[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




                      STRENGTHENING THE SAFETY NET

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, APRIL 17, 2012

                               __________

                           Serial No. 112-24

                               __________

           Printed for the use of the Committee on the Budget





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                       COMMITTEE ON THE BUDGET

                     PAUL RYAN, Wisconsin, Chairman
SCOTT GARRETT, New Jersey            CHRIS VAN HOLLEN, Maryland,
MICHAEL K. SIMPSON, Idaho              Ranking Minority Member
JOHN CAMPBELL, California            ALLYSON Y. SCHWARTZ, Pennsylvania
KEN CALVERT, California              MARCY KAPTUR, Ohio
W. TODD AKIN, Missouri               LLOYD DOGGETT, Texas
TOM COLE, Oklahoma                   EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   BETTY McCOLLUM, Minnesota
TOM McCLINTOCK, California           JOHN A. YARMUTH, Kentucky
JASON CHAFFETZ, Utah                 BILL PASCRELL, Jr., New Jersey
MARLIN A. STUTZMAN, Indiana          MICHAEL M. HONDA, California
JAMES LANKFORD, Oklahoma             TIM RYAN, Ohio
DIANE BLACK, Tennessee               DEBBIE WASSERMAN SCHULTZ, Florida
REID J. RIBBLE, Wisconsin            GWEN MOORE, Wisconsin
BILL FLORES, Texas                   KATHY CASTOR, Florida
MICK MULVANEY, South Carolina        HEATH SHULER, North Carolina
TIM HUELSKAMP, Kansas                KAREN BASS, California
TODD C. YOUNG, Indiana               SUZANNE BONAMICI, Oregon
JUSTIN AMASH, Michigan
TODD ROKITA, Indiana
FRANK C. GUINTA, New Hampshire
ROB WOODALL, Georgia

                           Professional Staff

                     Austin Smythe, Staff Director
                Thomas S. Kahn, Minority Staff Director
















                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, April 17, 2012...................     1

    Hon. Paul Ryan, Chairman, Committee on the Budget............     1
        Prepared statement of....................................     3
    Hon. Chris Van Hollen, ranking minority member, Committee on 
      the Budget.................................................     4
        Prepared statement of....................................     6
        Submission for the record: Saint Camilius Food Pantry 
          Report.................................................    93
    Casey B. Mulligan, professor of economics, University of 
      Chicago....................................................     7
        Prepared statement of....................................     9
    Ron Haskins, co-director, Center on Children and Families, 
      Brookings Institution; senior consultant, Annie E. Casey 
      Foundation.................................................    16
        Prepared statement of....................................    19
    Robert Rector, senior research fellow, family & welfare 
      studies, the Heritage Foundation...........................    26
        Prepared statement of....................................    31
    Robert Greenstein, president, Center on Budget and Policy 
      Priorities.................................................    36
        Prepared statement of....................................    41

 
                      STRENGTHENING THE SAFETY NET

                              ----------                              


                        TUESDAY, APRIL 17, 2012

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:00 a.m., in room 
210, Cannon House Office Building, Hon. Paul Ryan, [Chairman of 
the Committee] presiding.
    Present: Representatives Ryan, Garrett, Cole, McClintock, 
Stutzman, Lankford, Black, Ribble, Flores, Mulvaney, Huelskamp, 
Young, Rokita, Van Hollen, Kaptur, Blumenauer, McCollum, Ryan 
of Ohio, Moore, Castor, Bass, Bonamici.
    Chairman Ryan. Before I start with my opening statement, I 
want to outline our plan for a hearing next week. As part of 
the House Budget, we propose to replace the sequester with 
reforms to ensure that we get the deficit reduction we all want 
without the huge reductions on top of reductions that the Obama 
administration is already planning in the defense program.
    So, pursuant to the budget, we are going to consider 
reconciliation and other legislation to fix this sequester as 
we discussed in our markup. As a result, I think we need to 
learn more about the sequester, how OMB would implement the 
sequester, and what the impact would be, and to learn about the 
specific proposal for replacing the sequester.
    To that end, we plan on holding a hearing on the Budget 
Control Act on April 25th. For the past couple of weeks, we 
tried to get OMB to agree to testify. They have refused so far. 
We sent a letter to OMB yesterday to the acting director, 
asking that they testify. My hope is that we can have a hearing 
next week. It's critical we fix this sequester and secure the 
deficit reduction called for in the Budget Control Act, and I 
just want to have members know this to mark their calendars for 
the hearing we're planning on having. You want to speak on 
this?
    Mr. Van Hollen. Just very briefly, Mr. Chairman. I just 
want to make the point, and I think the CBO has been clear on 
this, as has the White House, they have a plan for replacing 
the sequester. They have a budget that they presented to the 
United States Congress that would replace the $1.2 trillion in 
deficit reduction mandated by the sequester with a balanced 
approach. So, they have been very clear and on the record 
through their budget as to how they would avoid the sequester 
in a way that maintains deficit reductions.
    Chairman Ryan. Right, but the question is if no plan is 
passed to replace it, then how is it to be implemented? That's 
what we want to get at.
    Before we start, let me note today that millions of workers 
and businesses are filing their taxes today. I view the core 
mission of this committee as ensuring that every dollar the 
government takes from hard-working citizens is spent as 
efficiently and as effectively as possible and only on programs 
where the federal government has a critical role to play.
    To that end, the focus of today's hearing is on reforming 
the federal government's role in public assistance programs, so 
that taxpayer dollars are carefully targeted to those in need, 
the disabled, the sick, and those who, through no fault of 
their own, have fallen on hard times. As we seek to end 
wasteful practices, promote independence, and protect the 
safety net from the threat of a debt crisis, we should learn 
the extraordinary successes of the 1996 Welfare Reform Act. 
There is a lot to be learned there.
    The hearing will come to order. On the eve of the 1996 
Welfare Reform, democratic senator Frank Lautenberg voiced his 
concern that the bill would transform America into a third 
world nation, leaving quote, ``children hungry and homeless, 
begging for money, begging for food, and even at eight and nine 
years old engaging in prostitution,'' closed quote.
    Senator Lautenberg was not alone in making these kinds of 
apocalyptic predictions about this historic law. But, what 
happened in reality? Transforming welfare, among other things, 
instituting meaningful work requirements, setting time limits, 
and empowering states to design more effective programs, just 
like we did in Wisconsin, cut case loads in half against a 
backdrop of falling poverty rates.
    There was the single greatest reduction in poverty among 
children since the 1960s. Poverty among children in female-
headed households fell from 55.4 percent in 1991 to 39.3 
percent in 2001. The Congressional Research Service said this 
past December that quote, ``Since 1996 welfare reform, progress 
appears to have been largely sustained in both reducing welfare 
dependency and poverty among children and female-headed 
families in spite of the recent recession.'' Today, over 15 
years later, we are hearing the same kinds of hysterical 
predictions from critics of our budget. Last week, President 
Obama accused republicans of being ``social Darwinists.'' I did 
not think that Senator Lautenberg's outlandish accusation could 
be topped, but I think it has been now.
    Let's put aside the outrageous rhetoric. Let's look at the 
facts. Let's look at what works and what does not work. Let's 
look at where we are headed. Let us look at what a debt crisis 
would do to us. Let's look at what the House Budget actually 
does. This budget treats all Americans with respect and 
dignity. It recognizes that the federal government's attempts 
to help can often do more harm than good. One honest observer 
of government could not agree, disagree with that.
    It is in our national interest to create a class of people 
permanently dependent on the government? No, it is not. More to 
the point, is it in the best interest of these individuals to 
become dependent upon government? No. We must also ask what 
happens to those who are most in need of government assistance 
when the government can no longer pay its bills if we have a 
debt crisis? We face the most predictable debt crisis in 
history, and if this crisis hits those who rely on the safety 
net the most will be hurt the first and the worst. Just turn on 
the TV. Look what is going on across the Atlantic.
    In contrast to the gradual reforms that our budget faces 
in, reforms that protect those most in need of help, a debt 
crisis would force sharp, immediate cuts in spending, hurting 
those who cannot help themselves. Meanwhile, sharp, immediate 
tax increases would stunt job growth and opportunity for those 
who can. We saw the success of welfare reform. Our budget 
follows the tradition of this success. Opponents of reform were 
wrong in 1996, as we believe they are today. As we act to 
prevent a debt crisis that truly would devastate the poor, they 
are even more wrong.
    I want to thank all the witnesses for coming today. I 
appreciate you taking time out of your busy schedule to provide 
us with your testimony. We have people who have been involved 
in this issue for years and decades, who have done great, 
scholarly work, and I welcome the insights that you are going 
to bring to this committee. And, with that, I would like to 
turn to the ranking member, Mr. Van Hollen.
    [The prepared statement of Paul Ryan follows:]

Prepared Statement of Hon. Paul Ryan, Chairman, Committee on the Budget

    Before we start, I just want to note that today, millions of 
workers and businesses will file their taxes.
    I view the core mission of this committee as ensuring that every 
dollar the government takes from a hardworking citizen is spent as 
efficiently and effectively as possible, and only on programs where the 
federal government has a critical role to play.
    To that end, the focus of today's hearing is on reforming the 
federal government's role in public-assistance programs, so that 
taxpayer dollars are carefully targeted to those in need--the disabled, 
the sick, and those who, through no fault of their own, have fallen on 
hard times.
    As we seek to end wasteful practices, promote independence, and 
protect the safety net from the threat of a debt crisis, we should 
learn from the extraordinary success of the 1996 Welfare Reform Act.
    On the eve of the 1996 welfare reform, Democratic senator Frank 
Lautenberg voiced his concern that the bill would transform America 
into a Third World nation, leaving ``children hungry and homeless * * * 
begging for money, begging for food, and even at eight and nine years 
old engaging in prostitution.''
    Senator Lautenberg was not alone in making these kinds of 
apocalyptic predictions about that historic law. But what happened in 
reality?
    Transforming welfare--by, among other things, instituting 
meaningful work requirements, setting time limits, and empowering 
states to design more effective programs--cut caseloads in half against 
a backdrop of falling poverty rates.
    There was the single greatest reduction in poverty among children 
since the 1960s. Poverty among children in female-headed households 
fell from 55.4 percent in 1991, to 39.3 percent by 2001.
    The Congressional Research Service said this past December that, 
``Since 1996 welfare reform, progress appears to have been largely 
sustained in both reducing welfare dependency and poverty among 
children in female-headed families, in spite of the recent recession.''
    Today, over 15 years later, we are hearing the same kinds of 
hysterical predictions from critics of our budget.
    Last week, President Obama accused Republicans of being `social 
Darwinists.'
    I didn't think that Senator Lautenberg's outlandish accusation 
could be topped, but I think it has been.
    Let's put aside the outrageous rhetoric. Let's look at what the 
House-passed budget actually does.
    This budget treats all Americans with respect and dignity. It 
recognizes that the federal government's attempts to help can often do 
more harm than good. What honest observer of government could disagree?
    Is it in our national interest to create a class of people 
permanently dependent on the government? More to the point, is it in 
the best interest of these individuals to become dependent on 
government?
    We must also ask: What happens to those who are most in need of 
government assistance when the government can no longer pay its bills?
    We face the most predictable debt crisis in history--and if this 
crisis hits, those who rely on the safety net the most will be hurt the 
first and the worst.
    In contrast to the gradual reforms our budget phases in--reforms 
that protect those most in need of help--a debt crisis would force 
sharp, immediate cuts in spending, hurting those who cannot help 
themselves. Meanwhile, sharp, immediate increases in taxes would stunt 
job growth and opportunity for those who can.
    We saw the success of welfare reform. The Republican budget follows 
in the tradition of this success.
    Opponents of reform were wrong in 1996, and today--as we act to 
prevent a debt crisis that truly would devastate the poor--they are 
even more wrong.
    I want to thank all of witnesses for coming today. I appreciate all 
of you taking time out of your busy schedules to provide us with your 
testimony.

    Mr. Van Hollen. Thank you, Mr. Chairman. I join the 
chairman in welcoming all of our witnesses today to a very 
important hearing. I think there is universal agreement that we 
should spend taxpayer money wisely. I also think there is 
agreement that we should learn from a successful reforms. I 
think, as we will find out in this hearing, some of the 
successes that apply to the welfare reform provision simply do 
not apply in this case, and we will also hear some of the 
consequences of certain aspects of that reform.
    Mr. Chairman, there is a difference between reform and just 
taking a hatchet to important social safety net programs. We 
obviously have deep differences of opinion on this issue. I 
happen to think that the president's characterization of this 
budget is correct, and I think it is Orwellian to present a 
budget that tears a huge hole in the safety net as one that is, 
in fact, designed to strengthen support for vulnerable 
Americans. This week brings a very strong contrast to the 
different approaches that would be taken in this body and in 
the senate.
    We saw in the senate yesterday a vote on the Buffet Rule, 
asking millionaires to pay more to help reduce our deficit. 
Meanwhile, here in the House, we are having a vote this week on 
a bill that would add billions of dollars to the deficit by 
providing tax breaks to hedge fund owners, to Washington law 
firms, all under the guise of a small business bill. And, here 
in the Budget Committee, we are talking about quote; 
``strengthening the social safety net'' when in fact this 
budget tears big holes in it.
    Let's put this hearing in context and why we are here 
today, and it is because the budget that has been presented by 
our Republican colleagues takes a lopsided approach. It ignores 
the advice of bipartisan commissions that say that any 
credible, responsible approach to reducing the deficit combines 
cuts, and we need to make cuts and difficult decisions, but it 
combines those cuts with an end to special interest tax 
loopholes and asking the folks at the very top to pay a little 
bit more to help reduce our deficit. And because it refuses to 
ask wealthier Americans to pay one penny toward deficit 
reduction, because it takes that whole revenue stream out of 
the equation, it means that their budget hits everyone and 
everything else harder. That is simple math.
    We have talked in this committee about the impact the 
Republican budget would have on the Medicare guarantee and 
ending the Medicare guarantee. We have talked about how it 
would cut very important investments necessary to keep our 
economy strong, in our infrastructure, in transportation, 
education. Today, we will focus on its impact in the social 
safety net.
    I have to say that the storyline, at least part of the 
storyline that accompanies this Republican budget is, in my 
view, a cynical one. It is one designed to tell Americans that 
these social safety nets are not necessary because people 
choose these safety nets over getting a job, that people who 
are out of work choose to be out of work, that people who need 
the support of food and nutrition and health programs choose to 
be in that position, and that by cutting these essential 
supports, by making people who are on the economic edge even 
more desperate, that we will give them renewed willpower to 
pull themselves up by their bootstraps, that, in fact, we are 
doing a favor to the people who will be most harmed.
    As we consider how we can strengthen the social safety net, 
we should be clear about what our goals are and how we define 
success. Is our goal, in fact, to strengthen that social safety 
net? If that is the goal, Mr. Chairman, we join you in an 
effort to find essential reforms. But, if our goal simply is to 
take a hatchet to part of the budget in order to meet certain 
targets while refusing to take a balanced approach, we cannot 
join in that effort.
    What this does is cut Medicaid by $810 billion. By the year 
2020, the Medicaid program would be reduced by a full third. By 
2050, and these numbers are according to the Congressional 
Budget Office, it would cut Medicaid by a whopping 75 percent. 
It does this by converting Medicaid into a block grant program 
that provides inadequate funding that fails to keep pace with 
the need. It does this under the name of flexibility, refusing 
to recognize that Medicaid already has a lot of flexibility. 
More than 30 states already operate under the Medicaid waiver.
    CBO has concluded that this will mean states either have to 
pay a lot more, which means increased taxes on their citizens, 
or cut back significantly. An Urban Institute study recently 
explained what the consequences are.
    We will have a conversation about to what extent the work 
incentives under welfare reform, actually apply to a program 
like Medicaid. I think we will find that the comparison stops 
very early on.
    We will also have a conversation about SNAP, the Food 
Assistance And Nutrition Program. It was decided back during 
welfare reform not to block grant that because it did provide 
an essential, absolute safety net for people in need and 
provided an economic stabilizer.
    So, Mr. Chairman, again, I think that people are willing to 
explore ways that really reform the process for the better. 
What we are not willing to do is simply blindly cut programs 
that are absolutely necessary to provide help to people in 
need, including lots of seniors, simply to meet one half a 
budget equation that refuses to look at the revenue half of 
that equation, while cutting provides additional tax breaks to 
people who are the best off in this country. We do not think 
that is shared responsibility. We look forward to working with 
you on a budget plan, a deficit reduction plan that truly meets 
that goal. Thank you.
    [The prepared statement of Chris Van Hollen follows:]

      Prepared Statement of Hon. Chris Van Hollen, Ranking Member,
                        Committee on the Budget

    While today's hearing is titled ``Strengthening the Safety Net,'' 
it is mostly an effort to sugarcoat a Republican budget that shreds the 
social safety net while providing gold-plated tax breaks to the 
wealthiest Americans. It's truly Orwellian to present a budget that 
tears apart the social safety net as one designed to strengthen support 
for vulnerable Americans.
    This week presents a very clear contrast in the priorities between 
Republicans and the Democrats in Congress. Yesterday, the Senate voted 
on the Buffett Rule to make sure that millionaires take greater 
responsibility for reducing the deficit. All but one Republican voted 
no and all but one Democrat voted yes.
    Meanwhile, this week in the House, we're going to be doing two 
things. We're taking up legislation that will add billions to the 
deficit by providing big tax breaks to hedge fund owners, big 
Washington law firms, and others under the guise of a small business 
bill. And here in the Budget Committee, we are holding a hearing 
attempting to put a compassionate face on the shredding of the social 
safety net.
    Let's put this hearing in context. The Republican budget takes a 
lopsided approach to addressing our deficit. Rather than taking the 
balanced approach that has been recommended by bipartisan groups--an 
approach that requires deficit reduction through a combination of 
spending cuts and additional revenue--the Republican budget refuses to 
eliminate one single tax break for the purpose of deficit reduction. It 
refuses to ask the wealthiest Americans to pay one penny more for the 
purpose of deficit reduction. Simple math tells you that, because that 
revenue is taken off the table, the Republican budget hits everyone and 
everything else much harder.
    We've talked about the impact of the Republican budget in terms of 
ending the Medicare guarantee. We've talked about the fact that it 
would slash important investments necessary to keep our economy strong, 
like investments in education, infrastructure, science, and research. 
And today we will focus on what it does to the social safety net.
    The storyline that accompanies the Republican budget is a 
particularly cynical one. It is one designed to tell Americans that 
these social safety nets are not necessary because people choose those 
safety nets over getting a job; that most people who are out of work 
choose to be out of work; that most people who need the support of food 
and nutrition programs choose to be in that position; and that by 
cutting these essential supports--by making people on the economic edge 
even more desperate--they will be giving people the willpower to pull 
themselves up by their bootstraps; that they are in fact doing a favor 
to the people who will be most harmed.
    As we consider how we can ``strengthen the safety net,'' we should 
be clear about what our goals are and how we define success. Are we 
focused first on helping vulnerable Americans and what success means 
for their lives? Or is our first goal to cut deficits by dismantling 
programs that preserve the economic well-being of the vulnerable while 
expanding tax breaks to the wealthiest people and corporations in 
America? The answers to these questions lead to very different 
approaches.
    If one starts with the goal of simply cutting these programs, then 
the Republican budget is one way to get there. It attempts to balance 
the federal budget on the backs of the poor, by gutting federal 
spending on safety net programs and replacing it with the failed 
philosophy of ``trickle-down'' economics--arguing that somehow, if we 
shower the richest among us with hundreds of billions of dollars more 
in tax breaks, they will pass on the benefits to those at the lowest 
economic rungs. The Republican budget cuts $810 billion from Medicaid. 
It will be cut by 30 percent by 2022, and by an astounding 75 percent 
by the year 2050.
    The Republican budget converts Medicaid into a block grant to 
states and provides inadequate funding that fails to keep pace with 
need. It speaks vaguely of providing more flexibility to states, 
missing the point that states already have significant flexibility. For 
example, 30 states operate Medicaid under one or more waivers of 
federal rules.
    CBO concluded that the Republican budget would mean that states 
will need to increase their spending on these health programs, cut back 
services, or both. Cutbacks could involve reduced eligibility, coverage 
of fewer services, lower payments to providers, or increased cost-
sharing by beneficiaries--all of which would reduce access to care. An 
Urban Institute study of the same Medicaid plan in last year's 
Republican budget found that 14 million to 27 million people could lose 
Medicaid coverage. Millions of poor people losing health care 
coverage--in a program where half of all beneficiaries are children and 
another quarter are either senior citizens or people with significant 
disabilities that make them unable to work.
    I also note that concerns about work incentives that drove welfare 
reform in 1996 have no relevance to Medicaid. First, it is a program 
that provides health care coverage to those left behind by the private 
insurance market. Second, two-thirds, or 66 percent, of Medicaid 
spending is for senior citizens and people too disabled to work, while 
another 20 percent is for children. Medicaid costs reflect underlying 
health sector trends and population aging, as more people need help 
paying for long-term care. Spending also reflects the economy--more 
people rely on Medicaid when jobs are scarce.
    As for SNAP, it already has strong work incentives built in. 
Moreover, in 1996, rejecting proposals to block-grant SNAP (known then 
as food stamps) was critical to building bipartisan support for welfare 
reform. SNAP continues to serve the most critical of roles in society--
providing food security for families who have fallen on hard times. It 
is a major stabilizer that allows the federal government to respond 
quickly to changes in economic conditions. SNAP spending will decline 
as the economy recovers. Attempting to force further cuts will leave 
millions of children without adequate diets.
    The idea that the approach in the Republican budget strengthens or 
repairs the social safety net is the kind of doublespeak that 
aggravates Americans. The plain meaning of ``strengthen'' is to make 
something stronger and more vigorous. The Republican budget does the 
direct opposite: it shreds that safety net; it weakens it. To make 
matters worse, it does so while expanding tax breaks for millionaires 
and corporations that have done exceedingly well not only by their own 
efforts, but because of their workers, customers, and fellow citizens.

    Chairman Ryan. Thank you. Gentlemen, obviously our goal is 
to bring spending that's sustainable and to include reforms 
that actually work to serve the purpose of these programs, 
which we think we have missed on that by virtue of just the 
results and the fact that poverty is at an all-time high.
    With that, we will start with Dr. Casey Mulligan, professor 
of economics at the University of Chicago. Welcome, and I think 
it is your first time coming to the Hill. Then we will go with 
Ron Haskins, co-director of the Center on Children and Families 
at the Brookings Institution. Ron is no stranger to this body, 
nor is Dr. Robert Rector, senior research fellow at the 
Heritage Foundation, and, Bob, we kept your seat warm. I think 
that is where you always sit. It is good to see you again. Bob 
Greenstein, president of the Center on Budget and Policy 
Priorities. Why do we not go with Casey, then Ron, then Robert, 
and then Bob. Dr. Mulligan.

