The American Spectator

Political Hay

The Conservative Welfare State

By Peter Ferrara on 7.2.08 @ 12:08AM

(Page 2 of 2)

DOUTHAT AND SALAM BLUNDER when they go on to discuss welfare reform. They say, quite rightly,

In the early 1990s, an alliance of conservatives and neoliberals joined forces to reform welfare, ignoring the objections and fearmongering of almost everyone to their left. A decade later, this reform stands as working class conservatism's most impressive domestic policy achievement to date....[T]he renovation of welfare delivered exactly what it promised: reduced welfare rolls and increased employment rates.

But they fail to recognize that this was just the beginning of welfare reform, not its completion. Only the old Aid to Families with Dependent Children (AFDC) program was reformed in the 1990s. The same principles can and should now be extended to the enormous Medicaid program, Food Stamps, housing subsidies, and dozens of other Federal means-tested programs for the poor.

These programs should all be block granted back to the states just as the AFDC program was in 1996. Even more exciting is the new safety net the states could each build under these block grant reforms.

For example, suppose all aid to the able bodied was in the form of an offer to work. Report to your local welfare office before 9 a.m. and you are guaranteed a work assignment somewhere paying the minimum wage for a day's work. A private job assignment would be the top priority. If you need more money, come back tomorrow. If you have children with no one to care for them, bring them with you and they will receive free day care, where they will be medically examined and treated if necessary.

If you work a minimum number of hours each month, you get a Medicaid voucher that will purchase basic private health insurance. If you work for a continued period establishing a regular work history, you would be eligible for new housing assistance focused on help in purchasing your own home.

The new Federal minimum wage will soon be $7.25 an hour, or $15,000 for a full year's work. These workers would continue to receive the EITC and child tax credits. This is an additional $4,000 for one kid, and close to $7,000 for two kids. Then there is the value of the child care and the health insurance.

This is more than adequate as a safety net. There is no need for a significant increase in the EITC or higher child tax credits or a new wage subsidy program. This system would save the Federal and state governments enormous sums, especially as private sector jobs started substituting earned wages for former welfare benefits from all of these programs.

INDEED, THERE ARE absolutely no disincentives to work in this system. The only way to get assistance for the able bodied is to work, in this program or in the private sector. This would all but eliminate long-term welfare dependency and move millions still too dependent on the government into private sector self-support and self-reliance. The government safety net would truly be used only for short-term emergencies.

Moreover, the incentives for illegitimacy under this system are also reduced to ZERO! Someone, either the father or the mother, will have to go to work to support a child in any event (EITC benefits are only available to those who work as well, and no one can live on a child tax credit of $1,000). There is nothing to be gained under this system by avoiding marriage or couples splitting up. So this system does not discourage marriage either.

The government could even reduce administrative costs to a minimum under this system. There would be no need to maintain and investigate eligibility requirements. If Warren Buffett wants to show up for a work assignment before 9 a.m., no big deal. That is unlikely to be a significant long-term issue.

This is far better than simply laying on top of the current system close to $100 billion a year in new wage subsidies. Such a proposal ignores the welfare debates and experiments of the 1970s, which found that expanding assistance into higher income ranges actually resulted in less work and self-support. That is because the subsidies have to be phased out at some income range unless they are to be paid to everyone. And phasing out such subsidies as income increases results in a major tax on work and advancement. So subsidies into higher income ranges pull workers back down into dependency.

THIS SAME TROUBLING tendency to ignore what has come before is shown in the discussion of health care as well. Douthat and Salam just repeat the standard liberal criticism of Health Savings Accounts (HSAs) in saying,

The trouble with the current conservative answer is that it would likely drive down costs for most people but drive them up for the most vulnerable Americans -- the poor and the old, who would be stuck in ever more costly traditional plans while the young and the healthy flooded into HSAs.

The point behind HSAs is that higher deductibles result in enormous savings in health insurance costs, and that savings can be used to fund the HSA with cash to pay for expenses below the deductible. In my own case, I save with my $5,000 deductible far more than $5,000 compared to what I am told standard family coverage costs. With cash in the account to cover the deductible, the HSA is far better for the sick than standard coverage, because they have cash on hand to finance what they choose for their own care at least up until the deductible. It is also far better for the poor, who have cash to finance routine preventive care that health insurers generally do not pay for, and they can make a net profit out of the deal besides.

Would it be too much to ask for the authors to call the acknowledged national expert on HSAs, John Goodman at the National Center for Policy Analysis, who does have a telephone, and ask him about the false criticisms of HSAs that they embrace? This failure to acknowledge and recognize what has come before is a general problem for the conservative movement, and reduces our effectiveness sharply.

Douthat and Salam do have some good ideas. While their health care section is confused, their discussion of education is tremendous, with a focus on school choice among public schools for elementary and secondary education, and a transformation of higher education focused on true benefits for the working class. Conservatives should also embrace their call for government policy to get out of the way and even promote suburban development that would produce highly attractive, affordable housing for the working class. Their ideas for expanding highway, road, airport, and Internet infrastructure throughout flyover America are also valuable to the extent the private sector is not already doing that.

But Big Government is not going to work any better for conservatives than it did for liberals, in terms of achieving public good, rather than just short-term political power.

Letter to the Editor

topics:
Taxes, Education, Health Care, Business, Social Security, Medicaid, Conservatism, Medicare