million Americans by 2019 into a Medicaid system that is fundamentally broken, exploding costs for the federal government and state governments alike. The way forward in Medicaid is to follow the reforms included in The Path to Prosperity, not expand a broken program. Repealing the new law and replacing it with true, patient-centered reforms will better serve Medicaid patients while contributing to solvency of federal and state budgets.

Q: How would this budget affect other low-income assistance programs such as Food Stamps?

A: The Supplemental Nutrition Assistance Program (SNAP, formerly known as Food Stamps) offers a good case study in how low-income assistance programs are in urgent need of reform. Spending on SNAP has quadrupled in the past decade, growing unsustainably fast in good times and bad, due the open-ended nature of the program (states receive federal dollars in proportion to how many people they enroll). This leads to a bloated program rife with waste, fraud and abuse.

With regard to federal low-income assistance programs, this budget advances repairs that fix the flawed incentive structure that rewards profligacy and poorly targets assistance to those in need. By capping open-ended federal subsidies and freeing states to develop innovative approaches to delivering aid to those who truly need it, the budget’s gradual reforms encourage states to reduce rolls and better help recipients find work. The budget also calls for time limits and work requirements like the reforms that proved successful at cutting welfare rolls in half and reducing poverty nationwide in the mid-1990s.

Q: If recipients of aid are being required to find work, shouldn’t the government be doing a better job at helping them reach the first rung on the ladder of opportunity?

A: Yes. This budget advances reforms to increase job-training outcomes across the board. It improves accountability by calling for the consolidation of duplicative federal job-training programs into a streamlined workforce development system with fewer funding streams that provide accountable, targeted career scholarship programs. Instead of wasting job-training money on duplicative administrative bureaucracy, this budget calls for job-training programs to be better coordinated with each other – and with the Pell program – to maximize every dollar for those who need it.

As for Pell, Congressional Democrats and the President have pushed Pell Grant spending to unsustainable rates. There is growing evidence that this new spending is simply enabling a rapid rise in tuition costs – college costs have risen at twice the rate of inflation and shot up by over 8 percent last year. This budget brings Pell spending under control and makes sure aid helps the truly needy, not university administrators.  At the same time, the proposed reforms ensure that we maintain the current maximum Pell award ($5,550).