     STATEMENTS OF CASEY MULLIGAN, PROFESSOR OF ECONOMICS, 
  UNIVERSITY OF CHICAGO; RON HASKINS, CO-DIRECTOR, CENTER ON 
 CHILDREN AND FAMILIES, BROOKINGS INSTITUTION; ROBERT RECTOR, 
SENIOR RESEARCH FELLOW, HERITAGE FOUNDATION; ROBERT GREENSTEIN, 
       PRESIDENT, CENTER ON BUDGET AND POLICY PRIORITIES

                  STATEMENT OF CASEY MULLIGAN

    Mr. Mulligan. Chairman Ryan, Ranking Member Van Hollen, and 
members of the committee, thank you for the opportunity and 
honor to discuss with you today. Our new safety net program 
rules over the past couple of years have changed the reward to 
work. A multitude of public policies effect that reward and 
thereby effect who is employed.
    A basic economic principle is that the monetary reward to 
working has important effects on how many people are employed 
and how much they work. By definition, the monetary reward to 
working is the difference between the resources a person has 
available to use or save if she works and what she has 
available when she does not work.
    The effect of taxes and subsidies on the reward to working 
can be summarized as a marginal tax rate, and by that I mean 
the difference between taxes paid and that of subsidies 
received when working, and that taxes paid when not working, 
sometimes expressed as a fraction of the amount produced when 
working.
    Now, people without jobs or otherwise with low incomes 
sometimes receive benefits from social safety net programs. The 
benefits are rarely called taxes by layman, but economists 
understand the benefits to have many of the characteristics of 
marginal tax rates because a program beneficiary loses some or 
all of her benefits as a consequence of working. The more 
income that a person receives when not working, the less is the 
reward to working.
    A multitude of public polices affect the reward to working, 
to name just a few: federal, state, and local income taxes, 
payroll taxes, unemployment insurance benefits, and nutrition 
assistance programs.
    Thanks to a labyrinth of relevant programs the marginal tax 
rate can equal or exceed 100 percent in some cases, which means 
that the reward to working is zero or negative. In such cases a 
person might have more resources available to use or save as a 
consequence of working less. Legislation that supposedly cuts 
or credits taxes can nonetheless reduce the reward to working 
and increase the marginal tax rate appropriate for labor market 
analysis. If it cuts taxes more for those who work less, then 
it cuts taxes for those who work more. Even private sector 
transactions, such as the settlement of mortgage, consumer, and 
child support debts sometimes may have many of the 
characteristics of taxes paid to the public treasury, 
especially in terms of their propensity to reduce the reward to 
working.
    The reward to working, and, therefore, the marginal tax 
rates, affects what people do. High marginal tax rates mean 
small incentives to seek, create, and retain jobs. The 
consequences of high marginal tax rates are found all over the 
economy, even by persons whose individual marginal tax rates 
might not be all that high.
    Now, America absolutely must have taxes and must have 
safety net programs, even though they reduce the reward to 
working, but if this Congress wants to understand or shape what 
is happening in labor market or to the budgets of social 
programs, it would be counterproductive to approximate marginal 
tax rates as zero or to assume them to be eternally constant, 
regardless of what incentives are embodied in new legislation.
    In reality, at least a dozen new and important federal and 
state safety net benefit rules have collectively changed the 
reward to working, especially for groups whose employment rates 
are particularly sensitive to safety net benefits. Of course, 
unemployment insurance program benefits are now available 
longer into unemployment spells up to 99 weeks than they were 
five years ago; but also do not forget that new modernization 
provisions now provide unemployment benefits in a variety of 
circumstances when benefits were formerly unavailable.
    While it lasted, the 2009 American Recovery and 
Reinvestment Act also added a bonus to weekly unemployment 
checks and helped unemployed people pay for their health 
insurance. The food stamp program expanded in a variety of 
dimensions. All of these policy changes, and more, serve to 
increase marginal tax rates over the past couple of years. By 
my calculations, the net effect of all of these changes through 
2012 was to increase marginal tax rates for the median 
household head or spouse at least 4 percentage points above 
what they were in 2007, and this was on top of the 40 plus 
percent marginal tax rate already in place back then. Marginal 
tax rates have increased even more for less skilled people.
    It is sometimes claimed by non-economists, at least, that 
the safety net does not prevent anyone from working because 
supposedly everyone strives to have more income rather than 
less, and we gladly take any job that paid them more than the 
safety net did. This income maximization claim is contradicted 
by the most basic labor market observations, not to mention 
decades of labor market research. A presumably unintended 
consequence of the recent safety net expansions has been to 
reduce the reward to working, and, thereby, keep employment 
rates low, keep unemployment rates high, and keep national 
spending low longer than they would have if safety net program 
rules had remained unchanged.
    The bottom line is that helping the poor and economically 
vulnerable has a price in terms of labor market inefficiency. 
Since 2007, we have been paying more of that price. American 
public policies have moved significantly in the direction of 
less labor market efficiency and, perhaps, more than was 
necessary for providing the assistance to those who need it. 
Thank you.
    [The prepared statement of Casey Mulligan follows:]

   Prepared Statement of Casey B. Mulligan, Professor of Economics, 
                         University of Chicago

    Chairman Ryan, Ranking Member Van Hollen, members of the committee: 
thank you for the opportunity and honor to discuss with you today how 
new safety net program rules over the past couple of years have changed 
the reward to work. A multitude of public policies affect that reward, 
and thereby affect who is employed. In some cases, the monetary reward 
to work is zero, or worse.
                                overview
    A basic economic principle is that the monetary reward to working 
has important effects on how many people are employed, and how much 
they work. By definition, the monetary reward to working is the 
difference between the resources a person has available to use or save 
if she works and what she has available when she does not work.
    The effect of taxes and subsidies on the reward to working can be 
summarized as a marginal tax rate: that is, the difference between 
taxes paid net of subsidies received when working and net taxes paid 
when not working, sometimes expressed as a fraction of the amount 
produced when working.
    People without jobs or otherwise with low incomes sometimes receive 
benefits from social safety net programs. The benefits are rarely 
called taxes by laymen, but economists understand the benefits to have 
many of the characteristics of marginal tax rates because a program 
beneficiary loses some or all of her benefits as a consequence of 
working. The more income that a person receives when not working, the 
less is the reward to working.
    A multitude of public policies affect the reward to working. To 
name just a few: federal, state and local income taxes, payroll taxes, 
unemployment insurance benefits, and nutrition assistance programs.
    Thanks to a labyrinth of relevant programs, the marginal tax rate 
can equal or exceed 100 percent in some cases, which means that the 
reward to working is zero or negative. In such cases, a person might 
have more resources available to use or save as a consequence of 
working less.
    Legislation that ``cuts'' or ``credits'' taxes can nonetheless 
reduce the reward to working, and increase the marginal tax rate 
appropriate for labor market analysis, if it cuts taxes more for those 
who work less than it cuts taxes for those who work more.
    Even private sector transactions such as the settlement of 
mortgage, consumer, and child support debts sometimes have many of the 
characteristics of taxes paid to the public treasury, especially in 
terms of their propensity to reduce the reward to working.
    The reward to working, and therefore the marginal tax rate, affects 
behavior. High marginal tax rates mean small incentives to seek, 
create, and retain jobs. The consequences of high marginal tax rates 
are felt all over the economy, even by persons whose individual 
marginal tax rates might not be all that high.
    America absolutely must have taxes and safety net programs, even 
though they reduce the reward to working. But if this Congress wants to 
understand or shape what is happening in the labor market or to the 
budgets of social programs, it would be counter-productive to 
approximate marginal tax rates as zero, or to assume them to be 
eternally constant regardless of what incentives are embodied in new 
legislation.
    In reality, at least a dozen new and important federal and state 
safety net benefit rules have collectively changed the reward to 
working, especially for groups whose employment rates are particularly 
sensitive to safety net benefits.
    Of course, unemployment insurance program benefits are now 
available longer into unemployment spells--up to 99 weeks--than they 
were five years ago. But also don't forget that new modernization 
provisions now provide unemployment benefits in a variety of 
circumstances when benefits were formerly unavailable. While it lasted, 
the 2009 American Recovery and Reinvestment Act (hereafter, ARRA) also 
added a bonus to weekly unemployment checks, and helped unemployed 
people pay for their health insurance. The food stamp program expanded 
in a variety of dimensions. All of these policy changes, and more, 
served to increase marginal tax rates over the past couple of years.
    By my calculations, the net effect of all of these changes through 
2012 was to increase marginal tax rates for the median household head 
or spouse at least four percentage points above what they were in 2007 
(Mulligan 2012), on top of the forty-plus percent marginal tax rate 
already in place. Marginal tax rates have increased even more for less-
skilled people.
    It is sometimes claimed, by non-economists at least, that the 
safety net does not prevent anyone from working because supposedly 
everyone strives to have more income rather than less, and would gladly 
take any available job that paid them more than the safety net did. 
This ``income maximization'' claim is contradicted by the most basic 
labor market observations, not to mention decades of labor market 
research. A presumably unintended consequence of the recent safety net 
expansions has been to reduce the reward to working and thereby keep 
employment rates low, keep unemployment rates high, and keep national 
spending low, longer than they would have been if safety net program 
rules had remained unchanged.
    The remainder of my testimony offers more detail as to marginal tax 
rate changes in recent years, and how they relate to the government 
safety net.
      a labyrinth of public policies affect the reward to working
    The marginal tax rate is the difference between taxes paid net of 
subsidies received when working and taxes paid net of subsidies 
received when not working, sometimes expressed as a fraction of the 
amount produced when working. Among the variety of measures that 
economists use to study the reward to working, this concept of the 
marginal tax rate has the advantage that it readily captures important 
combined incentive effects of a multitude of tax and subsidy programs 
(Gruber and Wise 1999).
    The marginal tax rate appropriate for labor market analysis 
includes not only the combined sum of the extra taxes owed when 
working, but also adds the combined sum of all safety net benefits 
foregone, because taxes generally take away from the resources 
available to people who work while safety net benefits generally add to 
the resources available to people who do not work.
    Many of us worked on our federal individual income tax Form 1040 
over the weekend and may be familiar with our tax rate on that form. 
But the marginal tax rate as defined above is significantly different 
from the Form 1040 rate because, among other things, the federal 
individual income tax is only one of many taxes. As a consequence of 
working, and the additional spending and saving that wage income 
permits, American workers (and employers on behalf of employees) pay 
income, payroll, sales, excise, property, and other taxes to federal, 
state and local governments.
    Federal, state, and local governments deal in massive amounts of 
resources, and affect the reward to working both in the process of 
obtaining revenue and in the process of distributing revenue to 
beneficiaries. The Bureau of Economic Analysis estimates that income, 
payroll, sales, and excise taxes amounted to about 23 percent of 
national income and over 30 percent of the nation's labor income, on 
average between 2000 and 2010. Even if none of that revenue had been 
spent on safety net programs, the tax collections by themselves would 
have reduced the reward to working.
    Safety net program spending is also significant, especially during 
the last several years. I estimate that federal, state, and local 
spending on non-elderly beneficiaries of unemployment insurance, 
nutrition assistance, Medicaid, and other means-tested subsidies 
occurred at a combined rate of more than $400 billion per year in 2009 
and 2010, measured in fiscal year 2010 dollars (Mulligan 2011). Even if 
governments had somehow been able to fund these programs without any 
taxes, the process of distributing the program benefits would have 
reduced the reward to working.
    Legislation that ``cuts taxes'' can nonetheless reduce the reward 
to working, and increase the marginal tax rate appropriate for labor 
market analysis, if it cuts taxes more for those who work less than it 
cuts taxes for those who work more because the reward to working is the 
difference between taxes (net of subsidies) paid when working and taxes 
(net of subsidies) paid when not working.
    Thanks to the labyrinth of relevant programs moving large amounts 
of resources, the marginal tax rate can equal or exceed 100 percent in 
some cases (Romich, Simmelink and Holt 2007), which means that the 
reward to working is zero or negative. In such cases, a person might 
have more resources available to use or save as a consequence of 
working less.
    The reward to working, and therefore the marginal tax rate, affects 
behavior. High marginal tax rates mean small incentives to seek, 
create, and retain jobs, and to make the sacrifices of time, hassle, 
etc., naturally required by employers, customers, and clients in 
exchange for a paycheck. The consequences of high marginal tax rates 
are felt all over the economy, even by persons whose individual 
marginal tax rates might not be all that high.
    The economic distortions created by marginal tax rates are not 
linear: an increase from 90 percent to 100 percent has a greater effect 
on incentives than an increase from 40 percent to 50 percent, which 
itself has a greater effect on incentives than an increase from 0 
percent to 10 percent. A rate increase from 0 to 10, for example, still 
leaves a worker with 90 percent of her reward from working, whereas a 
rate increase from 90 to 100 leaves her with no reward.
 marginal tax rate and government safety net changes in and around the 
                            great recession
    At least a dozen new and important federal and state safety net 
benefit rules have collectively changed the reward to working, 
especially for groups whose employment rates are particularly sensitive 
to safety net benefits.
    The unemployment insurance (hereafter, UI) program offers weekly 
cash benefits to people who have lost their jobs and have as yet been 
unable to find and start a new one. On average they receive about $300 
a week until they start working again, until they stop looking for 
work, or until their benefits are exhausted. Before the recession, an 
unemployed person in a typical state without high unemployment would 
often have his benefits limited to a maximum of twenty-six weeks 
(United States Department of Labor 2007). The federal law in place 
before the recession included some local labor market ``Extended 
Benefit'' triggers that, based on the statewide unemployment rate, 
would automatically lengthen the maximum benefit period. These 
automatic triggers began to extend the duration of benefits around the 
nation in the middle of 2008 (United States Department of Labor 2011a). 
At about the same time, the Supplemental Appropriations Act of 2008 
included new ``Emergency Unemployment Compensation'' (EUC) legislation 
that extended maximum benefit periods for the entire nation. The 
Worker, Homeownership, and Business Assistance Act of 2009 further 
extended the EUC periods, so that unemployment insurance benefits could 
be paid up to 99 weeks (United States Department of Labor 2011b).
    It is widely recognized that the UI benefit duration rules changed 
over the past couple of years (see Elsby, Hobijn and Sahin (2010), 
Shimer (2010), Daly, et al. (2012) and the studies cited in Council of 
Economic Advisers (December 2010)). Nor is it a surprise that a person 
unemployed more than 26 weeks saw her marginal tax rates increase as a 
result of the rule changes, because they provided benefits that would 
terminate if and when she went back to work before the benefits were 
exhausted. More surprising is that other safety net expansions 
collectively served to increase marginal tax rates significantly more 
than the new UI benefit duration rules did, not to mention reinforce 
the labor market impacts of the latter (Mulligan 2012).
    The February 2009 American Recovery and Reinvestment Act 
(hereafter, ARRA) expanded eligibility by encouraging states to 
``modernize'' (and relax) their UI eligibility requirements by 
processing earnings histories through an ``alternative base period,'' 
including persons who quit their job for compelling family reasons, 
adding 26 weeks of eligibility for persons enrolled in training 
programs, and/or paying benefits to persons who search only for part-
time work (United States Department of Labor 2009). The modernization 
provisions raised marginal tax rates for people who would have found it 
difficult or impossible to qualify for UI under the previous rules.
    The ARRA also raised marginal tax rates by exempting the first 
$2,400 of unemployment benefits received by an unemployed person from 
2009 federal income tax (United States Department of Labor 2011b). This 
provision is an example of a ``tax cut'' that nevertheless reduced the 
reward to working because it reduced taxes for people who experienced 
unemployment sometime during 2009 and did not reduce taxes for people 
who worked throughout the year.
    The ARRA's Federal Additional Compensation (FAC) provision also 
raised marginal tax rates by adding $25 per week to unemployment 
compensation checks. This $25 per week was not available to people who 
were working, because unemployment compensation checks are reserved for 
people who are unemployed.
    For laid off workers who wanted to remain on their former 
employer's health plan, the ARRA's COBRA subsidy offered to pay 65 
percent of the cost. For a $13,027 annual family health insurance 
premium (Crimmel 2010), that subsidy was worth more than $700 per 
month. Many of the unemployed did not receive the COBRA subsidy, but 
the subsidy increased marginal tax rates for people who did receive it, 
or would have received it had they not been working.
    The Department of Agriculture's food stamp program, now known as 
Supplemental Nutrition Assistance (SNAP), provides funds to low income 
households for the purpose of buying food (Social Security 
Administration 2008), often in conjunction with cash assistance 
programs. The rules for SNAP eligibility were relaxed in and around the 
2008-9 recession as states were eliminating the ``asset test,'' as the 
2002 Farm Bill permitted them to do. The asset test elimination 
increased marginal tax rates appropriate for labor market analysis 
because households could receive SNAP benefits based solely on their 
net income, and not based on the value of their assets. For persons in 
the few states that retained asset tests, new federal asset eligibility 
rules were relaxed by the 2008 Farm Bill (Eslami, Filion and Strayer 
2011, 6).
    Both the 2008 Farm Bill and the 2009 ARRA increased the amount of 
the SNAP benefits paid to eligible households, and thereby increased 
marginal tax rates.
    The Housing and Economic Recovery Act of 2008 created a first-time 
home buyers' tax credit of up to $8000, but it phased out as annual 
family income varied beyond the income limitation. This provision is 
another example of a ``tax cut'' that nevertheless reduced the reward 
to working because it reduced taxes for people below the annual income 
limit more than it reduced taxes for people earning above it (people 
who work fewer weeks during the year are more likely to earn below the 
annual income limit required to obtain the full credit).
    The 2009 ARRA created a refundable personal income tax credit for 
calendar years 2009 and 2010 called the ``Making Work Pay Tax Credit'' 
(hereafter, MWPTC). For most people, the MWPTC had no effect on the 
reward to working because they or their household would have received 
the same amount of the credit regardless of an individual's work 
decision. A few persons saw their reward to working increase, a few 
others saw it reduced.
    In contrast to the many provisions cited above, the employer 
portion of the federal payroll tax has been reduced since January 2011 
and thereby reduced marginal tax rates appropriate for labor market 
analysis since that date. By my calculations, the net effect of all of 
these changes through 2012 is still to leave marginal tax rates for the 
median household head or spouse at least four percentage points higher 
now than they were in 2007 (Mulligan 2012), on top of the forty-plus 
percent marginal tax rate already in place. Marginal tax rates have 
increased even more for less-skilled people.
    Of the several safety net expansions cited above, three of them 
from the ARRA have expired and thereby no longer elevate marginal tax 
rates as they did when the expansions were active: the COBRA subsidy, 
the FAC, and the federal income tax exemption for UI. MWPTC has also 
expired. The other marginal-tax-rate-elevating provisions remain in 
place today.
    The Patient Protection and Affordable Care Act was passed in March 
2010. As a result of this legislation, Medicaid enrollment and spending 
are expected to increase significantly in 2014, when the program is 
made ``available to able-bodied adults with incomes up to 133 percent 
of the federal poverty level'' (Sack 2010). By increasing the resources 
that part of the population can have when their incomes are low, this 
provision of the Act will increase their marginal tax rates. Other 
provisions of the Act, such as means-tested health insurance premium 
assistance, will also increase marginal tax rates when they go into 
effect.
 wage garnishment and related private sector activities affecting the 
                             reward to work
    The Internal Revenue Service, Department of Agriculture, and state 
unemployment agencies are not the only institutions looking at a 
person's employment status and federal individual income tax return to 
determine how much she should pay or receive. My own employer, the 
University of Chicago, and thousands of other universities, colleges, 
and schools look at federal income tax returns through their financial 
aid programs to determine how much a parent should pay for her child's 
education. While we welcome the opportunity to help students from 
disadvantaged families, economists have long recognized that financial 
aid practices affect incentives for students' parents to work and save 
(Dick and Edlin 1997).
    Workers sometimes have their wages garnished by creditors and/or 
child support agencies. Garnishments may be a necessary part of a well-
functioning credit market and necessary to properly support children, 
but they also serve to reduce the reward to working by the person whose 
wages would be garnished (Holzer, Offner and Sorensen 2005).
    Even if these private sector actions affecting the reward to work 
had been constant over time, they still interact with the safety net 
expansions cited above because the economic distortions resulting from 
marginal tax rates depend on the sum total of all taxes, subsidies and 
garnishments that derive from a person's wages. Moreover, it does not 
appear that the private sector's influence on marginal tax rates has 
been constant over time. A new federal bankruptcy law went into effect 
in late 2005. The 2009 ARRA stepped up enforcement of child support 
debts (National Conference of State Legislatures 2009).
    Perhaps the most dramatic single increase in marginal tax rates has 
been associated with the federal guidelines for the settlement of 
``under-water'' home mortgages. Mortgage modification initiatives have 
been the one of the main ways the federal government has sought to 
reduce home mortgage foreclosures, especially when those foreclosures 
are motivated by negative home equity (Congressional Oversight Panel 
2009, 4). In 2008, the Federal Deposit Insurance Corporation (FDIC), 
Federal National Mortgage Association (Fannie), and the Federal Home 
Loan Mortgage Corporation (Freddie) all announced debt forgiveness or 
``loan modification'' formulas. The Treasury Department continued this 
work under President Obama's administration with its ``Home Affordable 
Modification Program'' (HAMP) as part of its ``Making Home Affordable 
Initiative,'' which replaced the Fannie and Freddie programs.
    These programs often recommend a new mortgage payment amount that 
is lower than the payment specified in the original mortgage contract. 
More important in terms of marginal tax rates, the new payment is set 
in proportion to the borrower's income at the time of the modification. 
The more the borrower is earning at the time of the modification, the 
more she will be required to pay her lender over the next five to seven 
years, or more. The marginal tax rate on income earned at the time of 
modification can easily exceed one hundred percent and sometimes exceed 
two hundred percent as a result of the federal modification guidelines, 
not to mention the many other taxes and subsidies that also reduce the 
reward to working (Mulligan 2009; Herkenhoff and Ohanian 2011).
                    the income maximization fallacy
    It is sometimes claimed, by non-economists at least, that the 
safety net does not prevent anyone from working because everyone 
strives to have more income rather than less, and would gladly take any 
available job that paid them more than the safety net did. This 
``income maximization'' hypothesis is contradicted by the most basic 
labor market observations, not to mention decades of labor market 
research.
    Before the recession began, well over 100 million Americans were 
not working. To be sure, some of them could find no reward in the labor 
market and would be stuck without gainful employment no matter how lean 
the safety net got. But many others were not working by choice. You 
probably know skilled stay-at-home mothers or fathers who could readily 
find a job but believe that the net pay from that job would not justify 
the personal sacrifices required. They are examples of people who 
deliberately do not maximize their income. Other examples are people 
who turn down an out-of-town promotion in order to avoid relocating 
their families, and workers who eschew higher paying but less safe 
occupations. Earning income requires sacrifices, and people evaluate 
whether the net income earned is enough to justify the sacrifices.
    When the food stamp or unemployment programs pay more, the 
sacrifices that jobs require do not disappear. The commuting hassle is 
still there, the possibility for injury on the job is still there, and 
jobs still take time away from family, hobbies, and sleep. But the 
reward to working declines, because some of the money earned on the job 
is now available even when not working.
    Decades of empirical economic research show that the reward to 
working, as determined by the safety net and other factors, affects how 
many people work and how many hours they work. To name a small fraction 
of the many studies: Hoynes and Schanzenbach (2012) show how potential 
participants stopped working or reduced their work hours when the food 
stamp program was introduced. Studies of unemployment insurance find 
that program rules have a statistically significant effect on how many 
people are employed, and how long unemployment lasts. Yelowitz' (2000) 
research shows how a number of single mothers found employment exactly 
when, and where, state-level Medicaid reforms increased their reward 
from working. Gruber and Wise (1999) and collaborators show how the 
safety net for the elderly results in less employment among elderly 
people. Autor and Duggan (2006) and the Congressional Budget Office 
(2010) explain how the number of disabled people who switch from work 
to employment-tested disability subsidies depends on the amount of the 
subsidy relative to the earnings from work. Murphy and Topel (1997) 
show how poor wage growth among less-skilled men helps explain their 
declining employment rates during the 1970s and 1980s.
    Because economists have identified many other cases in which means-
tested and employment-tested subsidies caused people to work less 
(Krueger and Meyer 2002), it should be no surprise that the same kinds 
of behavioral responses occurred since 2007: a larger safety net 
reduced aggregate employment and hours worked.
             other misconceptions about marginal tax rates
    I previously cited at least a dozen changes in subsidy rules that 
served to raise marginal tax rates. Any one of them may appear 
insignificant by itself, especially for the purpose of aggregate labor 
market analysis. But that doesn't mean that the combination of a dozen 
or more potentially small marginal tax rate increases is itself small.
    Focusing on just one of any of the safety net expansions is also 
misleading as to the magnitude of the overall increase in marginal tax 
rates and therefore potentially misleading as to the sources of the 
major changes in the labor market since 2007. It is even possible that 
attention to one program in isolation of the wider safety net could 
motivate backwards public policy responses.
    To see this, imagine that UI rules became more generous, and that 
added to the number of households who were unemployed and with less 
income than they have when working. A number of the added unemployed 
people apply for food stamps, which from the food stamp program's point 
of view makes it look like ``the economy is getting worse,'' so food 
stamp officials recommend enhancing food stamp benefits, which further 
increases the marginal tax rate. But, in this example, the added food 
stamp applications come from higher marginal tax rates created by UI, 
and the right food stamp policy response may be to reduce benefits in 
order to stabilize the overall marginal tax rate. My point here is not 
that the actual safety net expansions were excessive but rather that 
the economics of the safety net can be different when the safety net is 
viewed as a whole rather than on a program-by-program basis. The 
distinction is more than academic: recent events involved expansions of 
the safety net in many dimensions, and all of that occurred on top of a 
labyrinth of other safety net programs.
    Another misconception is that most of the growth of federal income 
security program spending came from the recession, and not from more 
generous program rules (Krugman 2011). My estimates suggest the 2007 to 
2010 rate of increase of inflation-adjusted per capita government 
spending on Unemployment Insurance and SNAP was at least triple of what 
it would have been if the real benefit and eligibility rules had 
remained what they were in 2007 (Mulligan 2012).
    It is sometimes thought that safety net transactions only impact 
the people who participate in the programs. To the contrary, the safety 
net is funded by taxpayers, lenders, owners of government debt, 
beneficiaries of government programs other than the safety net, or some 
combination thereof. As a portion of the beneficiaries opt to earn 
less, they also opt to spend and save less, as their household budget 
constraint requires. They lawfully pay less taxes. Businesses 
anticipate having fewer employees and invest less. These behavioral 
changes are bad news for employers in general, for people who produce 
the consumer and investment goods that beneficiaries would be buying if 
they were back at work (and goods the program funders would be buying 
if they were not funding the expansions), and for people who live in 
places like Michigan whose economies are especially intensive in the 
production of such goods (Gali, Gertler and Lopez-Salido 2007).
                              conclusions
    The bottom line is that helping the poor and economically 
vulnerable has a price in terms of labor market inefficiency. Since 
2007, we have been paying more of that price: American public policies 
moved significantly in the direction of less labor market efficiency, 
and perhaps more than was necessary for providing assistance to those 
who need it.
    First of all, 100 percent marginal tax rates are difficult to 
justify as a reasonable balance between equity and efficiency, yet even 
in 2005 some demographic groups were subject to 100 percent marginal 
tax rates (Romich, Simmelink and Holt 2007), and the recent safety net 
expansions documented here added to the number of people facing such 
rates.
    Second, rather than making people feel safer, a number of the 
safety net expansions may themselves be a source of uncertainty via the 
political process because, among other things, they must be repeatedly 
renewed by Congress, and taxpayers are still unsure of exactly who will 
pay for them (Baker, Bloom and Davis 2011).
    Third, my testimony explains how multiple parties--governments, 
lenders, and courts--have claims on the income that appears on a 
person's tax return. Multiple tax collectors can lead to excessive 
marginal tax rates, as each individual collector might not value the 
effect of his extraction on the revenues received by the other 
collectors (Olson 2000). For these reasons, it is likely possible to 
reduce marginal tax rates and enhance labor market efficiency without 
giving up much or any of the benefits that come from safety net 
programs.
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        Liabilities, and Benefit Reductions.'' Families in Society: The 
        Journal of Contemporary Social Services 88, no. 3 (2007): 418-
        26.
Sack, Kevin. ``Recession Drove Many to Medicaid Last Year.'' New York 
        Times, October 1, 2010: A16.
Shimer, Robert. ``The Labor Market in the Great Recession: Comment.'' 
        Brookings Papers on Economic Activity, Spring 2010: 57-65.
Social Security Administration. Food Stamp Facts. May 2008. http://
        ssa.gov/pubs/10101.html (accessed November 12, 2011).
United States Department of Labor. ``Monetary Entitlements.'' 
        Comparisons of State Unemployment Laws. 2007. http://
        workforcesecurity.doleta.gov/unemploy/uilawcompar/2007/
        comparison2007.asp (accessed November 2, 2011).
----. ``Persons Claiming UI Benefits in Federal Programs.'' 
        Unemployment Insurance Program Statistics. October 7, 2011a. 
        http://www.ows.doleta.gov/unemploy/docs/persons.xls (accessed 
        October 25, 2011).
----. ``Unemployment Insurance Program Letter No.14-09.'' Employment 
        and Training Administration. February 26, 2009. http://
        wdr.doleta.gov/directives/corr--doc.cfm?DOCN=2715 (accessed 
        January 18, 2012).
----. ``Unemployment Laws and Insurance.'' Chronology of Federal 
        Unemployment Compensation Laws. May 3, 2011b. http://
        workforcesecurity.doleta.gov/unemploy/pdf/chronfedlaws.pdf 
        (accessed October 28, 2011).
Yelowitz, Aaron S. ``Evaluating the Effects of Medicaid on Welfare and 
        Work: Evidence from the Past Decade.'' Employment Policies 
        Institute, 2000.

