Paul Ryan’s stories of personalized support through “Opportunity Grants” sound too good to be true … because they are. (More)

Paul Ryan’s Poverty Bait-and-Switch, Part II: … Too Good to Be True

This week Morning Feature examines the House Budget Committee’s draft proposal to reform the social safety net. Yesterday we looked at the proposal and its goals as described by Chairman Ryan. Today we see that he’s promising more than his plan can possibly deliver. Tomorrow we’ll conclude with a more progressive approach to poverty and opportunity.

“He hit me in the head with a two-by-four.” “Foreign languages?”

Yesterday we saw House Budget Committee Chairman Paul Ryan’s fictional story of Andrea and the individual attention and personalized help she would get from a poverty assistance provider under his “Opportunity Grant” proposal. But in his 2004 book American Dream, Jason DeParle recounts the true story of a caseworker at a for-profit welfare-to-work office in Wisconsin:

Facing a parade of addled clients, Michael found himself thinking more about keystrokes than the substance of what they said. His befuddlement reached its dark apogee with the arrival of a large, sobbing woman free-associating about her troubles. Michael dutifully posed the questions on his screen.

Sobbing Woman: I got into it with my sister’s boyfriend….
Michael: What are your employment goals?
Woman: … he hit me in the head with a two-by-four…
Michael: Foreign languages? Written or verbal?
Woman: … we’re out of food …
Michael: Volunteer work or hobbies?

Volunteer work or hobbies! “No, I don’t want to hear that you’ve been at food pantries for the last two months,” he thought. “What I want to know is whether you play volleyball!” A coworker suggested the information might help him guide a client’s job search, but Michael kept picturing a gnome darting out of the computer room: “A knitter! A knitter! We’ve got a knitter, folks!”

“A fleet of roughly more than 700,000 social workers”

Michael tried to give clients the personalized attention Chairman Ryan imagines, but he was juggling double the recommended caseload. And that’s the glaring flaw in Chairman Ryan’s proposal, as Mother Jones’s Stephanie Mencimer explains:

Individualized anti-poverty services are way more expensive than just giving people cash or food stamps, and creating such services would inevitably expand the administrative demands on any social program or limit the number of people who could be served.

Consider, as a hypothetical, the food stamp program, which Ryan thinks should require people to work as a condition of receiving the benefit (ignoring, for the moment, that nearly 60 percent of working-age adults getting food stamps already work). More than 40 million Americans get food stamps. Providing all them with a hand-holding caseworker with whom, under Ryan’s plan, they’d draft long-term plans and contracts outlining their responsibilities and goals before they’d be allowed to eat, would require a fleet of roughly more than 700,000 social workers, assuming a reasonable caseload of about 55 clients per caseworker. Social workers don’t make much money, with a median salary of about $44,000 a year. Even so, 700,000 of them would cost more than $30 billion a year, not including benefits. That’s nearly 40 percent of what the country currently spends on food stamps and nearly twice the entire federal welfare budget. By comparison, the current food stamp program delivers 92 percent of its funding directly to people in need; only 5 percent goes to administrative costs.

“Now it’s come back to bite us”

Chairman Ryan insisted that his plan would not cut funding for existing safety net programs, but he did not say he would increase that funding. He also said states receiving grants would have to “spend that money on people in need – not roads, not bridges, no funny business,” but that would include the overhead for program providers.

And Maximus – the for-profit social welfare firm that Michael worked for – billed the state of Wisconsin for quite a lot of … funny business:

  • $30,006 in entertainment expenditures, including a $23,000 payment to a nationally known musical performer for a speech to 40 W-2 participants and Maximus employes, and three concerts, two of which benefited a local theatre group
  • $15,741 in expenditures that benefited Maximus or its employes, including a meeting held at the Interlaken Resort, a holiday party at the Milwaukee Clarion Hotel, hotel rooms in Lake Geneva, corporate memberships, and agency-sanctioned parties and other social events
  • $195,745 for a range of advertising activities that appear to have been more promotional than informational and whose costs may not justify the benefits accrued
  • $22,248 for restaurants and other food purchases for which there was no documented business purpose
  • $23,976 for 36 transactions for which the vendor and/or product or service purchased could not be determined

Maximus also collected $3.4 million in consulting fees for advice that may cost Wisconsin millions more:

Senator Rob Cowles (R-Green Bay), co-chairman of the Legislature’s Joint Audit Committee, told the Journal Sentinel he hoped state officials would avoid giving consulting companies like Maximus similar incentives in future contracts because it exposes taxpayers to excessive risk and invites excessive claims on federal taxpayers. “Now it’s come back to bite us. … When I hear stuff like this, I do a slow burn,” Cowles told the paper.

“Helped a lot of people off the welfare rolls and into poverty”

Even where there was no outright fraud, a 2012 study by the Center on Budget and Policy Priorities found that many states used TANF block-grant funds in ways that cut spending for the needy:

While states vary significantly in how they have used their TANF and MOE funds, several overall patterns have emerged. Beginning in TANF’s early years, shrinking cash assistance caseloads freed up federal and state funds that had previously gone to poor families in the form of benefits. States used the flexibility that the block grant gave them to redirect those funds. Some of the freed-up funds were channeled to child care and welfare-to-work programs to further welfare reform efforts, particularly in TANF’s early years. But over time, states redirected a substantial portion of their TANF and MOE finds to other purposes, with some funds being used to substitute for (or “supplant”) existing state spending and thereby help plug holes in state budgets or free up funds for purposes unrelated to low-income families or children.

As existing state programs were shifted onto the federal block-grant ledger, state funds that had gone to those programs were spent elsewhere, or doled out in tax cuts. And as state legislatures learned how to do that, the poverty rate began to climb (link is to a Census Bureau Microsoft XL spreadsheet). In arguing against a Basic Income Guarantee – which we’ll explore more tomorrow – economist Max Sawicky explains:

If you like the transfer of cold cash, your chief target ought to be Temporary Assistance for Needy Families, the fruits of the Clinton/Gingrich welfare reform of 1996. The Feds provide a grant to state governments, who busy themselves with helping people to help themselves. In the actual event, states helped a lot of people off the welfare rolls and into poverty. The national poverty rate, notwithstanding this reform, steadily went up after 2000.

In short, Chairman Ryan’s plan would shift federal safety net spending from imperfect but very efficient government programs to equally imperfect but very profitable private programs. That’s great if you’re Richard Montori, the Maximus CEO who took home a tidy $5.1 million last year. But for people in need, Chairman Ryan’s plan is a classic bait-and-switch.

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Happy Friday!