America / Politics

Expanding Opportunity in America: A Proposed Initiative by Rep. Paul Ryan

On July 24, Representative Paul Ryan spoke at the American Enterprise Institute and began a discussion on poverty and opportunity in the U.S. His discussion draft provides an innovative way to reorganize the safety net while remaining deficit neutral. This comprehensive package of policies will not only appeal to members from both sides of the aisle, but will do a lot to help the 46 million U.S. citizens living in poverty today and the 70% of poor children who will fail to reach the middle class in adulthood.

The goals of this proposal are to reinvigorate an emphasis on experimentation, analysis, and the use of hard evidence when it comes to policymaking in poverty reform. The basis for this proposal is rooted in the concepts of autonomy and flexibility to states in exchange for more accountability.

The first component of the proposal is an Opportunity Grant (OG), a pilot program in a select number of states. The OG would consolidate several existing aid programs while fulfilling federal-approval conditions. A new OG plan must: demonstrate how funds will be used to move people out of poverty and into independence, require all able-bodied recipients to work or engage in work-related activities, use some funding to encourage new approaches by innovative groups, and agree with the federal government on measures of success and evaluation by a third party.

Poverty is not a one-size-fits-all burden. Poverty can be situational or generational; some people have fallen on tough times and require temporary assistance, others require help over the long term, and many require rigorous case management to provide structure or address addiction to drugs or alcohol. Many things must change to properly address poverty in its varying forms. The current safety net discourages work; people are incentivized to earn less money and hover around the poverty line in order to qualify for more means-tested programs. The Ryan proposal would bring the federal government’s one-size-fits-all formulaic approach to welfare to a flexible, individualized system of case management.

Case managers would work with families to provide a holistic kind of aid, designing a life plan that includes a contract with benchmarks for success, a timeline for achieving the benchmarks, sanctions for breaking the contract terms, incentives for exceeding the contract terms, and time limits for remaining on cash assistance. Key metrics for state success will include the number of people who find work, the number of people who get off assistance, high-school graduation rates, and wage growth among low-income households.

The proposal includes an expanded Earned Income Tax Credit (EITC) that would double the maximum credit, include childless adults, and lower the eligibility age for workers from 25 to 21. The EITC incentivizes work by increasing work’s rewards. Expanding the EITC to childless workers will improve labor-force participation among young adults, of which has dropped steadily in recent years. This could lower unemployment rates, increase marriage rates, and reduce incarceration rates. Additional reform would simplify the complexities of the EITC that led to $13.3 billion in improper payments in fiscal year 2013 alone. If individuals received the tax credit with their paychecks, improper payments and barriers to receiving the credit would be reduced. The expanded EITC also works as an alternative to raising the minimum wage. Increases in the minimum wage harm employment, CBO recently found that raising the minimum wage could reduce employment by approximately 500,000 workers. To expand the EITC, states would need to eliminate a number of inefficient programs.

Education is the next step for opportunity. The federal government cannot solve all of the problems in education but can provide direct aid at key moments in children’s lives to help close the achievement gap. Grant conversions and reforms, test models, simplified applications, and expanded accreditation will work at the levels of early education, elementary and secondary education, higher education, and job training. One focus is on federal aid in higher education that has contributed to skyrocketing tuition rates. While reform is necessary, this proposal needs to be careful that it does not pull funding from the middle class. This proposal creates the potential for families to be unable to afford higher education yet unable to receive aid, shifting the burden of lack of achievement to the middle class.

A failure in this proposal is the provision that will cap loans to graduate students does not consider the realistic landscape of the job market. He assumes that those seeking advanced degrees “shouldn’t need a lot of public support to finance their next credential.” This ludicrous assumption does not consider the increasing need for an advanced education; a bachelor’s degree is no longer enough in many job markets. In addition, the caps do not appear to be specific to graduate school programs; it could be very restrictive for certain specialties.

Next, the proposal attempts reform for the criminal-justice system and the 2.2 million people currently behind bars. Incarceration severely harms a person’s labor market prospects, reduces a family’s income, and contributes to setbacks in school readiness of the more than 2.7 million children who have an incarcerated parent. Reforms could target how we sentence individuals to prison, how offenders are treated inside prison, and how society helps them to reintegrate afterwards; applying only to non-violent and low-risk offenders. Granting judges more flexibility within mandatory-minimum sentencing guidelines could reduce unreasonably long sentences for low-risk, non-violent offenders. Implementing a risk- and needs-assessment system in prisons in addition to expanding enrollment in rehabilitative programming will reduce high rates of recidivism. Other promising initiatives come from state crime reform experiments in Texas and Wisconsin that have reduced rates of imprisonment and crime and saved money, a win-win for everyone.

The final aspect of the expanding opportunity proposal involves reform of federal regulations that in 2013, cost the economy $1.86 trillion. Regulations on the production and use of energy placed a disproportional burden on low-income families because energy costs make up a larger share of low-income families’ budget. Regulation has a regressive effect, requiring Congress to review regulations that would disproportionately affect low-income families will protect vulnerable communities.

Fifteen percent of U.S. citizens live in poverty today. Something must be done to help those in need. The Expanding Opportunity proposal by Paul Ryan provides an innovative and grounded view of what can be done. By putting politics aside and focusing on the issue at hand, Ryan has started a discussion on a direction that should be taken to improve the lives of those in our country. As Ryan eloquently stated, “I don’t have all the answers; nobody does. But by working together, we can build a healthy economy and help working families get ahead.”

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