    Chairman Ryan. Thank you. Mr. Haskins.

                    STATEMENT OF RON HASKINS

    Mr. Haskins. Chairman Ryan, Ranking Member Van Hollen, 
members of the committee, thank you for inviting me. It is a 
great honor to be here to testify. I think this is the only 
place in the country where American people can come and see a 
budget that will actually seriously address our long-term 
deficit and bring it into acceptable range in the foreseeable 
future. I think that is a great achievement; of course, it does 
not mean that it has to happen exactly the way Chairman Ryan 
lays it out, but I assume that this committee will have a full 
argument about how the Democrats would like to change it, and, 
in the end, we are going to have to change a lot that we do, 
including, I think, with taxes and spending. And, so, have at 
it. I am glad to participate in it.
    I am going to, was asked by the committee to talk about 
three things: spending, phase-out rates, or benefit reduction 
rates that Casey just talked about, and block grants. Let me 
just say a few words about each.
    First, on spending, Robert Rector has laid out the spending 
in great detail. I am going to defer mostly to him, but I do 
want to make a few points. First, if you look at Figure 1 in my 
testimony, here you see that there has been a huge increase in 
spending on means-tested programs. These are the 10 biggest 
means-tested programs taken from a CRS document, so this is not 
the entire safety net; it is the 10 biggest programs, and it 
has increased almost every year both in constant dollars, total 
spending, and per person in poverty. So we are spending more 
and more and more.
    To give you an example, if you take 1980, we spent about 
$126 billion on these 10 programs. In 2011, we spent $626 
billion on these programs, and if you translate that to 
spending per person in poverty, it goes from about $4,300 to 
$13,000. So no matter how you look at this, we have very 
substantially increased spending. By the way, it has also 
increased about 31 percent in the three years of the Obama 
administration, even though in one year and, perhaps, two years 
spending per person in poverty actually fell. That shows you 
how much the poverty rate increased.
    We have a lot of spending. I was on the staff of the Ways 
and Means Committee in 1996, and we thought we had a pretty 
good safety net, and we were spending about a third of what we 
spend now. So the point of this is that I think there ought to 
be savings in here, and it is a matter of looking to how to get 
it.
    So spending: big increases, no matter how you measure it 
some of the money is spent by people above the poverty line, 
and the big question is what are the programs that we are 
getting the most benefit from, and what are the programs we are 
not because we need to change something. Some of the savings 
are going to have to come out of low-income programs, I 
believe.
    Second, phase-out rates: This is a huge problem. Casey's 
testimony is the best short treatment of this issue that I have 
ever seen. It is really complete. If you read the references, 
it will drive you nuts, because it is a very complex area. If 
you show the third figure here, this shows a chart.



    I am not going to explain the chart, but I just wanted you 
to see what you could nicely call a spaghetti chart. It is from 
the Congressional Research Service in 1995, and what it does is 
trace out what happens to various taxes and benefit programs as 
a person's earnings increase. This is exactly the topic that 
Casey was addressing. And, as you can see, you never get as 
much as you earn. That is the disincentive effect; and at some 
point in the distribution you lose almost everything you earn; 
and at one point you actually lose more than 100 percent of 
what you earn. It does not pay to earn that extra dollar. So, 
these are a big issue in our programs, and they stem especially 
from the fact that we have so many programs in both the tax 
code and in spending programs, and some are going down and up. 
They are not coordinated at all. We could create one big 
program, but that would create all kinds of headaches, 
administrative and otherwise, that I outline in the testimony. 
So, this is definitely a problem.
    But, I want to point something out. In the welfare reform 
legislation of 1996, we basically cut through this problem by 
saying you have to work. Work requirements and time limits, 
seeing also a time limit on welfare, they trump phase-out 
rates. Why? Because you have to work, and that is what the 
welfare reform bill did, and people went to work in droves.
    And, secondly, we have created, over the years, what I 
would call a work support system. It has the earned income tax 
credit, childcare, and other benefits, that help low income 
working families. Back in the old days if people took a job 
they lost all their welfare benefits. So we have reduced those 
benefit reduction rates, but they are still very substantial, 
as Casey points out. But in a program where you are required to 
work and lose your benefits if you do not, then I state the 
benefit reduction rate makes much less difference than under 
other circumstances.
    Finally, I want to say just a few words about block grants. 
Block grants have two huge advantages. One is from the state 
perspective they give a lot of flexibility; now not every block 
grant does that. You could write a block grant so it is full of 
all kinds of details and requirements, what governors used to 
call strings, in which case it does not give states the 
flexibility.
    The other advantage is from the federal perspective that it 
is a way to control spending. An open-end entitlement like 
Medicare, Social Security, Medicaid, and so forth, you are 
subject to the whims of the population and what changes people 
make in benefits and so forth, and those programs do not come 
up for review very often. So a way to control the spending is 
to give a block grant with a fixed amount of money and give the 
states flexibility. I would make at least one exception to 
that, and that is I think we still have to have accountability. 
We have to have financial accountability, which I think we 
would have almost no matter what you did because of the Single 
Audit Act, but we also have to find out if these programs 
actually have impacts; so I would require data reporting from 
the states to see if these programs are having their intended 
effects.
    Another thing I want to say about block grants is that when 
we passed two big block grants in 1996, both the TANF Program, 
which ended about three welfare programs and put them in a 
block grant, and a daycare program block grant, which ended 
about five programs, and when we did that we consulted 
carefully with the states. We had one consultation session that 
I remember that had 30 or 40 people from state governments in 
there, and we went through the changes that we were making and 
the strings that were on the block grants. Since the states 
have to implement them, I think it is a very good idea to 
consult carefully with the states in the construction of the 
block grant.
    So, Chairman Ryan, thank you again for asking me to 
testify. We simply have to do something about our deficit. Our 
children and grandchildren are paying a price, and it is going 
to involve some changes in low income programs for sure. Thank 
you.
    [The prepared statement of Ron Haskins follows:]

    Prepared Statement of Ron Haskins, Co-Director of the Center on 
Children and Families, Brookings Institution; Senior Consultant, Annie 
                          E. Casey Foundation

    Chairman Ryan, Ranking Member Van Hollen, and Members of the 
Committee: Thanks for inviting me to testify today. I consider it a 
privilege to have the opportunity to talk to members of the House 
Budget Committee.
    In response to instructions from the Committee, I'm going to talk 
about three topics: trends in spending on means-tested programs; work 
incentives and phase out rates for means-tested programs; and block 
grants.
                    trends in means-tested spending
    The lower line in Figure 1, based on a Brookings analysis of 
federal budget data published by the Office of Management and Budget, 
shows federal spending since 1962 in the ten biggest means-tested 
federal programs. In 2011, we estimate that about 87 percent of the 
spending was on entitlement programs.\1\ Federal spending on poor and 
low-income Americans has increased enormously. Since 1980, by which 
time all but two of the ten programs that spent the most money in 2011 
were in place, spending has increased by about $500 billion, from $126 
billion to $626 billion after adjusting for inflation.
    One cause of the increase in spending is that both the population 
and the number of poor people in the U.S. have increased over time. 
Thus, even if the federal government spent the same amount of money in 
2011 on means-tested programs per person in poverty as we spent in 
1962, spending would have increased. The solid line in Figure 1 
expresses the increase in federal means-tested spending as spending per 
person in poverty. Expressed in this way, over the past five decades, 
federal spending on major means-tested programs has increased from 
about $516 to a little more than $13,034 per person in poverty. If we 
use the figure on spending per person in poverty in 1980, when most of 
the major means-tested programs were in place, the increase is from 
about $4,300 to $13,000 per person or more than $3 spent in 2011 for 
every dollar spent in 1980.\2\ More recently, means-tested spending 
increased from about $477 billion to $626 billion in the three years of 
the Obama administration, an increase of about 31 percent. However, the 
recession that began in December 2007 and the increase in poverty 
during and following the recession is an important part of the 
explanation for increased means-tested spending during the Obama 
administration. Spending per person in poverty increased by about 9 
percent as compared with the 31 percent increase in total spending 
during the first three years of the Obama administration. A portion of 
the rise in means-tested spending, which was authorized as part of the 
American Recovery and Reinvestment Act of 2009, began to expire in 
2010.



    Figure 2 shows how means-tested spending is distributed among eight 
broad categories of programs.\3\ The categories include health, cash, 
food, housing, education, social services, energy, and employment and 
training. The figures are for 2009, the last year for which the 
Congressional Research Service has calculated means-tested spending 
within these eight categories. Not surprisingly, the figure shows that 
health is by far the biggest category of spending at $319 billion in 
2009, about 2.5 times as much as cash programs, the second biggest 
category. Employment and training at $9 billion is the smallest of the 
eight categories. Figure 2 shows that means-tested spending, like total 
spending in the federal budget, is driven in large part by the rising 
cost of health care. In this respect, figuring out ways to control the 
growth of health care spending would reduce the rate of increase in 
both total federal spending (and debt) as well as federal means-tested 
spending.



    A few additional points about these figures are in order. First, 
keep in mind that these spending data are for only the ten largest 
means-tested programs. The Congressional Research Service estimates 
that in 2009, spending on these ten programs represented about 75 
percent of total federal means-tested spending.\4\ If that percentage 
remained roughly the same for 2011, total federal means-tested spending 
in that year was closer to $835 billion than the $626 billion spent on 
the ten biggest programs.
    Second, state and local governments spend their own money on many 
of these programs. The Congressional Research Service has estimated 
that state and local governments supplemented federal spending on 
means-tested programs by around 27 percent in 2004.\5\ If we assume 
that the 27 percent has remained roughly constant, we can estimate that 
total federal, state, and local government spending on means-tested 
programs was probably around $1,143 billion in 2011.
    On a per-person in poverty basis, that figure represents about 
$23,731 in spending by federal, state, and local governments. But this 
estimate should be considered in light of several caveats. The first is 
that not all of the spending on means-tested programs goes directly to 
individuals and families. Some of the money is spent on programs, such 
as the $14.5 billion spent on Title I of the No Child Left Behind Act 
and the $9 billion in spending on employment and training programs, 
that provide services rather than direct cash or in-kind benefits. 
Second, some of the money in programs that provide cash or in-kind 
benefits directly to households goes to individuals and families that 
are not below the poverty level. Children in families of up to 200 
percent of the poverty level, for example, are eligible for Medicaid or 
the Child Health Insurance Program (CHIP) in almost every state.\6\ 
Similarly, people in households with incomes up to 130 percent of 
poverty are eligible for SNAP benefits (Supplemental Nutrition 
Assistance Program, previously food stamps). In the case of the Earned 
Income Tax Credit (EITC), in 2010 a single mother with two children 
could receive benefits if the mother's income was below $40,964, about 
225 percent of the poverty level for this family. Professor David Armor 
of the School of Public Policy at George Mason University is in the 
process of using Census Bureau data and data from other sources to 
estimate the percentage of benefits in health, nutrition, housing, and 
cash means-tested programs that go to individuals or households with 
income above the poverty line. Although Armor's work has not yet been 
published, he is finding substantial fractions of the benefits in all 
these programs going to individuals and families with income above the 
poverty level and some of it even going to those with incomes above 200 
percent of the poverty level.
    Means-tested spending has increased enormously, no matter how it is 
measured. Although there have been some periods of comparatively rapid 
growth, such as during the recession of 2007 to 2009, Figure 1 shows 
that spending has grown almost every year for the last five decades. 
The increase in spending has been the most rapid in health programs, 
but cash, nutrition, and several other types of spending have also 
increased rapidly. Similarly, spending per person in poverty has also 
increased substantially, although not quite as rapidly as total 
spending.
                 work incentives and benefit phase outs
    The impact of welfare benefits on work incentive has always been a 
contentious issue. Common sense tells us that if able-bodied people get 
welfare benefits without doing anything in return, their incentive to 
work and achieve self-sufficiency will be diminished. This common sense 
view is also supported by a host of research studies. Reviews of the 
empirical evidence on this issue have consistently shown that welfare 
reduces work effort.\7\ To reduce such work disincentive, most means-
tested programs have phase out rates because program designers want to 
maintain a financial incentive for benefit recipients to work. The hope 
is that by reducing welfare benefits by less than a dollar for each 
dollar of earnings, recipients will have at least some incentive to 
work or work more. The ideal outcome would be to design benefits so 
that an extra dollar of earnings would always produce a net income 
increase that is as close to the amount of earnings as possible. The 
lower the phase out rate, the greater the increase in net income and 
therefore work incentive. However, lower phase out rates make means-
tested programs more expensive. There is a clear tradeoff between 
program cost, benefit phase out rates, and work incentive.
    The difficult problems posed by phase out rates and work 
disincentives is greatly complicated by the fact that all families with 
earnings are subject to taxation of their earnings and some families 
receive more than one means-tested benefit. Consider some of the 
possibilities: workers are subject to the roughly 15.3 percent FICA 
tax\8\ from their first dollar of earnings; they could face an EITC 
phase out of up to 21 percent; families with housing benefits face a 
marginal tax rate of 30 percent on their earnings; and so forth. 
Considering all of the effects on net income and work incentives 
simultaneously strains the ability to understand just how much net 
income would change at a particular point in a person's earnings curve. 
Figure 3 is taken from a 1995 report from the Congressional Research 
Service. Although the specific phase out rates portrayed in the figure 
are somewhat out of date, a mere glance at the figure conveys the 
immense complexity of trying to figure out the net impact of so many 
different phase out and phase in rates operating simultaneously. The 
Congressional Budget Office is now completing a similar report on 
marginal tax rates in the tax and transfer system which goes into great 
detail in showing the actual marginal tax rates faced by individuals 
and families with various characteristics. Some of the rates are very 
high and under some circumstances an extra dollar of earnings can 
result in net income increases of 50 cents or less.



    Problems maintaining work incentives are an inevitable consequence 
of means-tested programs. It would be possible to reduce, but not 
eliminate, the work disincentive effect of the current system if all 
benefits could be combined and then phased out at a single phase out 
rate. However, there are many problems with creating such a system. For 
one thing, the current benefits system is a combination of cash (the 
EITC, the Child Tax Credit, TANF, and Supplemental Security Income) and 
in-kind benefits (primarily SNAP and other nutrition programs, housing, 
Medicaid and SCHIP, and home heating). Perhaps the in-kind benefits 
could be paid as cash, but that would cause problems with various 
interest groups such as the National Grocers Association that would 
fight against cashing out SNAP benefits. Democrats might oppose 
converting benefits to cash because providing a lump sum cash payment 
would make the high level of benefits paid to some families more 
transparent than under a system when some of the benefits are paid in 
kind, thereby raising objections from Republicans who would likely 
argue that the system is too generous and should be cut. Moreover, the 
administrative complexity of such a system might make it very difficult 
to operate. Yet another problem is that an all-cash system could 
greatly increase the number of means-tested benefits families receive 
(although they would be combined into one benefit). As surprising as it 
might seem, under the current system few families actually receive all 
the means-tested benefits for which they qualify. A recent study 
sponsored by the Department of Agriculture showed that only 72 percent 
of people qualified for SNAP benefits actually receive them and that in 
some states the rate is below 60 percent.\9\ Both the Current 
Population Survey and the Survey of Income and Program Participation 
show that random samples of Americans receive relatively few of the 
benefits for which they are qualified.\10\
    Given the difficulty of phasing out means-tested benefits and 
maintaining work incentives, an approach to this issue taken in the 
TANF program established by the 1996 welfare reform legislation is 
important to consider. Regardless of benefit phase out rates, a matter 
that was left up to states by the 1996 law, the federal statute 
requires state programs to have two features that directly address work 
incentive. The first is that all state programs are required to have 
strong work requirements. Specifically, at any given moment 50 percent 
of TANF recipients must be involved in work activities that are tightly 
defined in the legislation. States that do not comply are fined. As 
part of the work requirement, states are required to impose financial 
sanctions on recipients who do not comply with the work requirement. 
The combination of work requirements imposed on both states and 
individuals backed up by financial sanctions serve to motivate states 
to adopt demanding programs and recipients to prepare for and look for 
work, usually in the private sector. In addition, the TANF legislation 
imposes a five-year limit on benefit receipt, sending a strong signal 
that benefits are not permanent, as they had been under the Aid to 
Families with Dependent Children program that TANF replaced. With 
strong work requirements and time limits, the work incentive created by 
benefit phase out rates is much less important. Soon enough, 
individuals must work regardless of the financial work incentives.
    Despite these strong pro-work features of the TANF program, it 
would be a serious mistake to think that American social policy depends 
exclusively on these essentially negative inducements to work. 
Beginning roughly in the mid-1980s, Congress created or reformed a host 
of programs that supplemented the income of poor and low-income working 
families, especially single mothers. These reforms included:
     Expansion of Medicaid and CHIP benefits so that all 
children in families under 200 percent of poverty are eligible for 
coverage in most states
     Several expansions of funding for child care and reform of 
child care programs to give states more flexibility in use of child 
care subsidies to help working families
     Several reforms of the SNAP program making it easier for 
working families to receive food subsidies
     Numerous expansions of the EITC; the maximum EITC benefit 
in most states is greater than the average value of their TANF benefit
     Creation of the refundable child tax credit that, like the 
EITC, provides a cash benefit to low-income families with earnings.
    Taken together, these work support benefits constitute the nation's 
most successful method of attacking poverty among families with 
children.\11\ The combination of increased work by poor mothers 
following welfare reform and benefits from the work support system 
resulted in substantial declines in poverty among children in female-
headed families. Even today, after two recessions, the poverty rate 
among children living in female-headed families is lower than it was 
before welfare reform and the work rate among single mothers is still 
higher than before welfare reform.\12\
    The TANF experience demonstrates that using phase out rates to 
increase work incentive can be trumped by strong work requirements and 
a comprehensive work support system.
                              block grants
    Block grants provide states with a sum of money to accomplish broad 
policy purposes which are specified in the authorizing language. Block 
grants can be constructed so that they achieve a major goal of state 
policy and a major goal of federal policy.\13\ States are always 
pleased to accept federal dollars, of course, but they also want 
flexibility with how the dollars are to be spent. Thus, states are 
doubly pleased if the block grant specifies the broad purposes of the 
federal grant and leaves it to state government to decide how best to 
achieve those purposes. From the federal perspective a major potential 
advantage of block grants is that spending can be controlled. In the 
case of open-ended entitlement programs such as Medicaid and SNAP, 
everyone who meets program qualifications has a legal right to receive 
the benefit. By contrast, in programs with capped spending such as 
housing programs and the major child care programs, local authorities 
or states receive a fixed amount of money and individuals are not 
entitled to receive the benefits. Most block grants, including the TANF 
program, the Child Care and Development Fund, and the Social Service 
Block Grant, have fixed funding. In all three of these cases, federal 
spending has increased slowly if at all in recent years and then only 
when Congress explicitly authorized and appropriated the additional 
funds. Given the enormous and growing deficit that afflicts the federal 
government, the possibility of spending control in major areas of 
social policy through the use of block grants should not go unnoticed.
    The history of federal block grants shows that it is rare for the 
federal government to provide states with funds to achieve broad social 
goals without some strings attached. In the case of TANF, for example, 
the block grant came accompanied by substantial requirements for data 
reporting, work requirements that states had to follow, and many other 
strings. These requirements were negotiated with states in marathon 
sessions that resulted in requirements that states felt they could live 
with. If Congress is to create additional block grants, it would be 
advisable to negotiate the terms of the block grant with states. In the 
case of TANF, Congress worked with the National Governors Association, 
the National Conference of State Legislators, and the American Public 
Human Services Association to find mutually acceptable provisions on 
work requirements, data reporting, and other details.
    The general issue of block grant requirements is especially 
important because of the need for accountability in spending federal 
funds. Under the Single Audit Act, all federal grants of over $100,000 
given to states must be audited under widely accepted audit standards. 
But accountability for spending goes far beyond ensuring that funds are 
spent on activities for which they are intended. Rather, recent years 
have seen increased emphasis on showing whether federal funds are spent 
on state programs that actually achieve their purposes. Especially in 
education programs and welfare programs designed to encourage work, 
high quality program evaluations, usually involving random assignment 
designs, are the order of the day. Both the Bush and Obama 
administrations placed great emphasis on the importance of evidence-
based policy.\14\ Evidence-based policy is especially important today 
because the nation's major social intervention programs in preschool, 
the public schools, delinquency, employment and training, and many 
other areas usually do not have significant impacts on the social 
problems they were designed to address.\15\
    To continue this growing federal practice of insisting on program 
accountability, block grants should include, in addition to financial 
accountability, two types of mandatory reporting. First, all programs 
receiving block grant funds should be required to report a standard set 
of data on program participants such as number and characteristics of 
people served, type of treatment, length of treatment, and, where 
possible, evidence of program success. Second, the secretary of the 
federal agency administering the program should be provided with funds 
to conduct high-quality evaluations of selected programs to determine 
if particular approaches or program models, as well as the specific 
characteristics of program models, are effective in producing the 
desired program outcomes.
                                endnotes
    \1\ Housing, Title I grants to local education agencies, and half 
of Pell Grants were counted as non-entitlement spending. Thus, $545.0 
of total spending of $626.2 or 87 percent was entitlement spending in 
2011.
    \2\ The number of people in poverty in 2011 will not be published 
by the Census Bureau until next fall. Based on a model designed by 
Richard Bavier, a former senior official at OMB, that has successfully 
predicted the poverty level for the past several years, poverty 
increased by .6 percentage points in 2011, bringing the poverty rate to 
15.7 percent in that year. According to the American Community Survey, 
the population of the United States in 2011 was 306 million. Thus, 
around 48,042,000 people were poor in 2011. This is the figure used to 
compute means-tested spending per person in poverty for 2011.
    \3\ Karen Spar, ``Federal Benefits and Services for People with Low 
Income: Programs, Policy, and Spending, FY2008-FY2009'' (R41625), 
Washington, DC: Congressional Research Service, January 2011, p. 9.
    \4\ Karen Spar, ``Federal Benefits and Services for People with Low 
Income: Programs, Policy, and Spending, FY2008-FY2009'' (R41625), 
Washington, DC: Congressional Research Service, January 2011, p. 12.
    \5\ Domestic Social Policy Division, ``Cash and noncash Benefits 
for Persons with Limited Income: Eligibility Rules, Recipient and 
Expenditure Data, FY2002-FY2004'' (RL33340), Washington, DC: 
Congressional Research Service, March 2006.
    \6\ According to the Kaiser Family Foundation, only North Dakota, 
Oklahoma, Arkansas, and Idaho set the child eligibility level for 
Medicaid and CHIP below 200 percent of poverty; half the states are at 
250 percent or above. See http://www.kff.org/medicaid/upload/7993-
02.pdf
    \7\ Robert Moffitt, ``Incentive Effects of the U.S. Welfare System: 
A Review,'' Journal of Economic Literature, 1992, 30(1): 1-61; Sheldon 
Danziger, Robert Haveman, and Roert Plotnick, ``How Income Transfers 
Affect Work, Savings, and the Income Distribution: A Critical Review,'' 
Journal of Economic Literature, 1981, 97(3): 975-1028.
    \8\ The FICA tax for Social Security and Medicare is split between 
employer and employee payments totaling 15.3 percent of earnings (up to 
a limit of about $106,800 in the case of the Social Security Tax). 
However, economists assume that if the portion of the tax paid by 
employers were not required by federal law, employers would increase 
wages by an amount equal to the tax.
    \9\ Karen E. Cunnyngham, ``Teaching Those in Need: State 
Supplemental Nutrition Assistance Program Participation Rates in 
2009,'' Washington, DC: U.S. Department of Agriculture, December 2011.
    \10\ Janet Currie, ``The Takeup Rate of Social Benefits,'' Los 
Angeles, CA: UCLA, 2004.
    \11\ A study in the 2008 edition of the Ways and Means Committee's 
Green Book (see Appendix E, Table E-31) shows that, primarily because 
of increased work rates, the poverty rate of families headed by never-
married mothers before any government taxes or transfers, fell from 
48.3 percent to 39.6 percent between 1989 and 2006. Thus, due to work 
effort by these mothers, the poverty rate before taxes and transfers 
had fallen by nearly 20 percent. When support for these working 
families from the work support system were added to income in 2006, the 
poverty rate fell from 39.6 percent to 26.1 percent or by an additional 
35 percent. The combination of increased work rates and an improved 
work support system has had a major impact on poverty among families 
headed by never-married mothers.
    \12\ Poverty rates for families headed by single mothers decreased 
between 1996 and the start of the Great Recession in late 2007, from 
35.8 percent to 30.7 percent. Even with increased hardship and 
unemployment during the recession, the 2010 rate of 34.2 percent is 
still below the 1996 rate. According to Brookings tabulations of data 
from the Current Population Survey, the average employment-to-
population ratio for never-married mothers in the five years before 
welfare reform in 1996 was 44.6 percent. The ratio increased every year 
through 2000, increasing to 65.6 percent in that year, an increase of 
47 percent compared with the five years before welfare reform. Even in 
2010, after two recessions, the rate was 58.7 percent, still over 30 
percent above the pre-welfare reform level.
    \13\ Pietro S. Nivola, Jennifer L. Noyes, and Isabel V. Sawhill, 
``Waive of the Future? Federalism and the Next Phase of Welfare 
Reform,'' Brookings Institution, Welfare Reform and Beyond Policy Brief 
#29, March 2004.
    \14\ Ron Haskins and Jon Baron, ``Building the Connection between 
Policy and Evidence,'' London: NESTA, September 2011.
    \15\ Isabel V. Sawhill and Jon Baron, ``Federal Programs for Youth: 
More of the Same Won't Work, Youth Today, May 2010, p. 21.

    Chairman Ryan. Thank you, Mr. Haskins. Mr. Rector.

                   STATEMENT OF ROBERT RECTOR

    Mr. Rector. Thank you very much for the opportunity to 
testify here today. If we were to look at the overall safety 
net, I think it basically has three components, which are for 
the elderly, Social Security and Medicare, for the unemployed, 
unemployment insurance, and worker's compensation; and, for the 
poor, what I call the means-tested welfare state.
    Now, the means-tested welfare state is largely unknown. 
Everybody understands we spend a lot of money on Social 
Security and Medicare. Virtually no one understands that for 
every dollar we spend on Social Security and Medicare, we are 
spending 75 cents on assistance to the poor. And, this year 
alone that spending came to $927 billion, close to a trillion 
dollars a year, on expenditures that are largely unrecognized. 
Most of the debate about this system is irrational because 
there are 79 different programs, and when we talk about welfare 
we basically talk about one program at a time while ignoring 
the other 78. It is like having a jigsaw puzzle with 78 pieces, 
but when you write a press story about it, you only write a 
press story about one piece at a time. That always makes the 
welfare state seem very small, very meager, and it always seems 
like we are not spending enough, basically, because we are 
never actually discussing how much is going out the door on 
these programs.
    Now, if you take this $927 billion, these programs are 
unique in the sense that they have required state spending in 
them, so you cannot just look at federal spending. You are 
requiring states to spend money on these programs, particularly 
on Medicaid, and that goes out the door, and it assists poor 
people, and that is about a quarter of all this spending. You 
have to add that in order to get a good sense of the resources. 
When you look at these 79 programs what you find is about half 
the spending goes to medical care, primarily through the 
Medicaid program, about 40 percent of it, which is about $380 
billion a year, goes to cash, food, housing, and housing 
programs, a lot of different programs there. And about 10 
percent of this spending goes to what I call our enabling 
programs, programs that are intended to make the poor more 
self-sufficient, like child development or targeted job 
training or targeted education funds into poor communities from 
the federal government.
    About half of these benefits go to families with children, 
predominantly single parent families with children. About a 
quarter of them go to the disabled. About 15 percent go to the 
elderly; so it is a diverse population.
    And Ron has gone into the spending. Adjusting for inflation 
back when the war on poverty started in 1965, we were spending 
about, I think, $60 billion a year. This spending, adjusting 
for inflation, has increased sixteen fold since that time. All 
together, we have spent $19.8 trillion in means-tested 
assistance since the beginning of the war on poverty. People 
would say that is mainly in medical care. This breaks it out. 
The purple is the medical care, but, you can see even after 
adjusting for inflation, all the other types of spending went 
up very dramatically as well.
    For example, means-tested cash, food, and housing, over the 
last 20 years, actually grew faster than Social Security 
spending; most people have no idea of this. In fact, a lot of 
people are surprised when they see this, and they say, ``I 
thought we ended this back in 1996.'' And I say, ``Yeah, you 
ended it short of $927 billion, okay?'' Enormous growth in 
spending with really no stopping point.
    This chart shows this spending as a percentage of GDP.
    

    
    What you can see is back at the beginning of the war on 
poverty the spending was about one percent of GDP, and it 
increases about one percentage point of GDP each decade. By the 
1980s you were up to around 3.5 percent of GDP. During Bush's 
presidency, you were at about 5 percent of GDP. We have now 
ratcheted up to 6 percent of GDP. And people might say that is 
reasonable. We are in a recession. We ought to spend more money 
on the poor during a recession. But when you look at Obama's 
out year projections in his fiscal year 2013 budget this 
spending never comes back down. It grows dramatically over the 
next ten years and will remain always at or above 6 percent of 
GDP for the foreseeable future.
    One of the rules here is the ratchet principle. When this 
spending goes up, there is never any press comment on it, okay? 
It is invisible, absolutely invisible. It just goes up, and you 
never will see a press story about this at all. Then after it 
goes up 1 percentage of GDP, if you were to try to pull it back 
down to, say, 5 percent of GDP, then you are savaging the 
safety net and so forth and so on; so all the increases are 
always invisible. They are off-camera. They are never talked 
about. If you try to take a dime out of this after it has been 
ratcheted up then the sky is falling. The end of the world is 
right here upon us.
    Now, one question is, well, how much is this spending? How 
much is $927 billion a year? Well, the answer is if you just 
took that money and divided by the number of poor people in the 
U.S., it comes to around $19,000 per poor person per year. My 
figures are a little different than Dr. Haskins because I have 
the state contributions in this as well; and that is not a very 
accurate figure, because a lot of this spending goes to non 
poor people as well.
    A more accurate way of assessing these resources is to say 
if you took all of this spending and spread it out equally 
within the lowest income one-third of the population, about 100 
million people, which is probably the pool of overall 
recipients, how much does that amount to? It comes to around 
$9,000 per person per year, or around $36,000 for a family of 
four.
    One way to understand this, how much is being spent, is if 
you took that $927 billion and you converted it all into cash 
and you handed it out, you would have enough money there to 
raise the income of every family in the United States to 200 
percent of the poverty level. That's $44,000 a year. You could 
take every single low income family and raise their minimum of 
$44,000 a year and still have about $200 billion in spare 
change on the side. That is how much is being spent here, 
largely invisibly, largely without any acknowledgement, and 
when you try to talk about this, which is very important, you 
will immediately get caught in the briars nest of trying to 
talk about one program at a time. Well, let's talk about WIC. 
Let us talk about Section 8 housing.
    The fact of the matter is that there is an enormous 
overlapping system of benefits with far more money going out 
the door than anyone knows. I would say before we permanently 
ratchet this spending up from 5 percent to 6 percent of GDP, 
which is what Obama is asking for, we ought to figure out where 
that money goes, because I do not know where this money goes 
nor does anyone else in this city. It goes out the door, but 
when you go to try to count it in the census and so forth, most 
of it disappears.
    You guys are stuck with the game, and the game I call it 
that has been going on in this city for 40 years is you spend 
it and we in the welfare industry will not count it. All of our 
surveys and so forth, we will hide. We will not count this 
money as received by the poor. In fact, out of this $900 
billion in spending, only about 4 percent of this is routinely 
counted as income received by poor people. And then we say my 
goodness, poor people do not have any economic resources. You 
need to spend more money. It is a permanent con game on the 
American taxpayer. You have to have an honest accounting of how 
much money is going out the door. This is important spending. 
It does go, it does help people, but you have to have a real 
accurate understanding of how much you, in fact, are asking the 
taxpayers to pay in support.
    Now, people would say under the Obama administration, this 
spending has been ratcheted up by 30 percent in three years. It 
is the largest increase ever in the U.S. welfare system, a 
huge, huge increase. And most people, when I talk to the press 
or to just ordinary people will say that sort of makes sense, 
okay? We are in the middle of a very severe recession. We need 
more spending. But the anticipation is that that spending will 
go back down after the recession ends. No way. You have not 
been in Washington very long if you think that is what is going 
to happen, okay?
    If you looked at that earlier chart and the one that Dr. 
Haskins had, this spending never goes down, okay?



    Maybe three years out of 50 years does this spending ever 
go down. And if you look at Obama's 2013 budget, what he shows 
is that this spending pauses for one year, and then it starts 
to grow and grow and grow and grow very rapidly. It never goes 
back down. It will always remain above 6 percent of GDP, and by 
2021, you are going to be spending $1.5 trillion on means-
tested welfare. And, again, do not ever expect to see any 
mainstream news story on this as this spending goes up year 
after year after year. The stories you will get is about some 
marginal cut in one of the programs or something like that 
because, basically, the left does not want to acknowledge how 
much we currently redistribute income. Not to say that these 
programs should be just slashed or abolished or that they do 
not help people, they do, but we have to be honest about the 
magnitude of help that we are giving and try to design these 
programs more accurately.
    One other thing that is very important, I think, in the 
Obama budget, is to look at the relative priorities given to 
the means-tested welfare system and national defense. This is 
out years. The blue line in the Obama budget, that is national 
defense spending. The pink line is means-tested welfare.



    And what you find historically is in the entire post-war 
period, defense spending always greatly outstripped welfare 
spending, and that was true up until 1993, which was the first 
year that welfare actually jumped above defense spending. But 
from 1993 through the present time, really we have spent about 
$1.33 in welfare for every dollar that we were spending on 
national defense, not exactly a story you see in the press, 
either, but the Obama budget breaks that entirely. What Obama 
is saying is he is going to freeze national defense spending in 
nominal terms for a decade while he is going to increase means-
tested welfare by about 70 percent during that same period.
    So while the current ratio of means-tested welfare to 
defense is about $1.30 to a dollar, Obama by 2021 is going to 
take that up to around $2.40 of welfare for every dollar spent 
on national defense, a huge transformation in national 
priorities and national programming.
    I think that it is clear that the deficits that are in the 
Obama budget are unsustainable and to a significant degree, 
although not entirely, those deficits are the result of these 
very rapid planned increases in the welfare state that are 
buried in that budget. I think that what we need to do, among 
other things, is begin to get this welfare spending under 
control, not by severely cutting it, but by rolling the 
spending back to the levels that existed before the beginning 
of the current recession, adjusting for inflation, and then 
allow that spending to increase at the rate of inflation for 
the next 10 years.
    We were already at record levels of spending in 2007 before 
the recession began. If this spending is a temporary response 
to the recession instead of a permanent increase in the welfare 
state, we ought to be able to go back to those levels. If we 
did that the savings for the federal government would be $2.7 
trillion over the next decade. That is how large this 
expenditure system is.
    Again, I am not calling for massive cuts. I am calling for 
going back to the sort of system that we had before the planned 
expansions that Obama is seeking to put into the welfare 
system. Thank you.
    [The prepared statement of Robert Rector follows:]

      Prepared Statement of Robert Rector, Senior Research Fellow,
           Family & Welfare Studies, the Heritage Foundation

    My name is Robert Rector. I am a Senior Research Fellow at The 
Heritage Foundation. The views I express in this testimony are my own, 
and should not be construed as representing any official position of 
The Heritage Foundation.
                                summary
    The governmental safety net has three basic components: 1) Social 
Security and Medicare for the elderly; 2) unemployment insurance and 
worker's compensation; and 3) anti-poverty or means-tested welfare 
programs. My testimony will deal with the means-tested welfare system 
which could also be called comprehensive assistance to the poor.
    The means-tested welfare system consists of 79 federal programs 
providing cash, food, housing, medical care, social services, training, 
and targeted education aid to poor and low income Americans. Means-
tested welfare programs differ from general government programs in two 
ways. First, they provide aid exclusively to persons (or communities) 
with low incomes; second, individuals do not need to earn eligibility 
for benefits through prior fiscal contributions. Means-tested welfare 
therefore does not include Social Security, Medicare, Unemployment 
Insurance, or worker's compensation.
    Although the public is aware that Social Security and Medicare are 
large expensive programs, few are aware that for every $1.00 spent on 
these two program, government spends 76 cents on assistance to the poor 
or means-tested welfare.
    In FY2011, federal spending on means-tested welfare came to $717 
billion. State contributions into federal programs added another $201 
billion, and independent state programs contributed around $9 billion. 
Total spending from all sources reached $927 billion.
    About half of means-tested spending is for medical care. Roughly 40 
percent goes to cash, food, and housing aid. The remaining 10 to 12 
percent goes what might be called ``enabling'' programs, programs that 
are intended to help poor individuals become more self-sufficient. 
These programs include child development, job training, targeted 
federal education aid and a few other minor functions.
    The total of $927 billion per year in means-tested aid is an 
enormous sum of money. One way to think about this figure is that $927 
billion amounts to $19,082 for each American defined as ``poor'' by the 
Census. However, since some means-tested assistance goes to individuals 
who are low income but not poor, a more meaningful figure is that total 
means-tested aid equals $9,040 for each lower income American (i.e., 
persons in the lowest income third of the population).
    If converted to cash, means-tested welfare spending is more than 
sufficient to bring the income of every lower income American to 200 
percent of the federal poverty level, roughly $44,000 per year for a 
family of four. (This calculation combines potential welfare aid with 
non-welfare income currently received by the poor.)
    In the two decades before the current recession, means-tested 
welfare was the fastest growing component of government spending. It 
grew more rapidly that Social Security and Medicare and its rate of 
increase dwarfed that of public education and national defense. While 
means-tested medical benefits have been the fastest growing part of the 
welfare system, most other forms of welfare aid have grown rapidly as 
well.
    For example, spending on means-tested cash, food and housing has 
grown more rapidly than Social Security over the last two decades. 
Adjusting for inflation and population growth, the U.S. now spends 50% 
more on means-tested cash, food and housing than it did when Bill 
Clinton entered office on a promise to ``end welfare as we know it''. 
It comes as a surprise to most to learn that the core welfare state has 
expanded dramatically since reform allegedly ``ended welfare'' in the 
mid 1990's.
    Total means-tested spending on cash, food and housing programs is 
now twice what would be needed to lift all Americans out of poverty. 
Why then does the government report that over 40 million persons live 
in poverty each year? The answer is that, in counting the number of 
poor Americans, Census ignores almost the entire welfare state: Census 
counts only a minute fraction of means-tested cash, food and housing 
aid as income for purposes of determining whether a family is poor.
    Despite the fact that welfare spending was already at record levels 
when he took office, President Obama has increased federal means-tested 
welfare spending by more than a third. Some might this is a reasonable, 
temporary response to the recession, but Obama seeks a permanent, not a 
temporary, increase in the size of the welfare state.
    According to the President's FY2013 budget plans, means-tested 
welfare will not decline as the recession ends but will continue to 
grow rapidly for the next decade. According to Obama's budget, total 
annual means-tested spending will be permanently increased from five 
percent of GDP to six percent of GDP. Combined annual federal and state 
spending will reach $1.56 trillion in 2022. Overall, President Obama 
plans to spend $12.7 trillion on means-tested welfare over the next 
decade.
    Obama's budget plans call for ruinous and unsustainable budget 
deficits. These deficits are, in part, the result of dramatic, 
permanent increases in means-tested welfare. An important step in 
reducing future unsustainable federal deficits would be to return 
welfare spending to pre-recession levels.
    To accomplish this, Congress should establish a cap on future 
welfare spending. When the current recession ends, or by 2013 at the 
latest, total federal means-tested welfare spending should be returned 
to pre-recession levels, adjusted for inflation. In subsequent years, 
aggregate federal welfare spending should grow no faster than 
inflation. This type of spending cap would save the taxpayers $2.7 
trillion dollars during its first decade. An aggregate welfare spending 
cap of this sort is contained in HR 1167, The Welfare Reform Act of 
2011 introduced by Congressman Jim Jordan (R-OH).
                        the hidden welfare state
    Most discussion of government spending and deficits assumes that 
the federal budget consists of four principal parts: entitlements 
(meaning Social Security and Medicare); defense; non-defense 
discretionary spending; and interest. This perspective is misleading 
because it ignores the hidden welfare state: a massive complex of 79 
federal means-tested anti-poverty programs.
    The public is almost totally unaware of the size and scope of 
government spending on the poor. This is because Congress and the 
mainstream media always discuss welfare in a fragmented, piecemeal 
basis. Each of the 79 programs is debated in isolation as if it were 
the only program affecting the poor. This piecemeal approach to welfare 
spending perpetuates the myth that spending on the poor is meager and 
grows little, if at all.
    The piecemeal, fragmented character of the hidden welfare system 
makes rational policy-making and discussion impossible. Sound policies 
to aid the poor must be developed holistically, with decision makers 
and the public fully aware of the magnitude of overall spending.
         understanding means-tested welfare or aid to the poor
    Means-tested welfare spending or aid to the poor consists of 
government programs that provide assistance deliberately and 
exclusively to poor and lower-income people.\1\ By contrast, non-
welfare programs provide benefits and services for the general 
population. For example, food stamps, public housing, Medicaid, and 
Temporary Assistance to Needy Families are means-tested aid programs 
that provide benefits only to poor and lower-income persons. On the 
other hand, Social Security, Medicare, police protection, and public 
education are not means-tested; they provide services and benefits to 
persons at all income levels.
---------------------------------------------------------------------------
    \1\ The only exception to this rule is a small number of means-
tested programs that provide aid to low income communities rather than 
individuals.
---------------------------------------------------------------------------
    Means-tested programs are anti-poverty programs: they are intended 
to increase the living standards or improve the capacity for self-
support among the poor and near-poor. Unlike many other government 
programs, means-tested welfare programs do not require a prior fiscal 
contribution to establish eligibility.
    The size of the federal means-tested aid system is particularly 
large because it is funded not only with federal revenue but also with 
state funds contributed to federal programs. Ignoring these matching 
state payments into the federal welfare system results in a serious 
underestimation of spending on behalf of the poor. Prior to the current 
recession, one dollar in seven in total federal, state, and local 
government spending went to means-tested welfare.
                         79 assistance programs
    The 79 means-tested programs operated by the federal government 
provide a wide variety of benefits. The federal welfare state includes:

          12 programs providing food aid;
          12 programs funding social services;
          12 educational assistance programs;
          11 housing assistance programs;
          10 programs providing cash assistance;
          9 vocational training programs;
          7 medical assistance programs;
          3 energy and utility assistance programs; and,
          3 child care and child development programs.

    Several programs provide more than one type of benefit. In addition 
there are a few independent state programs providing cash and medical 
aid. A full list of these programs is provided at the end of this 
testimony. (Note: Social Security, Medicare, veterans programs, 
unemployment insurance and workmen's compensation are not considered 
means-tested aid and are not included in this list, nor in the spending 
figures in this testimony.)
    In FY2011, federal spending on means-tested welfare, plus state 
contributions to federal programs, reached $927 billion per year. The 
federal share came to $717 billion or 77 percent; state spending was 
$210 billion or 23 percent. (See chart 1.)
    In recent years, 49 percent of total means-tested spending went to 
medical care for poor and lower-income persons, and 39 percent was 
spent on cash, food, and housing aid. The remaining 12 percent was 
spent on social services, training, child development, targeted federal 
education aid, and community development for lower-income persons and 
communities. (See chart 2.)
              means-tested spending by recipient category
    Roughly half of means-tested spending goes to families with 
children, most of which are headed by single parents. Some 28 percent 
of spending goes to disabled persons. Another 14 percent goes to 
elderly persons. A final eight percent of spending goes able-bodied, 
non-elderly adults without children. (See chart 3.)
                      growth of the welfare state
    Welfare spending has grown enormously since President Lyndon B. 
Johnson launched the War on Poverty. After adjusting for inflation, 
welfare spending was 16 times greater in FY 2011 than it was when the 
War on Poverty started in 1964. (See charts 4 and 5.)
    Means-tested welfare spending was 1.2 percent of the gross domestic 
product (GDP) when President Johnson began the War on Poverty. By the 
1980's spending had risen to around 3.5 percent of GDP. During the 
first decade of the twenty first century, spending averaged slightly 
less than 5 percent of GDP. By 2011, spending had reached 6.1 percent 
of GDP. However, under Obama's budget plans spending will not decline 
as the current recession ends but will remain at 6 percent of GDP for 
the next decade. (See chart 6.)
 welfare spending: the fastest growing component of government spending
    For the past two decades, means-tested welfare or aid to the poor 
has been the fastest growing component of government spending, 
outstripping the combined growth of Medicare and Social Security 
spending, as well as the growth in education and defense spending. Over 
the 20-year period between FY 1989 and FY 2008, total means-tested 
spending increased by 292 percent over the period. The increase in 
combined Social Security and Medicare spending was 213 percent over the 
same period.
    Means-tested spending on cash, food, and housing increased more 
rapidly (196 percent) than Social Security (174 percent). The growth in 
means-tested medical spending (448 percent) exceeded the growth in 
Medicare (376 percent).\2\ The growth in means-tested aid greatly 
exceeded the growth in government spending on education (143 percent) 
and defense (126 percent).
---------------------------------------------------------------------------
    \2\ Some have attributed the rapid growth in means-tested medical 
spending to inflation in medical prices. Medical prices only doubled 
during the period. The rest of the increase was due to expansions in 
the number of recipients and services provided.
---------------------------------------------------------------------------
                    total cost of the war on poverty
    Since the beginning of the War on Poverty, government has spent 
$19.8 trillion (in inflation-adjusted 2011 dollars) on means-tested 
welfare. In comparison, the cost of all military wars in U.S. history 
from the Revolutionary War through the current war in Afghanistan has 
been $6.98 trillion (in inflation-adjusted 2011 dollars).\3\ The War on 
Poverty has cost three times as much as all other wars combined.
---------------------------------------------------------------------------
    \3\ Stephen Daggett, ``Costs of Major U.S. Wars,'' Congressional 
Research Service, June 29, 2010. The CRS report counts the cost of wars 
through FY2010; the additional cost of the wars in Iraq and Afghanistan 
in FY2011, at $159 billion, was added to the CRS figures.
---------------------------------------------------------------------------
         means-tested welfare spending on lower-income persons
    With 79 overlapping means-tested programs serving different low-
income populations, it is difficult to determine the average level of 
benefits received by low-income persons. One way of estimating average 
welfare benefits per recipient would be to divide total means-tested 
spending by the total number of poor persons in the United States. 
According to the Census Bureau, there were 46.2 million poor persons in 
the U.S. in 2010. Total means-tested spending in 2010 was $881.2 
billion. If this sum is divided by million poor persons (including 
residents in nursing homes), the result is $19,082 in means-tested 
spending for each poor American.
    However, this simple calculation can be misleading because many 
persons with incomes above the official poverty levels also receive 
means-tested aid. Although programs vary, most means-tested aid is 
targeted to persons in the lowest income third of the population. Thus, 
a more a accurate sense of average total welfare spending per recipient 
can be obtained, if total welfare aid is divided among all persons 
within this larger group. Dividing total means-tested aid by all 
persons in the bottom third of the income distribution results in 
average welfare spending of $9,040 per person in 2011, or around 
$36,000 for a family of four. (See chart 7)
    This is not precise estimate of benefits received. Rather, the 
calculation is intended to gauge spending relative to the potential 
population of beneficiaries. Benefits are not uniform: disabled and 
elderly persons receive substantially higher assistance than do other 
recipients.\4\ Despite these caveats, a simple fact remains: the ratio 
of welfare outlays relative to the population served is very high.
---------------------------------------------------------------------------
    \4\ The per capita cost of medical care for elderly persons in 
nursing homes is particularly high; however, such spending is less than 
a tenth of overall means-tested spending, its exclusion would not 
greatly alter the figures in the text.
---------------------------------------------------------------------------
            means-tested spending on families with children
    Another way of examining spending levels is to look at welfare 
spending on families with children. In FY 2011, total means-tested 
spending was $927 billion. About half of this spending ($462 billion) 
will go to families with children. (Around one-third of this spending 
went to medical care.)
    If the $462 billion in welfare spending were divided equally among 
the lowest income one third of families with children (around 14 
million families), the result would be around $33,000 per low income 
family with children.
    In addition, most of these lower-income families have earned 
income. Average earnings within the whole group are typically about 
$16,000 per year per family, though in the midst of a recession, 
earnings will be lower. If average welfare aid and average earnings are 
combined, the total resources is likely to come to between $40,000 and 
$46,000 for each lower-income family with children in the U.S. It is 
very difficult to reconcile this level of resources with conventional 
claims that millions of lower-income families are chronically hungry, 
malnourished, or ill-housed.
                  welfare spending and the poverty gap
    The Census Bureau measures poverty in the U.S. by comparing a 
family's annual cash income with the federal poverty income threshold 
for a similar size family. The poverty income threshold for a family of 
four was roughly $22,000 in 2010. If the family's cash income is less 
than the poverty income threshold then the family is deemed poor.
    The poverty gap is a measure of the total amount of extra income 
needed to raise the incomes of all poor Americans up to the federal 
poverty income threshold. In other words, the poverty gap measures the 
extra economic resources needed to eliminate official poverty in the 
U.S. The pre-welfare poverty gap is the poverty gap if the current 
means-tested aid which Census reports as received by poor households is 
excluded from the initial count of income.
    In 2010, the poverty gap for all households was $152 billion. The 
pre-welfare poverty gap was $173 billion. Total means-tested spending 
in that year was $881 billion or five times the pre-welfare poverty 
gap. Means-tested cash, food and housing was $339 billion or nearly 
twice what was needed to raise all families out of poverty.
    The double poverty gap is the total amount of extra income needed 
to raise incomes of all low income households to twice the federal 
poverty income threshold. In 2010, twice the federal poverty income 
threshold for a family of four would be an income of around $44,000 per 
year. The pre-welfare double poverty gap is the amount of income needed 
to raise all low income family's income to twice the federal poverty 
threshold if current welfare benefits counted as received by the family 
are excluded from the initial count of family income.
    The pre-welfare double poverty gap for all households in 2010 was 
$720 billion. By comparison, total means-tested spending was $881 
billion in 2010 and $927 billion in 2011. If converted into cash, total 
welfare spending would be more than sufficient to raise the incomes of 
all U.S. households to twice the poverty level. This does not mean that 
restructuring benefits in this manner and converting all aid to cash 
would be an optimal policy, but it does illustrate the high level of 
resources that are currently allocated to assisting lower income 
persons.
       welfare spending increases under the obama administration
    Table 1 shows the growth in means-tested spending over recent 
years. In FY 2007, total government spending on means-tested welfare or 
aid to the poor was a record high $657 billion. By fiscal year 2011, 
total government spending on means-tested aid had risen to $927 
billion, a forty percent increase.

                                    TABLE 1.--GROWTH IN MEANS-TESTED SPENDING
                                                  [In billions]
----------------------------------------------------------------------------------------------------------------
                                                                   Federal
                                                                   spending      State spending   Total spending
----------------------------------------------------------------------------------------------------------------
FY 2007......................................................          $468.7           $189.2           $657.9
FY 2008......................................................          $522.3           $191.6           $714.1
FY 2009......................................................          $612.7           $167.2           $779.9
FY 2010......................................................          $695.3           $192.7           $888.0
FY 2011......................................................          $717.1           $210.1           $927.2
----------------------------------------------------------------------------------------------------------------

    President Obama's increase in federal means-tested welfare spending 
during his first two years in office was two and a half times greater 
than any previous increase in federal welfare spending in U.S. history, 
after adjusting for inflation.
               obama plans permanent increases in welfare
    Supporters of the President's spending might counter that these 
spending increases are merely temporary responses to the current 
recession. But that is not the case; most of Obama's spending increases 
are permanent expansions of the welfare state. According to the long-
term spending plans set forth in Obama's FY 2013 budget, combined 
federal and state spending will not drop significantly after the 
recession ends. In fact, according to the President's own spending 
plans, by 2014, welfare spending exceeds one trillion per year. By 
2022, total means-tested spending will reach $1.57 trillion.\5\ (See 
chart 8.) Much of this increase in spending will be due to the increase 
in medical expenditures under Obamacare.
---------------------------------------------------------------------------
    \5\ Most future state welfare spending will occur in the Medicaid 
program. Outyear state Medicaid spending figures were obtained from the 
Department of Health and Human Services, 2010 Actuarial Report on the 
Financial Outlook for Medicaid, page 19. www.cms.gov/ActuarialStudies/
downloads/MedicaidReport2010.pdf State Medicaid spending after 2019 was 
estimated based on the prior ratios of federal to state Medicaid 
spending. State means-tested spending for programs other than Medicaid 
is modest; outyear spending figures were estimated based on the 
required state contributions into a program relative to federal 
outlays.
---------------------------------------------------------------------------
    According to President Obama's budget projections, federal and 
state welfare spending will total $12.8 trillion over 10 years (FY 2009 
to FY 2018). This spending will cost over $130,000 for each taxpaying 
household in the U.S.
                spending priorities: welfare and defense
    Throughout most of the post-war period, annual defense spending 
greatly exceeded means-tested welfare. In 1993 welfare spending 
exceeded defense spending for the first time since the great depression 
of the 1930's. In subsequent years the ratio of welfare to defense 
spending averaged about 1.33 to 1.00.
    Obama's budget calls for jettisoning this pattern. Defense spending 
will decline in nominal dollars while means-tested welfare spending 
will increase 70 percent. By 2022, there will be $2.33 in federal and 
state welfare spending for every one dollar spent on national defense. 
(See chart 9.)
                               conclusion
    Means-tested spending comprises a vast, hidden welfare state. The 
public is almost totally unaware of the size and scope of government 
spending on the poor. This is because Congress and the mainstream media 
always discuss welfare in a fragmented, piecemeal basis. Each of the 79 
programs is debated in isolation as if it were the only program 
affecting the poor. This piecemeal approach to welfare spending 
perpetuates the myth that spending on the poor is meager and grows 
little, if at all.
    The piecemeal, fragmented character of the hidden welfare system 
makes rational policy-making and discussion impossible. Sound policies 
to aid the poor must be developed holistically, with decision makers 
and the public fully aware of the magnitude of overall spending.
    America faces a fiscal crisis. Obama's budget plans call for 
ruinous and unsustainable future budget deficits. These deficits are, 
in part, the result of dramatic, permanent increases in means-tested 
welfare. An important step in reducing future unsustainable federal 
deficits would be to return welfare spending to pre-recession levels. 
To accomplish this, Congress should establish a cap or limit on the 
future growth of total means-tested spending.
    When the current recession ends, or by 2013 at the latest, total 
means-tested welfare spending should be returned to pre-recession 
levels, adjusted for inflation. In subsequent years, aggregate welfare 
spending should grown no faster than inflation. This type of spending 
cap would save the taxpayers over $2.7 trillion dollars during its 
first decade. An aggregate welfare spending cap of this sort is 
contained in HR 1167, The Welfare Reform Act of 2011 introduced by 
Congressman Jim Jordan (R-OH).

    Chairman Ryan. Thank you. Bob?

                 STATEMENT OF ROBERT GREENSTEIN

    Mr. Greenstein. Thank you, Mr. Chairman, for the 
opportunity to discuss these important issues. The leading 
research suggests that the safety net is actually functioning 
much better than is often recognized. A comprehensive review is 
conducted by some of the leading scholars in the field on the 
impact of the safety net, among other things, they looked at 
the impact of the safety net on the amount that people work and 
found that the impact was quite small and that after taking 
this behavioral effect into account, that the safety net cuts 
poverty about in half. They found that one in every seven 
Americans would be poor without the safety net but is lifted 
above the safety net by it.
    Now, as we are hearing in this hearing and elsewhere, 
questions are raised about the safety nets impact on 
dependency, on the budget, and there are also issues about its 
impact on deep poverty. Let me briefly cover each of those in 
turn.
    Over the past few decades, we have moved, as Ron Haskins 
indicated, very much toward a work-based safety net. Cash 
welfare assistance for families who do not work has diminished 
greatly. Support for the working poor has increased. The 
results are notable. Even though 2010 was a year with an 
unemployment rate of 9.6 percent, and could I have the first 
slide, please?



    In 2010, 91 percent of all spending on federal entitlement 
benefits went to people who either are not expected to work 
because they are elderly or disabled, or were members of 
households that did work. These data are consistent with the 
findings of the comprehensive review of the research I 
mentioned, which finds that today's much more work-based safety 
net does not have a large effect in reducing work effort.
    The study reported, for example, that the research shows 
the effect of SNAPS, formerly called food stamps, on work, is 
quite small and that the impact on, of Medicaid on work appears 
to be minimal. This is in significant part of result of major 
changes in both programs from programs where you largely had to 
be on welfare to get the assistance to programs primarily for 
low-income working families who are not on welfare and where 
you do not have to be on welfare and can work at low wages and 
continue to get this support.
    The findings on these programs differ significantly from 
the findings regarding the effect of the old welfare system on 
work prior to welfare reform. Concerns that the current safety 
net is leading millions to become dependent and cease working 
are simply not consistent with the research.
    Let me turn to the budgetary issue, which the previous two 
members of the panel have talked a lot about. Now, we all know 
that Medicaid has been rising substantially in costs, and is 
projected to rise further. Health care costs are rising faster 
than GDP throughout the entire health care system, private 
sector, Medicare, and Medicaid. They have been for several 
decades, and the system-wide cost increases raise Medicaid 
costs with them, even though Medicaid costs less per 
beneficiary than private insurance. Medicaid pays providers 
less.
    Medicaid costs also will rise further in coming years 
because of the aging of the population. Older people have much 
higher average health care costs than younger people do, and 
costs will rise also because of the coverage expansions in the 
Affordable Care Act. They do not add to the deficit in that 
their costs were offset by reductions in Medicare and increases 
in revenue, but they push up costs for means-tested programs.
    Now, here is the key point. The figures that Ron Haskins 
and Robert Rector have just presented of the safety net 
exploding and cost are dominated by health care. They are 
largely a story of health care. Let us look at the data. What I 
suggest is for us to really dig in and understand what is going 
on, and that we take means-tested programs and we divide them 
into two categories: health care, and all of the rest. When we 
do that, here is what we find. Next slide, please.



    We find that federal expenditures for all means-tested 
entitlements outside health care equaled 2 percent of GDP in 
2011, and, to be sure, that is 50 percent higher for the 
average for the previous 40 years. However, the recent 
increases are largely driven by the economic downturn and 
temporary program expansions under the Recovery Act. The CBO 
projections show that expenditures for means-tested 
entitlements outside health care will decline as the economy 
recovers. They will fall to 1.3 percent of GDP, these are CBOs 
figures, by 2020 and thereafter.
    In other words, by 2020, total means-tested entitlement 
expenditures outside health care will return all of the way to 
their prior 40 year average, the average for 1972 to 2011, and 
those figures do not include discretionary programs. Low-income 
discretionary programs are going to shrink because all non-
defense discretionary shrinks under the Budget Control Act caps 
even if there is not a sequester that falls by 2021 to its 
lowest share of GDP since 1962.
    So, total means-tested spending outside of health care is 
on track, under the CBO figures, to actually fall over the 
coming decade below its previous 40 year average.
    What about Roberts figures on the Obama budget about how 
much means-tested spending goes up in coming years? That is an 
artifact of the expansions in the Affordable Care Act. Again, 
let us look at health care and the others separately. I would 
also note that when you look at how much the money is per poor 
person, you have to keep in account that over two-thirds of all 
Medicaid spending is for the elderly and disabled. Half of all 
nursing home expenditures in this country are paid for through 
Medicaid. You cannot take the big nursing home expenditures per 
person and somehow hand out as a per cash amount to a low 
income family with children.
    Final issue, deep poverty: This is a matter of concern. The 
number of children living below half the poverty line increased 
by 650,000 between 1995 and 2005, even before the economy 
turned down, and these figures do count non-cash benefits, like 
food stamps and housing and so forth, and the earned income 
credit, as income.
    So, basically what has happened is the changes brought by 
the 1996 welfare law, in combinations with expansions in the 
earned income credit, have pulled more single mother families 
into the labor market and raised many of their incomes. At the 
same time, the welfare changes also deepened poverty among 
another group of single mother families, primarily those with 
less education and skills and more physical, mental health, or 
other problems. Some of those families fell deeper into poverty 
as a result of having little, or nothing, from either earnings 
or cash assistance.
    Basically, any intervention in any field of government or 
even health care, whatever, can hurt some people, help some 
people and hurt others. The evidence suggests that the changes 
under the welfare law did reduce the number of people below 100 
percent of poverty, and, at the same time, increased the number 
people below 50 percent of poverty. Next slide, please



    This phenomenon is reflected in a recent study; it just 
came out about a month ago about by leading researchers that 
finds that the number of families and the number of children 
living below a standard that the World Bank uses to measure 
serious poverty in third-world countries living on less than $2 
per person per day has doubled since 1995. These findings are 
of particular concern in light of emerging research which shows 
that among low-income families, the level of income on a child 
as young affects school achievement and may well affect later 
employment and earnings as an adult.
    I would note here in this vein that were it not for the 
SNAP program, the rise in deep poverty would be much greater. 
The data showed that SNAP cuts nearly in half the percentage of 
children living below that World Bank poverty standard and 
plays a very important role here. So, in conclusion, one thing 
all panel members agree on is that we are on an unsustainable 
fiscal course, but we also have levels of poverty and 
inequality that are higher than those in most western nations. 
The Bowles-Simpson Commission Report sought to balance both of 
those concerns. It adopted and emphasized as one of its core 
principles that deficit reduction should not increase poverty 
or harm the disadvantaged, and it did not call for reductions 
in any low income programs outside Medicaid.
    Last year, a group of Christian leaders, ranging from the 
Catholic Bishops Conference and the Episcopal Church to the 
Salvation Army and the National Association of Evangelicals 
issued a call for policymakers to safeguard the poor in deficit 
reduction and draw a circle of protection, in other words, 
around programs targeted on them. So I will urge policymakers 
to seriously consider those principles as they face the tough 
decisions ahead. Thank you again for the opportunity to 
testify.
    [The prepared statement of Robert Greenstein follows:]
    
    
    
    
    Chairman Ryan. Thank you, Bob. Let me just begin with you, 
Dr. Mulligan. One in six people are in poverty today. Our rates 
are the highest they have been in a generation. And as we have 
seen, our spending on these programs is at an all-time high as 
well. So it is not working. That is the whole point here. What 
can we do to have our anti-poverty programs work? And that is 
the goal of this.
    I think this study in marginal tax rates, the implicit 
incentive or disincentive to move on to a life of independence 
on upward mobility is something that we need to look at. You 
have done so much work on this, Dr. Mulligan. Can you bring up 
Chart 8?



    We have Gene Sterling, his chart, you may be familiar with 
this, at the Urban Institute, who talked about the implicit 
marginal tax rate is as high as 80 percent or higher between 
the income thresholds of $15,000 and $40,000. You mentioned 
what the effect this has on labor force participation. I have 
two quick questions. What is the effect, in your quantitative 
analysis, on its effect on labor force participation, and what 
was the implicit rate before the recession, and what do you 
think it is now? And then onto that I think you have done some 
research into how much increasing spending on the safety net 
was due to natural increases related to the recession, and how 
much was due to changes in eligibility and benefits?
    So where were we before the recession started with the 
sense of spending and the implicit marginal tax rate? Where are 
we now with respect to the marginal tax rate? And how much of 
the additional spending was because of eligibility or because 
of the recession?
    Mr. Mulligan. Okay, Mr. Chairman, you pointed us to the 
chart here from the Urban Institute, and that is showing 
something like a marginal tax rate as a function of income. It 
is at a certain point in time. I do not know what year is 
covered, here, maybe it is 2011 or something. But the point is 
we are comparing different income groups, and you can see the 
line wiggles. There is not one marginal tax rate, of course.
    My work has really focused on, not comparing the income 
groups but comparing different years. Last year compared to 
2007 before there was a recession. And in doing so, of course, 
I look at charts like this, but I like to summarize things in 
terms of kind of just a middle person. I call it in my 
testimony, the ``median household head or spouse.'' What does 
their marginal tax rate look like? In 2007, their marginal tax 
rate from all these programs considered, as well as some others 
that are not considered there, was in the 40s, the low 40s, 
let's call it 42 percent for a precise number. And when the 
ARRA was at its heyday, that marginal tax rate went up around 
50 percent, so it went up about eight points, maybe nine 
points. Some of those provisions expired, and now we are down 
to maybe 46 percent; so there was an increase at one point of 8 
or 9 percent. Now we are just 4 percent or so higher. I say, 
``just;'' 4 percent is very big by historical standards, it is 
not like the marginal tax rate for the median household head or 
spouse changes every month or changes every year. That is a big 
change.
    I like to use the analogy of a 100 gallon fish tank and it 
is full of water, and there is fish living in there swimming 
around having fun and stuff. And you ask me, ``Well, what if I 
take a gallon of water out of that fish tank?'' And I say, 
``Well, the tank is already full, probably not going to be a 
big deal. There might be one sensitive fish there who is 
bothered, but most of the fish will be fine.''
    But if you got a fish tank that is half full or half empty 
because somebody else took 50 gallons out of it, and now you 
ask me, ``Can I take a gallon out of that tank?'' I say, ``You 
better be careful. You are going to do a lot more damage to 
those fish when you take 1 percent of the tank's capacity out 
of a tank that is already half empty.'' And that is where we 
were in 2007. People were not quite at 50 percent, but their 
marginal tax rates were up there around 40 or 50 percent, and 
what we did is we added several more percentage points to that. 
And that affects the economy.
    I do not claim by any means that everyone or most people 
stop working because the marginal tax rate goes from 42 to 46. 
I am not claiming that. But we have decades of research on 
those effects, and what I have found is that, you know, in 
reality, work hours per capita fell about 10 percent during the 
recession. Now they have rebounded a little bit, maybe they are 
down about 8 percent. If we had just kept the safety net rules 
and the marginal tax rates the way they were in 2007, if we had 
just kept it that way, the recession would have been kind of 
half as deep. Hours per capita would have fallen half as much. 
Employment per capita would have fallen half as much.
    Now if you look at any single provision, as Ron was saying, 
you look at any single provision, you might say, ``Well, what 
effect can that have on the employment rate?'' ``What effect 
can that have on our unemployment rate?'' Well, that is just 
one provision and it is small, but we have a safety net with 
many provisions. In my testimony I list at least a dozen 
changes in the rules. When you add those changes together, that 
is what is having a sizable impact on the employment rate.
    So to put it simply, the safety net rule changes roughly 
doubled the magnitude of the recession if you measure the 
magnitude of the recession in terms of either employment per 
capita or work hours per capita.
    The other question you asked, Mr. Chairman, was about the 
effects of the rule changes on the government spending, as 
opposed to the economy. And Dr. Greenstein said that the growth 
in spending over these last couple years is some combination of 
the recession and legislation. And I agree with that, but I 
understand your question to be, Mr. Chairman, what is the 
breakdown? How much is coming from the recession versus the 
legislation.
    I have prepared estimates of causes of spending changes on 
non-elderly people. A lot of the safety net spending is on 
elderly people; let me put that to the side for a second. Even 
if we ignore what I just said, that the social programs 
affected the economy, let's ignore that. The new eligibility 
and benefit rules added many more dollars to safety net 
spending than the recession did. Take, for example, the 
combined inflation-adjusted spending on unemployment insurance 
and SNAP, adjusted for population growth. That spending would 
have increased about 40 percent if the program rules had been 
constant, thanks to the recession. The 40 percent is 
historically unprecedented, that is a big change. It would have 
changed 40 percent.
    But what happened, in reality, on top of the recession, we 
had program rules and program rule changes and those two 
programs combined, their spending increased almost 200 percent. 
So the breakdown, Mr. Chairman, is 40 percentage points from 
the recession, another 160 percentage points from rule changes.
    Chairman Ryan. In UI and SNAP?
    Mr. Mulligan. In UI and SNAP combined. And those are the 
source of, in the non-elderly safety net spending, that is over 
three-quarters of the growth in the safety net spending in the 
past couple years has been in those two programs. So, I do not 
have a breakdown for you on the other programs, but you could 
see we got a big piece of the pie already.
    Now I put elderly to the side. Spending on the elderly and 
programs for the elderly, that is an important and interesting 
topic.
    Chairman Ryan. Let me get you there, because I am trying to 
keep Chris and myself to time limit, so we can get to other 
members, because I wanted to get to some of these other 
gentlemen if you do not mind. Let me just ask you quick, Ron, 
you were deeply involved in 1996 reform, so were you, Robert. 
Knowing what you now know from that experience, what would you 
do now in a very brief time period, to do, say welfare reform 
round two, to try and replicate the sort of successes we saw in 
the late 1990s?
    Mr. Mulligan. I think that the biggest mistake in the 
legislation, and I do not think anybody anticipated exactly how 
this was going to unfold, but there is a problem, I think, at 
the bottom. Robert and I disagree about this.
    Chairman Ryan. Deep poverty, you are talking about?
    Mr. Mulligan. Well, yes, measured in various ways. I think 
they are incompetent. I do not think they are capable of 
holding down even a minimum wage job. They get a job, they lose 
it, and they just cannot sustain themselves in the market. And 
they are the ones that are worse off. I think that problem is 
undeniable. Other people deny it and say that's not a big deal.
    Now, what would we do about it? We do not really know. When 
I testified for the Budget Committee a couple years ago, I 
said, ``We should do experiments to find out and try different 
things,'' I am not talking about a lot of money here. I am 
talking about trying to figure out how we can help these people 
at the bottom.
    Here is the point. More than in the past, our safety net is 
not just giving stuff away, it is requiring work, and I am sure 
at least one-and-a-half million low-income mothers went to work 
as a result of welfare reform, and they are better off, poverty 
fell, it turned out as Republicans said it would. But this 
group at the bottom, they at least appear to be incapable of 
sustaining employment, so they are really in trouble. They get 
food stamps, they live with other people, but their poverty 
rates are extremely high, and they last longer than in the 
past; so that is the group that I am concerned about.
    But the rest of it, I think, is a good model for the kind 
of things that you want to do. I think block grants definitely 
should be on the table; I am sure we would have big arguments 
about exactly what the characteristics are and what the strings 
would be for the states. Here is one notable difference, 
though, I will just take one second and say this, and that is 
in 1996, both Democratic and Republican state governors 
supported block grant. They wanted to block grant, and we knew 
it negotiating with them and so forth. I am not sure that is 
true now, and I am quite certain would not be true about 
Medicaid. The governors would be opponents, at least Democratic 
governors, and I think some Republican governors, too. That is 
a big difference between now and then.
    Chairman Ryan. Thank you. I want to keep time-sensitive, 
the other two gentlemen, we will just get you in on some other 
questions from other members. Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Mr. Chairman. First, I would 
observe that while spending on safety net programs is high now 
it is largely the function of the economic downturn. It has 
been called the most serious downturn since the Great 
Depression, and that obviously has an impact on safety net 
programs. In fact, they are designed to help cushion people 
during especially during different economic times. And so, 
while spending is up, the poverty levels would be much higher 
in the absence of those programs, and a little later I am going 
to ask Mr. Greenstein to comment on that.
    Mr. Haskins, as you said, the safety net programs are 
requiring work now more than they did in the past. I assume, 
based on your involvement that you think that the EITC, the 
earned income tax credit, is an important part of the reforms 
that have been made.
    Mr. Mulligan. Yes.
    Mr. Van Hollen. And Mr. Rector, you pointed to the fact 
that there are 79 programs. There is no doubt that there are 
lots of programs, and I think we would all agree that we can 
look to see whether we can better coordinate programs and where 
we can find efficiencies, we should. But I think you know that 
big drivers of costs are really about five programs that really 
drive those. I assume one of the ones you are talking about on 
your list as means-tested programs is the EITC, is that not 
right?
    Mr. Mulligan. Yes.
    Mr. Van Hollen. Mr. Mulligan, I just wanted to ask you 
about your analysis, because you state here, and I appreciate 
it. Obviously anytime you have these kind of programs, it will 
have some impact on labor market efficiency, that is not the 
argument here. The argument is the magnitude and the extent. 
Here you say America absolutely must have taxes and safety net 
programs, even though they reduce the reward to working. And 
so, there is no doubt at the margins here, these things have 
impact. The issue is how much?
    Mr. Greenstein referenced another study that has been done, 
and I would just like, Mr. Chairman, to include it in the 
record. It was revised June 2011 by three very distinguished 
economists where they found that taking into account all the 
behavioral effects in response to these incentives has very 
little impact on the incentive to work. And I would just like 
to ask you, Mr. Mulligan, and I understand that you recognize 
that some of the ARRA provisions are expiring. Others are also 
going to expire in time. For example under SNAP, there is a 
November 2013 end to the enhanced benefit. Have you broken out 
the different components of that as part of your analysis with 
respect to the 4 percent?
    Mr. Mulligan. Yes, I have done some breakdowns. Actually it 
was not so much a break-out, it was a build-up; I built up all 
the programs together. And yes there is an expiration coming on 
some of these things. On the other hand, we have the Patient 
Protection Act that is going to bring in some increases in 
marginal tax rate. And so, on the whole, going out four or five 
years, it looks like marginal tax rates will continue to be 
elevated above 2007 levels.
    Mr. Van Hollen. Right. So I am glad you brought up the 
Patient Protection Act, because it goes to Mr. Greenstein's 
point, that really to have a conversation about this that sheds 
more light than noise, we need to separate means-tested 
programs into health programs and everything else.--And if you 
could put up the next slide, please.



    This is based on Congressional Budget Office data. And this 
is based on current law, CBO looks at current law, so Mr. 
Mulligan, they look at the expiration dates for different 
enhancements in ARRA, for example. And what this shows, the 
bottom line shows all the major non-health-related means-tested 
anti-poverty efforts, safety-net efforts. And what you see is 
obviously they increased as the economy hit the skids, more 
people out of work, that is the bump up, and over time as those 
provisions phase out and the economy improves, you will see 
that that bottom line, the purple line actually returns down by 
the year 2022 to 1 percent of GDP, in fact lower than it was in 
the pre-recession period of time.
    The top line are the healthcare spending, so that includes 
Medicaid, that includes CHIP programs, children's health 
insurance program, it also includes the additional people who 
will be eligible for Medicaid as a result of the Affordable 
Care Act. So this chart, I think, is very important as we have 
this conversation, as Mr. Greenstein pointed out, because when 
you are talking about Medicaid, let's put aside the Patient 
Protection Act, when talk about the current Medicaid program, 
the question I have for you, Mr. Mulligan, is if you agree with 
the statement made in the study that I cited. And here's what 
they say: They say that they find that when it comes to labor 
supply effects, the effects from Medicaid appear to be minimal, 
and they make no adjustment. Have you done an analysis of the 
labor supply effects of the Medicaid program?
    Mr. Mulligan. Yes, in fact my estimates are built on a lot 
of the work that Dr. Moffet [spelled phonetically] in that 
study has done. I was more ambitious. I look at a lot more 
programs as included in their study, unemployment insurance 
would be an important thing.
    Mr. Van Hollen. I am just asking right now, with respect to 
Medicaid, the Medicaid program, the effect of the access and 
ability of people to access that program on incentives to work.
    Mr. Mulligan. In what year?
    Mr. Van Hollen. This year and going forward.
    Mr. Mulligan. Yes, I have looked at that, and I agree with 
your characterization that by itself, it is small.
    Mr. Van Hollen. Okay. Now the reason I raise that is this 
is the Budget Committee, right? We are looking at ways to 
reduce the deficit, I believe, we have a joint effort to do 
that. If you look at their budget, they cut $800 billion out of 
Medicaid over 10 years. And I just want to go to the next chart 
that shows what the composition of people on Medicaid is by 
dollar; these are the costs from Medicaid.



    Almost two-thirds of Medicaid dollars go to seniors and 
individuals with disability. I would venture to guess, you are 
not going to get a lot of work incentive changes out of seniors 
in nursing homes. Another 20 percent benefits kids. I venture 
we are not talking about trying to put kids to work.
    So if you look at the big cost drivers, and you look at the 
Republican budget, where they go is after Medicaid. And as you 
have said, Mr. Mulligan, the impact that Medicaid has on 
incentives to work is minimal, and we can see one of the 
reasons why, at least on a cost basis.
    So, let's be serious about this conversation here in the 
Budget Committee. We are happy to look at reforming programs. 
As I said, there may be 79 programs. A lot of them may be very 
small, and if we can find savings, we should. But the 
Republican budget reduces the Medicaid spending by 30 percent 
in the year 2022 and 75 percent in the year 2050. That is CBO, 
Congressional Budget Office, numbers. And I think we should 
keep our eye on the ball here in the conversation.
    And I would just like to end by asking Mr. Greenstein to 
comment on that, because every member of this committee knows 
Medicaid is already stretched to the limit. And everybody talks 
about the provider cuts under Medicare? We already know that 
there are really high provider expenditures in Medicaid. You 
have a waiver system that allows states great flexibility right 
now. And so to suggest that as part of this analysis and work 
incentives that we are going to get a lot of budget savings and 
the number one driver Medicaid is just wrong. Mr. Greenstein, 
if you could just comment about that.
    Mr. Greenstein. Two comments. Interestingly, some of the 
studies that Dr. Mulligan cites in his testimony, when you look 
at them, what they find is, and this is something. An expansion 
in a safety net program, depending on how it is designed, can 
actually increase work incentives. Example, one of the studies 
he cites, issued by a conservative think tank here in 
Washington, found that the changes in Medicaid, which were 
bipartisan, in the 1980s and early 1990s that changed Medicaid 
so that children did not have to be in welfare families to get 
Medicaid and the children in low-income working families became 
eligible, it found that that increased work incentives, 
decreased welfare use.
    When you make it so that you have to be on welfare and 
cannot work to get benefits, you are going to have big work 
disincentive effects. When you change the programs so you can 
work and get them, and as the welfare law does, it is hard to 
not work and get cash assistance, then you can actually 
increase work incentives.
    I would argue that the Affordable Care Act is likely to 
increase work incentives. A little example, today under 
Medicaid in the median state, if you are a low-income working 
family, you as a parent lose eligibility for Medicaid when your 
earnings hit 63 percent of the poverty line. If you are at 75 
percent, if you are a full-time minimum wage worker, and I 
would note that 55 percent of all employees in the United 
States whose families are below the poverty line do not have an 
offer of coverage from their employer, if you are working 
minimum wage and you do not have an employer offer of coverage, 
and you get really sick, you often have to quit your job in 
order to qualify for Medicaid. That is crazy, and the 
Affordable Care Act fixes that.
    With regard to the proposal in the House Budget, my concern 
is since Medicaid already pays about 20 percent less per 
beneficiary than private insurance, it pays providers a lot 
less, and its costs are actually been rising a little slower 
than private insurance, and mostly it is already contract with 
private managed care companies to run the Medicaid program for 
children and parents, it is extremely difficult to see how you 
could get savings of the magnitude in the House Budget without 
really deep cuts.
    In the Urban Institute study this last year, and under 
their most optimistic scenario, in which states exceeded in 
doing efficiencies that reduced Medicaid cost-growth per 
beneficiary all the way to GDP plus zero, they found that 
states would have to take 14 million low-income people off of 
Medicaid to fit within the budget parameters. And if they were 
not as successful, it could be as much as 27 million people 
losing Medicaid coverage, with a average reduction in provider 
rates of about 30 percent on top of that, meaning there being 
few doctors to accept patients.
    Chairman Ryan. Thank you. Mr. Garrett?
    Mr. Garrett. I yield the first 30 seconds.
    Chairman Ryan. I just want to point for clarification, I 
think it has been said a couple of times, our budget does not 
propose on Medicaid, work requirements or time-limits. That is 
not a proposal contained in our budget. I just want to clarify 
that.
    The other point is we are spending $100 billion next year 
on Medicaid alone. So I know this is the Washington talk. It is 
not being cut. It is not growing as fast as what the 
president's Budget proposes. And yes, we do propose to repeal 
the president's health care law, which has a dramatic increase, 
but we are actually still increasing spending on Medicaid in 
our budget. We are not calling for work requirements and time-
limits on Medicaid, and that is now defined as a savage cut 
when it is actually an increase that is not as big of an 
increase as the president is proposing. Mr. Garrett.
    Mr. Garrett. Thank you. Mr. Rector, according to your work 
as we have heard already, there are 79 means-tested welfare 
anti-poverty programs that the federal government runs. It 
costs around $927 billion per year. And since the creation of 
the modern day welfare state back in the 1960s, the size and 
scope of these federal anti programs have skyrocketed. In fact, 
according to CRS, taxpayers spent $2.7 billion in today's 
dollars back in 1962. Today we spend around $600 billion on the 
welfare programs.
    All these are well-intentioned or well-motivated and 
safety-net programs, but I am concerned that many of these 
programs are unconstitutional. You have TRIO, you have Job 
Corps, you have energy programs like LIHEAP, they are just a 
few of them that have dubious constitutionality, I would think, 
and again, are better off, quite honestly, left to the states 
to do.
    Now this issue of constitutionality is a timely one, 
considering what is going on across the street or what has gone 
on across the street with regard to health care. But most of 
today's so-called welfare state is built on, what I would 
suggest, is an unconstitutional foundation that we should begin 
to examine closely. So the question to you is, out of these 79 
welfare programs are out there, how many do you think, or what 
percentage are simply totally unconstitutional or highly 
questionable in their constitutionality?
    Mr. Rector. I would agree with you that it is very 
difficult to find a constitutional basis for much of any of 
this, but I am a realist, and these programs are not going 
away. And the reality is I think we would have been better 
served if the state governments had taken the role here, but 
all the way back into the 1920s, the state governments have 
been shucking their role. And basically their main function is 
to come here and ask you for more money. Honestly, I have been 
doing this for 30 years, and that is basically what I see 
states do.
    I do think that what we have to do is change the nature of 
the programs. And one thing that we need to avoid is the idea 
that the solution to this is to collect money in Washington and 
then hand it over to the states willy-nilly without any goals 
or guidelines, and that is a recipe for success. In fact, that 
is a recipe for failure.
    The word ``block grant'' is frequently used with respect to 
TANF. I would say that is a misnomer, with respect to the 
Temporary Assistance to Needy Families program, which I helped 
to design. I would call that a work activation grant, because 
the core of that program was to push people off of welfare and 
into employment, and it was, within its own little limited 
realm, which is a very small portion of the welfare state, it 
was pretty successful in doing that. But we did not say that 
the idea was to collect money here in Washington and then hand 
it over to the states.
    The biggest block grant program of all time was revenue 
sharing, created by Richard Nixon. What was the first program 
that Ronald Reagan abolished when he got in office? Revenue 
sharing. It was a waste of money. I would love it if the states 
wanted to take fiscal responsibility for this, but I do not see 
that. And so what you have to do is try to deal with this real 
world, which is a huge system that is growing very rapidly, a 
system that penalizes work and penalizes marriage, and thereby 
generates an endless increase in need for aid.
    Mr. Garrett. Well let's just follow up on that then to your 
left. Mr. Greenstein was just making reference to how some of 
that is potentially addressed in the Affordable Health Care 
Act, in his argument, that when you get into the situation of 
marginal tax rates and that there is a benefit of actually 
staying on the system as opposed to actually getting out and 
getting to work, do you agree with the assertions that he has 
made? He sounded reasonable.
    Mr. Rector. I think that that is a fool's errand, and it 
will end up costing you more.
    Mr. Garrett. Why is that?
    Mr. Rector. Try to reduce these marginal tax rates, you 
just expend the programs farther and farther up the stream 
until you have these programs going up to families making 
$80,000 a year. Way back in the ancient days we had something 
called the Seattle Denver Income Maintenance Experiment, which 
was in the 1970s and 1980s. And what that experiment showed was 
that the marginal tax rates on the programs, it created 
different experimental programs, marginal tax rate did not 
matter that much. What mattered was the core amount of benefits 
being given. How do you cut the Gordian knot here? The simplest 
thing is when you are giving assistance to an able-bodied 
adult, you must require that adult to work, prepare for work or 
look for work as a condition of receiving aid. That is what we 
did in the AFDC reform, but we only did it in one program, and 
that is why that reform was unsuccessful. That does not cost 
you more money; that costs you less money. That is the key to 
increasing employment.
    Mr. Garrett. Thank you, Mr. Rector.
    Chairman Ryan. Mr. Blumenauer.
    Mr. Blumenauer. Thank you, Mr. Chairman. I would agree with 
what Mr. Rector said about states being AWOL, states 
historically have not stepped up. They could have, they did 
not, but there is a whole range of areas: pollution, we would 
not have a Clean Water Act if states would have stepped up and 
done it, and if they had had the capacity to deal with things 
that crossed state lines.
    That is why, for instance, and I appreciate Mr. Haskins 
talking about some of the upside of what happened in 1996 and 
some of the downside. The states loved the idea of block 
granting then, and you look at what has happened in some 
states, Texas is a classic example, where they have back-filled 
a whole host of other things. The benefit levels in Texas are 
abysmal. Nobody in this room could remotely live on those 
levels, but they have used it for other purposes. And you have 
got material, all of you have got material that the press has 
tracked some of this, where it has not gone to the neediest, it 
has gone instead to back-fill problems that they could not 
solve in Arizona by selling their state capitol. I am not 
certain that that was the best policies to have followed, but 
we are dealing with some realities, here.
    I am more than a little frustrated that we seem to have an 
inability to accept some of the successes. I mean, Richard 
Nixon, Daniel Patrick Moynihan wanted a guaranteed annual 
income, and we have started to move in, some of the direction 
of 1996, to move towards rewarding work. But at the same time, 
Congress, in its wisdom, has made these programs much more 
complex. Poor people have to navigate all sorts of conflicting 
standards, we have tried to streamline it for food stamps. That 
has been a struggle. We make it hard for them. We have 
different standards for poverty if it is going to be for a 
college program under Pell grants it is what happens in terms 
of qualifying for some other educational benefits, for food 
stamps, for receiving money. They navigate something that would 
take the complaints we hear from the business community about 
the complexity of rules and regulations, they are simple by 
comparison to what families which, and I again agree with Mr. 
Haskins, a lot of these people are marginally functional, and 
we have them go from pillar to post to try and deal with 
different standards for health care, for food stamps, for 
educational benefits. It is draining, it is exhausting, it is 
not efficient. It wastes money of the system and of their time.
    I think it would be better if we tried to take the programs 
that work, try and refine them, actually have some standards, 
but deal with the realities that these folks live in. I just 
chuckle with the notion Mr. Rector talks about, if you just 
even this out all across the board, it would be $36,000 for the 
100 million poorest Americans. That is not how the system 
works, that is not how it is allocated. We are dealing with, as 
my colleague, Mr. Van Hollen, pointed out, the bulk of this 
medical expense driven to the disabled, the elderly, the most 
vulnerable and expensive, and that is not going to change.
    I am hopeful that we can come back and be realistic about 
the needs. And before we start walking down the path of 
seriously entertaining more draconian activities, more block 
granting to states that will use it to back-fill and not step 
up, for example, like Medicaid, the people that are visiting 
your offices are terrified that the Republican approach to 
Medicaid will be adopted. Because they are getting hammered 
now, even though it, as Mr. Greenstein points out, it saves 
money, at least as composed to private health insurance or 
Medicare. They are terrified about the cuts that are coming, 
and there is nobody that is going to step up and take it.
    One of the things I am concerned about, and Mr. Haskins, 
while we have you here, part of the law of unintended 
consequences, did not we see some rather interesting shift 
after 1996 to watching people move from welfare to disability. 
Have you looked at that at all?
    Mr. Haskins. Yes, there has been some movement like that, 
especially among children. And some people think it is not 
right, but advocates think it is. This is a very sensitive 
subject. We did change SSI for kids in the 1996 legislation, 
and as a result of that, about 100,000 little bit more than 
that I think, lost their benefits because they were not 
disabled, they had things like dyslexia. So the rolls went 
down, but then they came back up.
    Mr. Blumenauer. I see my time has expired, Mr. Chairman, 
but that is one of the areas I think would be kind of fun for 
us to focus in on, not for children, but for what has happened 
to disability payments altogether, that has been skyrocketing.
    Chairman Ryan. Yeah. Ways and Means, we have done some 
hearings on this as well. Mr. Stutzman?
    Mr. Stutzman. Thank you, Mr. Chairman. Mr. Rector, I would 
like to follow up on a comment that you had made, and I know 
what you are referencing to as states are coming to the federal 
government to ask for money for programs. I come from Indiana 
and served in the state legislature there for eight years, and 
I am seeing a real shift there that legislators would like to 
see more authority and the ability to have authority over 
programs like Medicaid. Are you seeing that anywhere else 
across the country? Is there a shift that people are frustrated 
with the strings that Mr. Haskins referenced? We saw that with 
the stimulus package. We saw that with just about every federal 
government program. There are always strings attached to it. We 
even just avoided unemployment insurance money from the federal 
government because of the strings that were attached to it in 
Indiana.
    Mr. Rector. I think Medicaid is different because, as I 
said in my testimony, 75 percent of means-tested spending is 
federal, 25 percent is state, but almost all that state 
spending is in Medicaid. And when you set Medicaid aside, this 
is like a 95 percent federally funded system. It is important 
to realize that.
    States are serious about Medicaid, because they have a lot 
of money on the table, okay, and it is absolutely true that 
what Obamacare does is it radically demands that states spend 
more money on Medicaid by increasing enrollment. It is not 
increased for disabled; disabled are already covered by that 
program. All these increases are going to able-bodied people, 
okay. And the reality is I think that the states do have a lot 
of play in the Medicaid system, and they need to have a very 
important role in determining how that system would work.
    By contrast, something like food stamps, they have only 10 
cents on the dollar in play there. What actually happens with a 
program like that is it becomes bureaucratically autonomous 
when it hits the state. States will not be serious about work 
requirements, for example, they do not have any money in it. It 
is not their program, and they do not want it. You want to take 
this over? They will not take that program over. They do not 
want to spend their money on that; they want you to spend 
federal money. But if you are going to spend federal money on a 
program like that, you have to make sure that that program 
meets the real goals, which should be to promote self-
sufficiency.
    When Lyndon Johnson launched the war on poverty, he said he 
wanted to reduce dependence, not increase it. He wanted to make 
people prosperous and self-sufficient through their own 
abilities. And judged by those standards, this $19 trillion has 
been an absolute debacle. The poor are far less capable of 
self-sufficiency today than they were in 1964 when we started 
these programs, because these programs reward non-work, and 
they in particular non-marriage. The percentage of births out 
of wedlock has grown from 7 percent in 1964 to 42 percent 
today. That is the key cause of child poverty today, and it is 
a key factor in all this welfare spending.
    Mr. Stutzman. Mr. Mulligan, I would like to ask you a 
question as well. In relation to the 70 programs, roughly 70 
programs, which I am not sure if that even includes Earned 
Income Tax Credit.
    Mr. Mulligan. It does.
    Mr. Stutzman. Does it? Okay. How have you seen these 
programs affect the incentive to working for people, because I 
can tell you, I hear from constituents back home that are very 
frustrated with folks who do take advantage of programs, and 
they say, ``You know, if they had worked as hard at finding a 
job or getting out and finding work as they do at finding 
government programs, they would be successful.'' And so I think 
that there is also this shift in our society that there are so 
many government programs out there, go out and find it, and you 
can make a living off of it.
    Mr. Mulligan. In the research field, we have a term called 
``take-up.'' It refers to how many people are technically 
eligible to receive the benefits from a program actually go and 
get the benefits. And the take-up in a lot of programs is less 
than 100 percent. There are a lot of people who choose not to 
take the benefits, and I account for that in my calculus. Now, 
I have not looked a baseline of what happens if we had no 
safety net? My baseline has always been what happens if we go 
back to 2007? And if we go back to 2007, there would be a small 
percentage of people whose employment status would be 
different. Now in an economy with 300 million people, a small 
percentage, we are talking a couple million people would be 
affected, but it is still a small percentage. And the norm is 
to continue working, continue to be employed despite rule 
changes in the safety net programs.
    Mr. Stutzman. Thank you, I yield back.
    Chairman Ryan. Thank you. Ms. McCollum.
    Ms. McCollum. Thank you, Mr. Chair. Thank you. After being 
here an hour and a half, there are so many questions and things 
that I would like cleared up, but I am going to have to focus 
here tight. One thing I would like to say is, to Mr. Garrett, 
the term ``unconstitutional,'' versus not in the Constitution, 
directed in the Constitution are two very different ideas, two 
very different concepts, because something silent in the 
Constitution versus unconstitutional, and we are just kind of 
throwing those phrases around here, and the social studies 
teacher in me just had to take a second and go back and take 
out the dictionary, and we need to mean what we say and say 
what we mean here.
    I would like to go back and just really look at this chart 
here.
    The people that we are talking about, seniors, our aunts, 
our uncles, great aunts and uncles if you are lucky enough like 
I am to have a great aunt who has made it to 104, never thought 
that she would live this long, lives independently. She 
receives Medicaid support and help. The disabled that I heard 
from when I was in the State House and we were going through 
and doing the welfare reform, who said, you know, ``I want to 
work, but when I work and I make a living wage, I lose my 
personal health care attendant. I cannot afford that. I cannot 
afford to lose my personal health care attendant.''
    The mothers, through no fault of their own, found 
themselves all of the sudden with children, say, ``I do not 
have any health insurance if I go back to work.'' So some of 
the reforms that we made to Medicare to help the elderly, we 
also made to Medicaid to help people who had children who 
wanted to go back to work. And now we are saying, ``No, we are 
going to cut that. You are not going to have access to health 
insurance for your children.''
    But I want to talk about SNAP for a minute, because I have 
been out visiting several schools in St. Paul. And I have to 
tell you, two of them that I had been to, 40, 60 percent 
poverty in these grade schools, and I have been there in the 
morning, and this is the School Lunch Program, but SNAP is also 
what is keeping them fed at home. Their parents, after about 
two weeks, the food is done from SNAP, they are over to the 
food shelves. But these kids who come into the School Lunch 
Program that on Monday might have been the first opportunity 
for them to have milk or a piece of fresh fruit. They are 
quiet, they say thank you and then they have a healthy meal 
again at lunch. If kids are hungry, they cannot concentrate in 
the classroom. And I know that this would not reflect any one 
of my colleagues here, but this is what is upsetting to me 
about the discussion, and what I am hearing about how people 
are talking about cutting SNAP and ``SNAP is not needed,'' and 
``food stamps are a waste.'' And I know this does not reflect 
any of my colleagues here, or any of the people on the panel, 
but these are the things that are out there, people are talking 
about.
    Rush Limbaugh, ``Children to eat. Cannot find food, there 
is always a neighborhood dumpster.'' June 16, 2010. And I will 
just cut to the end of it.
    It says, ``There is things in your house. There is a thing 
called a refrigerator, you probably know about it. Try looking 
there. There is also things that are called in the kitchen in 
your house called cupboards. And in those cupboards, you might 
go to find a dingdong, a twinkie, potato chips,'' he goes on 
and on and on. And then he goes on and says, ``If that does not 
work, try a happy meal at McDonald's. You know where a 
McDonald's is. There is a dollar menu at McDonald's, and if 
they do not have chicken McNuggets, dial 911 and ask for 
Obama.'' But here is what really, I think, goes to the heart of 
what when we are talking about SNAP and ``those people.''
    ``There is another place,'' Limbaugh goes on, ``If none of 
those options work to find food, there is always the 
neighborhood dumpster. Now you might find some competition with 
homeless people there, but there are videos that have been 
produced to show you how to healthfully dine and how to 
dumpster dive and survive until school kicks back up in August. 
Can you imagine the benefit we would provide people?''
    Folks, we need to, when we are having these discussions, 
not talk about ``those people'' or ``welfare people,'' the way 
that we are talking about Americans; we are talking about our 
children, we are talking about our elderly who, by the way, 
access SNAP. And so, just to this chart again, where we are 
today with where we talk about cutting entitlement programs, it 
is seniors, it is the disabled and it is children.
    Chairman Ryan. Thank you. Mr. Lankford.
    Mr. Lankford. Thanks you all for being here. Here is a hard 
question for us as a nation to struggle with. We have people in 
great need, and we are a nation that has determined we are 
going to step up and help. We are going to provide a safety 
net. Now, how do we determine success of that safety net?
    Is it based on the percentage of people that are in 
poverty? Is it based on the transition of people that were once 
in the safety net, out of the safety net, that they were there; 
we helped them successfully navigate out of that safety net? Is 
it the length of time in programs? Is it the coverage of every 
area of that individual? How do we determine success? So a lot 
of questions there, just quick responses, what you have seen 
from anyone who would like to respond to that. How do we 
determine success?
    Mr. Rector. I would go back to Lyndon Johnson's original 
goal that success here is not to increase the number of people 
receiving handouts. He said I do not want to deal merely with 
the symptom of poverty. I want to deal with the causes. I want 
to make people prosperous and self-sufficient. He said he 
wanted to turn the poor from being tax-eaters into taxpayers.
    So one measure of success would be the percentage of the 
able-bodied population that is able to sustain itself above the 
poverty level without government handouts, and by that 
standard, absolute, unmitigated 40 year disaster.
    Mr. Lankford. That is the issue. We have this structure 
now, if that is a goal, and I would concur that it is a great 
option for the goal, to say let's help people transition out of 
it, and are we accomplishing that? That is part of the issue 
here. Other comments you want to make? Yes, sir.
    Mr. Greenstein. Well there is no simple answer, there are 
multiple goals: reducing need and great hardship, we do not 
expect people who are elderly or disabled to go and work, and I 
very much agree with Ron Haskins, the data is crystal clear. 
Though I wish it were not the case, but there is a group of 
families at the bottom who have physical problems, mental 
health problems, depression, little education, little cognitive 
skills. I do not know if I would go so far as to use Ron's 
word, ``incompetent,'' but these are people, and that has gone 
up. And for some of them, I think we could try subsidized 
employment programs in the private sector, but they have a very 
hard time holding a job on their own.
    In terms of transitioning off the safety net, well yes, 
but. You know, here we have, I think the Chairman would 
probably agree with what I am about to say, I mean, if you 
really want to look at the safety net, you have to look at the 
tax code as well. I mean, we have a trillion dollars of tax 
expenditures. We have people who get things all the way up, so 
it is complicated.
    One last point though, that is key. Over the last several 
decades we have effectively made a decision implicitly in this 
country that to compete internationally in the economy we will 
let wages erode some at the bottom of the wage scale, and we 
provide things like the Earned Income Credit. We let health 
insurances erode among employers, but we have broader health 
coverage. Surely I would presume, most members, and perhaps all 
of the Republican members would agree that the right answer to 
lifting working-poor out of poverty is not to have the 
government set a minimum wage so high that, that alone, I mean 
you would probably lose jobs if you raised the minimum wage 
that high. So if you are in this international economy where 
wages are eroding at the bottom, you need a larger government 
role in making work pay and supplementing low wages.
    Mr. Lankford. Let me interrupt because I do have a ton of 
questions we are not going to get to now. But I do want to make 
a couple mentions of it. One is the comment that you made 
earlier Mr. Rector, and that is, as we have seen marriages 
collapse, especially among the poor, we have seen a greater 
need for government to engage. And the safety net continues to 
grow. And it is my concern is that we have shaped a safety net 
in such a way that it is created a disincentive for families to 
stay together, and that we have, somehow, as we try to create 
this safety net, we have also created a system where families 
are not needed financially in that. We need to have a system 
that does not punish or does not ignore the family, but also 
blesses the family in that.
    But I would also ask this question. Areas of fraud that we 
experience, because there are areas of fraud that are out 
there, we need to have a good safety net, but we need also to 
be diligent, to make sure that the people that are receiving 
benefits are the people that are exactly intended to receive 
those benefits as well. Comments about fraud, whether that be 
in SNAP or that be in SSI, I cannot tell you the number of 
senior adults that catch me that are furious about fraud that 
they have seen or experienced around Medicare, individuals that 
have come up to me that are receiving SNAP, or that are 
receiving Medicaid, that once we probe it, you think okay, this 
is probably not legal, and now they are receiving it. Are there 
other things that you have seen or comments that anyone want to 
make about SNAP or any other program, or how we deal with 
deficiencies to make sure the right people receive the right 
benefits.
    Mr. Rector. There is a massive amount of fraud all the way 
through all of these programs. You have to have much greater 
controls on identity, particularly in Medicaid. One of the 
other things that you can do to reduce fraud, though, one of 
the key elements of fraud is people that are working and do not 
tell you that they are working, and they get benefits they are 
not entitled to. One way to get around that is to have a work 
requirement. If you say, ``You have to come down here and do 
job search,'' and they already have a secret job they are not 
telling you about, they cannot do both of those things. That 
was a major factor in the caseload reductions in the early TANF 
reform, which were effectively rooting out fraud, caused 
substantial reductions in people that should never have been on 
that program.
    Chairman Ryan. Thank you. Ms. Bass.
    Ms. Bass. Yes, thank you. Let me just follow-up on some of 
what you were saying, because I do think that there has been a 
lot of fraud and misuse of benefits, but I think oftentimes, 
especially if you look at the dollar amount, a lot of that 
fraud in Medicare, if you look at who is committing that fraud, 
the dollar amount does not compare to the individuals versus 
some of the fraudulent businesses in the medical appliances and 
all, you cannot really make that comparison.
    But using the example that you were just giving, though, in 
terms of somebody who was working and they hid the fact that 
they were working, a lot of times people are caught in a catch-
22, because one of the main reasons why women go on and off 
public assistance is because when their children get sick, if 
they do not have the type of job that allows them to take sick 
days, then they have to stay home with the children, they lose 
their jobs. So it is a real catch-22. If people had healthcare, 
and if people had childcare, that is one of the biggest 
incentives for people to be able to have their job and retain 
it.
    I wanted to ask a couple of questions. Mr. Haskins, you 
described people who were at the lowest income levels as being 
incompetent, and I was just wondering if you could maybe 
explain that a little more. What you know about this 
population, why you would describe them as incompetent and 
where you would go with that. You raised the question that you 
were not exactly sure what to do with them, so maybe you could 
tell me how you have reached the conclusion about competency.
    Mr. Haskins. The first characteristic is an inability to 
hold down even a moderate job.
    Ms. Bass. Right.
    Mr. Haskins. And I can tell you that research shows that 
families that have more than one problem that interferes with 
job, like three or more children, a disabled child or a child 
with some kind of even mild disability, a low education, a big 
one is depression. So low-income families, usually single 
mothers, that have two or more of those problems are much less 
likely to be able to stay in the workforce.
    Ms. Bass. Right.
    Mr. Haskins. So that is what I mean. They have problems, it 
is not like they are lazy, they just are not competent to 
handle the problems that other people are able to get around. 
We all have those kind of problems, so that is what I meant.
    Ms. Bass. Okay, and I appreciate you making the distinction 
between that and laziness, because actually some of those 
problems that you described, and I am sure that you would 
agree, a person who is middle class can also have all of those 
same problems, or upper middle class, but if you have support 
services around you and you can afford to purchase counseling, 
or purchase medication, then you do not typically fall through 
the cracks if you have those same type of problems.
    Mr. Haskins. I think there is some truth in that. If you 
want to learn more about this problem, there is a program in 
Chicago called Project Match. A woman named Toby Herr who has 
been working on this problem, I think, for 20 years, and I 
think she would agree with the description I just gave to you, 
and she finds that it is very difficult, even with intense 
help, to help these people get on their own two feet. She has a 
program called Small Steps. So what she does, for example, is 
to get the mother to come to the childcare facility or Head 
Start facility and be there for, say, 10 hours a week. And then 
after she has done that for six months, to come more and to do 
something else, eventually to look for and get work. So it is a 
series of small steps. I think these problems that the low-
income mothers have that I am describing, they are less able to 
handle them than other even single mothers are.
    Ms. Bass. Right, and one of the reasons why I was asking 
you to explain, and I appreciate your explanation, is because 
how you would resolve those problems, what you have described 
are a number of programs. Now what I am concerned about, and 
again I appreciate your description, because frankly, sometimes 
I am saddened when I listen to some of my colleagues who 
describe people who are low-income because I think that they do 
not have a real view or maybe they do not have the life 
exposure or the education to understand that people who are in 
the circumstances that you described, and you described them as 
not being lazy, but you described them as people who have a 
variety of circumstances that when multiplied have people fall 
through the cracks.
    So to me then, I think about some of what we are proposing 
here, would actually make the problems that you are describing 
worse. And also, people who might have had a higher level of 
competency, education skills, or whatever, could actually be 
pushed down. So instead of strengthening the programs that you 
are describing, I am concerned that what we are talking about 
doing would actually exacerbate the problem in the population 
that you have just described.
    Mr. Haskins. Can I give a 30 second response to that, Mr. 
Chairman? Okay. I agree with much of what you say, but this is 
exactly the kind of description that we had back in 1996 when 
welfare reform was passed. People on welfare are not going to 
be able to support themselves. When we created a system that 
demanded they do so, imposed financial penalties on them, 
imposed time-limits on them, no matter what your interpretation 
of their characteristics is they went to work.
    Ms. Bass. Right, however, a couple things. I got to claim 
my time, because I am going to run out of it. I got to respond 
to this.
    Chairman Ryan. I will give you 20 seconds because, we got 
other Members here, and we got a vote coming up.
    Ms. Bass. That is fine. I would agree with you. During that 
time, we were in a better economic situation, and what we 
provided was childcare, and we also provided the ability for 
those folks to get training and education. Over the years, we 
have cut that back. We have cut the childcare. We have cut the 
education. I think that we all know, especially in this current 
recession, the homelessness amongst women and children has 
increased. Thank you.
    Chairman Ryan. Thank you. Ms. Black.
    Ms. Black. Thank you, Mr. Chairman. I am one of those 
people that really can be convinced that something is workable 
if you can show me the numbers that it is really managing the 
problem that you have. And when we look back at the initiation 
of these programs, and we see 6 percent of the population at 
that point in time, and now we say 42 percent of the population 
is in poverty, something is not working. And for me, I want to 
know, what is it that we can do to make it work? Because if our 
real incentive here is as President Johnson indicated, that we 
want to make people self-sufficient and prosperous, it does not 
appear that we are going that way if more people tend to be 
taking from the government because they are not able or not 
being self-sufficient, there is a real concern for me.
    And I will say that, as a nurse, and having worked with a 
number of people in the programs that I worked in, that what I 
saw was something very disturbing is that people become 
trapped. And they become so dependent upon a system where even 
when they have the skills, and you give them the opportunities 
and they attain the skills, that they are fearful that if they 
go to work or if they are not any longer getting that 
assistance that they have gotten regularly, that they may not 
be successful in the work world, so you know, ``I am fearful 
now, I cannot do this, I am going to be trapped.'' And that is 
where, I think, that our mistake is being made, is that we have 
got so many people being trapped in this program, and they are 
not getting out.
    So, can any of you, and maybe I will start with Mr. Haskins 
and Mr. Rector, talk about how we can do things to keep people 
from getting trapped in these programs?
    Mr. Haskins. Well, again, I hate to be a one note Johnny 
here, but work is the key. We have to have strong work 
requirements. We have two work requirements in food stamp 
program that are observed in the breach. The states do not 
aggressively implement the program. The biggest savings, I 
think, is in unemployment insurance. I mean, what kind of 
system do we have where unemployment insurance, people that 
draw that, have a work history? Compared to welfare we have 
very strong work requirements in welfare, but in unemployment 
insurance system, we have a requirement in the law but it is 
not observed. We should have much stronger requirements in 
unemployment insurance. People would get back to work much more 
quickly. You are supposed to be the land of entitlement and to 
give money to everybody? Several European countries, especially 
Germany and something called the Hart's reforms, has greatly 
strengthened their unemployment insurance programs and imposed 
much stronger requirements and even reduced benefits and 
reduced the length of benefits to get people back to work. This 
is the future of all the western democracies. More people have 
to work. When they get unemployed, they have to go back to work 
sooner. That is what we have to do?
    Ms. Black. Would you agree, Mr. Rector?
    Mr. Rector. Focus on two factors. If you look at the $450 
billion of the welfare state that is families with children, 
overwhelmingly, about 80 percent of that is single-parent 
families. Okay, so there are two causes of child poverty in the 
United States and two causes of welfare dependence, and those 
are the collapse of marriage and very low levels of work. Even 
in the hottest economic boom, the average poor parent has only 
about 600 hours of work during the year. If you were able to 
raise that to full-time work, you would drop the poverty rate 
in those families by about 60 percent, and this is not in a 
recession, but in the hottest economic boom.
    As Ron said, you clearly have to get the work rate up. You 
have to do that in programs like housing and food stamps, able-
bodied people will work or at least look for work. But more 
importantly, that is not really going to work if the marriage 
continues to collapse. The welfare state has driven fathers out 
of the home. That is the predominant cause of child poverty 
today. If a mother is married to the father, even if you hold 
education and race constant, it drops the probability of child 
poverty by 85 percent. There is nothing even remotely like 
that. Marriage is more effective, now get this, marriage is 
more effective in reducing child poverty than having the parent 
graduate from high school. I will probably get a press report 
saying he does not want people to graduate from high school. 
Graduating from high school is really important, okay? But 
actually, amazingly, marriage is more important, and we treat 
it with absolute indifference if not disdain within the welfare 
system.
    Ms. Black. Well thank you. And, Mr. Chairman, I think it is 
already said, my second question would have been about the 
incredible growth in the SSI program. And I know we have had 
some hearings in Ways and Means, but I would encourage that we 
would have those very hearing in here as well. Thank you. I 
yield back my time.
    Chairman Ryan. Thank you. Ms. Bonamici.
    Ms. Bonamici. Thank you, Mr. Chairman. So I noticed, Mr. 
Rector, in your testimony you talk about some 79, I believe it 
is, means-tested programs that you describe as making up the 
federal welfare system. And then you have tables attached to 
your written testimony that outline those programs. I think it 
would be helpful if we run through just a couple of those, so 
everyone has a clearer picture when we hear a reference to the 
means-tested programs you are describing as part of the federal 
welfare system.
    You include the refundable child tax credit, the Pell 
grant, Job Corps, America Corps VISTA and Head Start, and I am 
not sure that those programs in particular come to mind for 
most people when we talk about the federal welfare system. But 
I just want to take a moment and talk about Head Start.
    In October last year, there was a column in the New York 
Times by native Oregonian, Nicholas Kristof. And the column is 
titled, ``Occupy the Classroom.'' And Mr. Kristof described the 
findings of one of his interview subjects, Professor David 
Deming of Harvard, who had taken a look at Head Start outcomes. 
And here is what he wrote.
    ``The former Head Start participants are significantly less 
likely than siblings,'' so we are talking about the same 
socioeconomic group, ``to repeat grades, to be diagnosed with a 
learning disability or to suffer the kind of poor health 
associated with poverty. Head Start alumni were more likely 
than their siblings to graduate from high school and attend 
college.''
    So I want to ask Mr. Greenstein, this assertion seems to 
back up what you said about the long-term gains that these 
programs produce. Programs, such as Head Start, such as the 
Pell grant and Job Corps, seem to be the kind of things that we 
would want to invest in if we truly have an interest in 
breaking the cycle of poverty. So, I am sort of setting aside 
that these programs are the right thing to do to help those in 
need. Let's just look at the economic sense, and these 
investments make long-term economic sense, do they not?
    Mr. Greenstein. I agree. You have to look at each program 
one by one, but if you take something like Pell grants, in the 
absence of Pell grants, fewer promising low-income students 
would be able to afford to go to college, and the data is very 
clear that while there are many factors, that people who 
graduate from college have higher earnings and better 
employment prospects than people who do not.
    With regard to Head Start, it is interesting. For awhile, 
there were a lot of data that showed gains for children in the 
years following Head Start, but that then when you did 
standardized test scores, the gains seemed to fade away in 
secondary school. There is now new research that is very 
challenging that finds that even though some of the gains, or 
many of the gains, fade away in secondary school, they actually 
are finding that by the time people get to adulthood, that 
there are some increases in earnings.
    So I think these things are really important, and I am also 
in agreement with Ron Haskins that for the people at the very 
bottom, we really need to do more demonstration projects to 
find the things that are most effective in helping them and 
then replicate them.
    One last point, this is really key, some of the most 
important emerging research is research is research that finds 
for young children that a difference of several thousand 
dollars in their income, whether it is from earnings or from 
government assistance, is associated with increases in 
employment and earnings in adulthood. There is starting to be 
some evidence that it is deleterious for children's long-term 
earnings prospects to grow up in deep poverty, and we also need 
to take that into account.
    Ms. Bonamici. Thank you so much. And just briefly, I wanted 
to talk also about SNAP, because in 2010 there were proximately 
27,000 households in my district receiving SNAP benefits. And 
when we talk about the programs and the people who rely on 
them, sometimes certain assumptions are made. So I just want to 
make clear about the data here. Of those 27,000 households in 
my district, the medium income was below $19,000 a year; 50 
percent of the families had at least one person working in the 
previous year, and 36 percent had two or more people working in 
the previous 12 months. So roughly 87 percent of the 
participating families in my district had somebody working. So 
it is our struggling working families who really need this 
help. These are programs we should be supporting and not 
cutting. And I yield back the remainder of my time. Thank you, 
Mr. Chair.
    Chairman Ryan. Thank you. Mr. Flores.
    Mr. Flores. Thank you, Mr. Chairman. This has been a 
fascinating hearing. And it really exposes the deep differences 
in the way we look at economic opportunity in this country. I 
have to start by saying let's remember that the best social 
program ever designed by man to combat poverty is a private 
sector paycheck. This is where you house a family, you feed a 
family, you educate a family, you grow a state and local tax 
base and you grow and economically secure middle class.
    This hearing is about a choice between two futures for this 
country, a choice of debt, doubt and decline versus a choice of 
restoration of American exceptionalism. It is a choice between 
a failed Washington solution versus Main Street solutions. It 
is a choice between the reallocation of a shrinking economic 
pie versus a growing economic pie that provides more 
opportunity for everyone. It is a choice between the 
president's Budget, which accelerates our bankruptcy, which no 
Member of the Congress voted for, including the ranking Member 
that waxes so positively about it versus a budget that grows 
our economy and protects our security.
    It is a choice between no Senate budget versus a realistic 
House budget. It is a choice between food stamps or paychecks. 
It is a choice between more government versus more private 
sector. It is a choice between Solyndra versus Keystone. It is 
a choice between fake energy versus real energy, a choice 
between expensive gasoline versus abundant energy. It is a 
choice between tax increases versus tax reform. It is a choice 
between more poverty or more jobs. It is a choice between 
hiring more IRS agents and more UPA regulators, but having 
fewer troops and less security versus more private sector jobs 
and greater national security.
    For example, for the cost of a typical EPA bureaucrat, we 
can pay and equip two enlisted persons in our military. It is a 
choice between more million dollar vacations and spring break 
trips for our first family or more vacations for American 
workers. It is a choice between more wars against stay-at-home 
moms versus better job opportunities and bigger paychecks for 
spouses that work outside the home.
    It is a choice between more fast and furious guns for drug 
lords or more protection for Americans' Second Amendment 
rights. It is a choice between more spending of debt or a 
Balanced Budget Amendment. It is a choice between more spending 
on GSA bureaucrat parties versus more economic certainty and 
opportunities for middle class Americans. It is a choice 
between more taxes on job creators versus more jobs from those 
same job creators.
    It is a choice between more unemployment versus more 
employment. In summary, it is a choice between more debt, doubt 
and decline for future generations versus restoration of 
American promise, prosperity and security for our children and 
grandchildren.
    In this regard, I have a question for Mr. Rector. What is 
the single biggest determinant of poverty among families? I 
think you have talked about it, but what is the single biggest 
determinant?
    Mr. Rector. The single strongest determinant of child 
poverty is the absence of an employed father from the home, and 
basically as we have seen the non-marital birthrate rise from 7 
percent to 42 percent. That has caused a massive rate of 
poverty as well as need for assistance. And it is just amazing 
that in any academic setting, every liberal and conservative in 
the room would agree about this, but once you come out in 
public, ``Oh well, we are not going to talk about this,'' 
Senator Moynihan talked about this almost 40 years ago. And 
this is the key factor. This is the key cause of poverty, and 
it leads to all sorts of problems for those kids. And if I were 
to say there was one thing that the TANF reform failed in 1996 
was, the goal of that reform was to at least hold the line and 
not allow further erosion of the family, and that did not 
happen, it just got worse.
    Mr. Flores. Let me ask you this. Does anything that has 
been proposed improve the outcome of that single biggest 
determinant?
    Mr. Rector. I think that we really have made very few 
efforts in this. But what I would say is recognizing that if 
the research shows that these single mothers who are 
predominantly very low educated, the least educated women on 
our society, are not hostile to marriage. In fact, they 
idealize it. They believe it is a wonderful thing, the way you 
and I might think about a trip to Paris, okay. And they are 
very serious about being moms. They do not want a baby to have 
something to play with. They want to be a successful mom. The 
first and foremost thing we could do to help those mothers is, 
before they have children, and these are adult women, these are 
not teenagers, but to say to them from a very early age, ``You 
want to have children. You do not want your children to be 
poor. Do you understand that the number one factor in reducing 
poverty among children is to be married?'' Because no one tells 
them that.
    Mr. Flores. Mr. Chairman, I yield back.
    Chairman Ryan. Ms. Moore.
    Ms. Moore. Thank you so much, Mr. Chairman. It is so hard 
to prepare good, copious talking points because I am too busy 
listening to what people say, and I have to respond to it.
    First of all, I want to associate myself with the comments 
of the Chairman early on when he said, ``Let's put aside the 
outrageous rhetoric.'' I agree with that. Let's start out with 
the rhetoric about the wildly successful TANF program. By the 
way, hello, Mr. Greenstein, hello, Ron Haskins, these are good 
friends of mine. We have known each other since welfare was 
ended. Can you put this chart up? The first one I want is just 
the child poverty rates and the loss of benefits.



    This is a real straightforward chart that shows that as 
benefits have gone down, child poverty has gone up. You do not 
have to graduate from the Wharton School of Economics to 
understand this chart. And rather than adopt my good friend Joe 
Wilson from South Carolina's rhetoric, I will just invite you 
to look at that chart.
    I am so glad that in the past week, I have watched my 
favorite reality program, these news programs, and our 
candidates, and the candidate for president has talked about 
how being a stay-at-home mom is work. I am glad that we realize 
that taking care of children is work. I have three children, 
and trust me, it was work, they are all grown, they are still 
work.
    And so here we are hearing about how women who receive TANF 
are not working. You cannot have it both ways. And if they must 
go out in the workforce, and parenting is especially hard if 
your maid does not show up, or your nanny does not show up on a 
particular day. And it is really hard when you are the nanny, 
and you are the maid for somebody else's kids, and if you do 
not show up for work, you get sanctioned under TANF. Not only 
do you get sanctioned under TANF, but you are deemed to be 
lazy.
    So that is the first myth that I want to put up. And you 
can also put up the second chart.
    The second wild, outrageous rhetoric I would like to put 
aside is I am sorry, this methodology that we have from you 
sir, Mr. Rector. I will be 61 tomorrow, and I did have inferior 
education all my life, coming from the ghetto and all that, but 
I did go to college under one of the welfare programs, Pell 
grants. And I turned in a paper where you just sort of look 
together all kinds of numbers, benefits that are given on a 
community-base level, say AIDS stuff, or community development 
block grants, stuff that was not given to individuals, looked 
them all together and then claimed that you had given $13,000, 
but I could not keep up with these growing numbers that you had 
that were giving to all these people. And they gave me my paper 
back. They told me, ``No, Gwendolyn, you cannot do that, use 
that kind of methodology.''
    So I would venture to risk, knowing that you are a genius, 
that I reject your methodology in determining that poor people 
are indeed receiving all these benefits. You just cannot deem 
some 86-year-old woman that is laying up the ICU spending 
thousands of dollars a day in the ICU and deem that income to a 
2-year-old and say that they are not in poverty. I guess I want 
Mr. Greenstein to really respond to this.
    Mr. Greenstein. Well, I very much agree with that. As Mr. 
Rector acknowledged, half or more of all the dollars in his 
chart is health care. That is not money that goes to a family 
to spend, it is money that goes to hospitals, doctors, labs, 
nursing homes.
    Ms. Moore. It goes to elderly.
    Mr. Greenstein. Two-thirds of all Medicaid goes to elderly. 
I also agree with you that it is pretty difficult to take 
programs like the Community Development Block Grant, some of 
which goes to developers.
    Ms. Moore. Balance the budget.
    Mr. Greenstein. And to act as though the CDBG dollars are 
the equivalent of purchasing power for low-income people. But 
the biggest issue regards health care, and it is consistent 
with what I said earlier, what I think Congressman Van Hollen 
said in his remarks. There are specific, particular issues with 
health care, and we need to look at them somewhat separately.
    Ms. Moore. Claiming my time, sir. I was so happy to hear 
Mr. Chairman indulge me, and I was so happy to hear that women 
are revered in this campaign and in this budget. I just want to 
point out that two-thirds of the SNAP benefits and two-thirds 
of the Medicaid benefits go to women, and if any of you guys 
know a man who wants to marry me so that I do not need 
Medicare, bring him on. I mean, I am single, I am open.
    Chairman Ryan. Gwen, we've got some mutual friends in 
Milwaukee, we'll talk later.
    Ms. Moore. Okay, I am serious.
    Chairman Ryan. Mr. Rokita.
    Mr. Rokita. Thank you, Mr. Chairman, I wanted to give Mr. 
Rector some time to respond, not to the marriage proposal, but 
to the other things that were said.
    Mr. Rector. Well, I think that they are all interesting and 
valid points. As I laid out, when you look at this total 
expenditure, about half of it is medical care. I made that very 
clear. About 10 percent of it is what I called enabling 
functions. Now that is money, it is about $100 billion a year 
we are spending on behalf of the poor. We are putting that 
money out the door, for some analysis, you want to take that 
off the table, for some analysis you are trying to describe the 
resources that are going in, it is kind of important. But 40 
percent of this is cash, food and housing, and the simple fact 
is that, just in cash, food and housing alone, we are spending 
twice the amount of money needed to raise every single person 
out of poverty in the United States. Even if you took all the 
enabling programs off the table, took all the Medicaid 
expenditures for people in nursing homes, take that off the 
table, you still have enough money left over, if you converted 
this into cash, to take every family in the United States to 
200 percent of the poverty level, $44,000 a year: no Head 
Start, no job training, no nursing home care, $44,000 a year. 
It is an enormous amount of money, and no one knows where this 
money goes.
    Mr. Rokita. Let me go into that. Thank you, Mr. Rector. 
That was one of the questions that I had for you. You ask and 
rightfully so, for a need for an honest counting. Is there a 
specific proposal out there that you endorse? A system or 
process or procedure that would get us down this road to 
accomplish your request?
    Mr. Rector. I think you actually have to change the way 
that the Census works. The Census has undercounted income 
dramatically since 1950. It undercounts all types of income. 
The only thing it counts accurately is earnings. You know why 
it counts earnings accurately? Because it fixes the numbers. It 
adjusts them behind the scenes so they match up. Everything 
else is substantially undercounted, and then, for the most 
part, all the non-cash assistance, which is now the bulk of 
assistance here, is just off the table. So what you have here 
is you have close to $1 trillion in spending. And when the 
Census goes to count resources available to the poor in the 
most normal numbers, they count 4 percent of that. And then 
people come back and say, ``Oh my gosh, the poor people have no 
resources.'' They do not have any resources because it was all 
hidden. It is all not counted. Again, the game here is you 
spend, then we in social science do not count it.
    Mr. Rokita. Thank you. I understood that from your 
testimony, I just wanted you to get as specific as possible in 
the procedure.
    Mr. Rector. I think that you need, first of all, to ensure 
that all things about resources of the poor have to include all 
the resources including the non-cash, do not talk about cash-
only. Secondly, I think you need a completely improve the 
Census system that begins to use non-survey data, looks at tax 
records and things like that, looks at welfare receipt and 
things like that, gets to be accurate. The Census is missing $2 
trillion in income each year. That is more than the Gross 
National Product of England, I believe. It is very inaccurate.
    Mr. Rokita. Thank you. Mr. Mulligan, do you have a response 
to that, anything to add to my question about how do you get to 
an honest accounting, from a procedural perspective? If you do 
not, that is fine.
    Mr. Mulligan. The account area is really beyond my 
expertise.
    Mr. Rokita. Thank you. Mr. Haskins, same question.
    Mr. Haskins. Yes. I do not think the accounts are that bad 
the way they are now. The official Census Bureau measure is 
hopelessly flawed. The Census Bureau has a new measure they 
have been working on for a long time. It also has flaws, but it 
is much better, because it counts all the resources. It does 
count the food stamps and so forth. And it may undercount them 
some, Robert is right about that, but a guy named Burkhouser, 
Professor Burkhouser at Cornell is able to include all those 
government benefits, including healthcare and apply it to the 
income distribution and show that, unlike what you are likely 
to read in the New York Times, that the income all five 
quintiles since 1979 has increased. And it has increased 
substantially because of government benefits, especially at the 
bottom.
    So government is already doing a tremendous amount, and I 
think we could reduce what government does and still, not 
equalize, but bring the bottom up a little.
    Mr. Rokita. Thank you. Mr. Greenstein, same question. Did 
you have anything to add?
    Mr. Greenstein. Yes. We have a CBO series. It currently 
goes through 2007; it adjusts, and it counts these other 
benefits. And I want to note that the figures I have presented 
in my testimony today give a full accounting. How do I do that? 
Like in my figures on 650,000 more kids below half the poverty 
line? I count non-cash benefits, not health care, I count the 
other non-cash benefits and Robert's correct that the Census 
undercounts. The Urban Institute, in what is called the trim 
model, fully adjusts. We adjusted using the trim model. We 
added in all of the additional benefits to get to the full 
amount that goes out the door and is shown in the federal 
budget, and it was after we counted non-cash benefits and fully 
adjusted that we find an increase between 1995 and 2005 of 
650,000 kids below half the poverty line. There are ways that 
are available to analysts right, left or center to adjust.
    Mr. Rokita. Thank you. My time has expired. I thank all the 
witnesses.
    Chairman Ryan. Mr. Ryan.
    Mr. Ryan of Ohio. Thank you, Mr. Chairman. This has been a 
pretty interesting debate and discussion, so thank you for all 
the various viewpoints here. I think part of this, too, I think 
we need to look at the issue of poverty in context. And I do 
not think it even breaks down to some of these specific 
programs that we are talking about. And I agree that obviously 
the family is the number one indicator, and not just single-
parent homes. I come from a single-parent home, but there were 
grandparents and family members that are around, so there are 
alternative ways to try to deal with those situations.
    But the issue of context, and I think part of it is our 
education system. I think this drive to say that it is only 
about math and science, and it is not about the other skills 
that you actually need to live a full life in the United States 
of America are not being addressed, the social and emotional 
skills and having a level of emotional intelligence. It seems 
to me, it does not seem what job you end up at, it is about 10 
percent of knowledge, of actual content, and the other 90 
percent is how you show up. You are on time. You know how to 
deal with other people. You know how to connect to other 
people.
    And I think that this test-driven mentality that we have in 
the country has been a disservice to most of us, including and 
especially these young kids who are living in poverty, because 
those first set of skills that they need, and this is a bit 
off-message for what this debate is supposed to be about, those 
essential skills that they need are not being taught to them in 
the schools. And they come from broken homes. But we are not 
talking about managing poverty. I think everybody here is about 
ending it and figuring out a way to end it.
    Part of the discussion too saying we want to move people 
from tax-eaters to taxpayers is part of this, but that does not 
reflect the fact of the matter that 50 percent of this is 
Medicaid, and, while it may not be a cut in the definition of 
the chairman, it certainly is a cut if health care costs 
continue to rise and those costs are going to be pushed off 
onto somebody. And those people are in Ohio and Wisconsin and 
Maryland and Florida that end up in a nursing home. That is who 
uses Medicaid in Ohio. Those are middle class people maybe 
making $40,000 a year, and they cannot afford to send someone 
to a nursing home, but for the Medicaid program.
    It is about the issue of violence in our society and in 
those neighborhoods that those kids come from and beefing up 
cops programs, so that we have enough cops on the beat, because 
the tax base has been eviscerated in some of these communities. 
You cannot learn if you live in a violent, abusive 
neighborhood. Period, dot, the brain science is in. You cannot 
learn. Your medulla destroys your brain, and your prefrontal 
cortex does not work.
    So we have got to provide safe environments in our schools 
and in our neighborhoods. And we have got to invest in after-
school programs, so these kids who do not have a father, who 
live in violent neighborhoods, have a place to go, so they can 
learn the skills of teamwork and problem-solving and all these 
things that we want to teach.
    So I think this whole thing has to be taken into context. 
And I would argue, as well as probably most people on our side 
of the aisle, that the Affordable Care Act helped address a lot 
of these problems. I mean, you talked about disincentives to go 
to work, well the Affordable Care Act incentivized work because 
you would be able to go to work and get health care. So there 
was not this choice for the single mom to say I have to quit my 
job so I can get on Medicaid and stay home with my kid and go 
on the dole. Nobody wants to do that, and the Affordable Care 
Act incentivized that. It also provided incentives so that we 
can actually deal with people who are costing us a lot of 
money, with the medical home and the accountable care 
organizations, so that we have those wrap-around services that 
will drive health care costs down.
    At Summa Healthcare System in Akron, Ohio, they are already 
saving $8 million, $9 million, 10$ million a year by making 
sure that people do not end up in the emergency room, they end 
up getting the preventative medicine that they need. And I 
think the Affordable Care Act has done a good a good job, and 
will continue to do a good job.
    Lastly, you talk about having to go and check in so you do 
not have an underground economy job, you got to go and check in 
at Department of Job and Family Services. Well, there are cuts 
in almost all the states now in programs like that, they are 
downsizing and there is more people trying to access, so we 
have got to say if we want to end poverty, we maybe have to 
make these investments into the workforce that is going to have 
to manage these programs.
    And then lastly, I really do wish a lot of my friends on 
the other side were as concerned about fraud in the tax system 
as they were about fraud among poor people in our society. And 
Mr. Flores mentioned it. The president is trying to beef up the 
Internal Revenue Service, so that we can actually go after 
these folks, and there is not support on the other side. So it 
seems to me we are having a whole hearing on fraud from our 
friends on the welfare state, but when we talk about fraud in 
the IRS, there is no hearings or beefing up the IRS agents.
    Chairman Ryan. Thank you. Mr. Huelskamp.
    Mr. Huelskamp. Thank you, Mr. Chairman. I appreciate the 
opportunity to ask questions from our experts here today. I 
come from the state of Kansas, and actually last fall our state 
department that deals with these programs; I do not think it 
was a comprehensive review, anyway, but a pretty superficial 
initial start or review, and found at least in our small state, 
as much as $30 million in fraud in many of these programs. And 
some of the typical cases of folks that are not who they say 
they are, 6,400 that were probably from out of state because of 
our generous welfare policies in Kansas, 312 folks possibly 
dead and still receiving benefits, somehow somebody was picking 
up that check, but that is just a small state. By my 
calculations, if every state undertook a similar review, they 
could save at least $3 billion to $4 billion annually, which is 
kind of what we are talking about in some of these farm bill 
discussions over on the Agriculture Committee as well.
    My question is for the state of Kansas, or any other state, 
what particular incentives do we have in the system to actually 
ask our state partners to actually help root out the fraud and 
abuse that we hear over and over is occurring and occurring 
right in our state of Kansas. Mr. Rector, if you would like to 
start?
    Mr. Rector. Unfortunately, not very much. Again, part of 
the reason that TANF reform was taken seriously was that the 
states had money on the table in TANF. A lot of these other 
programs, SSI, food stamps, they have very little money on the 
table, and therefore it is very difficult to get state 
legislators or governors to pay attention to them. They 
certainly do not have any incentive to put effort into, say, 
cleaning up food stamp fraud because they do not pay for it. 
And I think that is very important to understand, and if you 
are going to clean that fraud up, it would have to be done by 
the people who pay for it, which happen to be you right here.
    Mr. Huelskamp. Yeah. Actually, I served in the state 
legislature, and actually the incentive is probably the other 
way around.
    Mr. Rector. Yes.
    Mr. Huelskamp. Actually, on the Medicaid program, the more 
the state spends, at least in our state of Kansas, the feds 
will put even more in. The debate over and over on the state 
floor is if we spend 40 cents, you will automatically get 
another 60 cents whether it is for fraud or otherwise. And, of 
course, we spend billions at the federal level trying to force 
fraud prevention units to work on the Medicaid and the Medicare 
side as well.
    But specifically, we have a farm bill discussion hopefully 
coming up this year; we will hopefully make some real changes. 
But I want to ask each one of you, what could we do at the 
state level that would encourage our state partners, and they 
are a partner in these programs, we expect them to serve as 
partners and actually to find a way to root out fraud and abuse 
and actually help improve a program to get the funds, we spend 
billions, as they do a great job outlining, to get to the 
people that are in need. And I guess I'll start with Mr. 
Haskins, if you'd like.
    Mr. Haskins. Well, I think there is already considerable 
motivation for states. They pay for almost half of Medicaid. 
They pay for half of TANF. They pay for half of the child 
protection programs. So they could save considerable money, and 
they administer all these programs, and they pay at least half 
the administrative cost of the programs. So they already have 
money in the game. Now, true, it is correct that food stamps is 
the one that they would be least likely to be vigilant about.
    Mr. Huelskamp. Food stamps though, that is within our 
jurisdiction on this farm bill that is coming up. So what can 
they do on food stamps? Are we just going to wait on 
Washington, or what can they do? So, quick question on that, 
just on the food stamps, that we are talking about here.
    Mr. Rector. I think the key in food stamps is to turn it 
into a work activation grant, not a block grant, which is just 
we give you money and you do what you want, but a grant program 
that is designed to promote work and marriage, that requires 
states to have certain goals in terms of participation, it has 
some penalties and rewards if you do not and has some serious 
things like fraud reduction. That is what really has to be 
done. I mean, this program is basically a dinosaur. It has not 
changed for 40 years. It is the same old giveaway program it 
always was. I mean certainly it meets needs, I do not want to 
suggest that people are not getting this money and are not 
getting benefits from it, but in terms of promoting self-
sufficiency and upward progress, it is not good at all, and we 
need to change it.
    Mr. Greenstein. Exactly the opposite is true. I think I 
know a little about this, I used to run the food stamp program 
for the federal government in 1979 and 1980. I was credited 
with cutting the error and fraud rate more than in half and was 
celebrated by an Inspector General who was one of those 
junkyard dogs Ronald Reagan promoted when he became president.
    The food stamp program today has only a 3 percent 
overpayment rate, fraud is a part of that. That is one-fifth 
the rate in the internal revenue code. States do have 
incentives. They come from several forms. States are required, 
as a condition of getting federal funding under food stamps, to 
do a very thorough; it is about eight to 12 hours per case 
investigation. There are 50,000 cases done nationally. There is 
a statistically valid sample for each state. If the state's 
error rate is high, they are required to take corrective 
action. The federal government can or on occasion does withhold 
the portion of the federal share of state administrative costs 
if they do not act. And we have gone, over several decades, 
from a program that had a 17 percent error rate when I first 
came in, to 3 percent today, and the 3 percent overpayment, 2 
percent net of underpayments. There is more that can be done, 
but one should not think that everything is a failure. I think 
in terms of error and fraud reduction in food stamps, we have 
made great progress. We have further to go, but we have made 
very substantial progress.
    Chairman Ryan. Thank you.
    Mr. Huelskamp. Thank you, I appreciate that.
    Chairman Ryan. Ms. Kaptur.
    Ms. Kaptur. Thank you. I want to thank Chairman Ryan and 
Ranking Member Van Hollen for holding a hearing this morning on 
something very important. I view feeding the hungry, as do the 
majority of people I represent, as both a moral as well as 
civil imperative. I have a problem with the Republican 
proposal, however, and I am glad for the hearing, because I 
frankly cannot support a budget that expands tax preferences 
for the most wealthy by nearly a trillion dollars, $961 
billion, while cutting the Supplemental Nutrition Assistance 
Program, our major food program, by $122 billion. For me it 
fails on a moral level as well as a civil level.
    I am sorry Congressman Garrett is not here. He talked about 
the Constitution. Well, I think feeding the hungry is a 
constitutional imperative. We talk about forming a more perfect 
union, about assuring domestic tranquility, about promoting the 
general welfare and securing the blessings of life for our 
current population and future population, and it seems to me 
this is central to our Constitution.
    The tax preferences that are in the proposed budget 
outweigh the food cuts by eight to one, eight times more 
benefit to the wealthy than what is proposed here in terms of 
the $122 billion cut in Supplemental Nutrition Assistance. It 
is simply is a nonstarter for me. And we know that two-thirds 
of these are people in our country who are gravely struggling.
    I can take you to a neighborhood in Toledo where we are 
installing community gardens and where women over the age of 85 
go and pick every pepper that we raise in the summertime to the 
ground because of hunger needs. And there is not a single food 
bank in the region that I represent that is not strapped to the 
edge. So I think to propose cuts, $122 billion is absolutely 
unconscionable.
    Now, I asked the staff to put up this chart, because I was 
sitting here working on some numbers.



    These are raw figures. They show the number of people in 
poverty in different years and decades and the number on SNAP. 
Well, when I sat here and figured out per million population, 
and if you go back to 1990 and you look at how many people were 
on SNAP when we had 248 million people in the United States, it 
was about 8 percent of the population was registered for our 
food programs. You know what it is today with population of 310 
million? About 7 percent. And so, it has actually not gone up, 
and it has actually gone down as a percent of our people, 
despite everything that is happening.
    So this chart needs another line, and that is to talk about 
the relationship to our population as a whole. So I think we 
are doing extraordinarily well as a country. And also, if you 
look at the red line at the top, you will see when Republicans 
were in power, Mr. Flores talked about jobs, more people went 
into poverty because jobs were outsourced. Jobs were not being 
created. Those who had wealth took it someplace else, and they 
did not invest here.
    So you look at the Bush era after the late 1980s, early 
1900s, and when Clinton became president, what happened? 
Poverty started to go down; it started to go down. And then 
what happened when Bush got in there? Back up again. In the 
early 2000s, and then we had the horrible crash in 2008 under 
Bush's watch. Look what happened. We are still trying to dig 
out of that.
    I think that we have to be reasonable in putting these 
budgets together and do what our people would want us to do, 
and that is to take care of those, including many members of 
our military, who are eligible for food stamps because they are 
not paid enough, and for those who are working. Who can 
possibly work in a laundromat, a mother with children, at 
minimum wage, owning a clunker of a car, having to pay gas to 
get to work, pay the heat bill, live on $1,300 a month, almost 
an impossibility in our country.
    So, I wanted to ask Mr. Greenstein your thoughts on the 
SNAP program. Most of the money in SNAP, and I am a member of 
the Subcommittee on Agriculture, goes right into benefits. It 
is a very efficient program. Is not the program being run 
efficiently something that we should be proud of and not be 
cutting at a time of need in our country, when there are not 
enough jobs being created because so many of our so-called 
corporations decide to go abroad where there are no labor 
rights, there are no environmental standards and people live as 
bonded labor in so many of these countries. Is it not an 
efficient program, we should be proud of this program, maintain 
it and not cut it by $122 billion?
    Mr. Greenstein. Yes, I think it is one of the most 
efficient and best-run programs we have. There has been a lot 
of discussion by the chairman, among others, of the big 
increases in SNAP costs in recent years. When you look at what 
happened, following the 1996 welfare law in an unintended side-
effect, a lot of people that left welfare for work got cut off 
food stamps when they went to work for low wages. It was not 
intended. Ron Haskins was among those who testified that we 
should address that. You should not lose food stamps if you 
went to work for low wages. Congress, on a bipartisan basis, 
Clinton and particularly the Bush administrations made the 
program more accessible to the working poor. We went from about 
70 percent of eligibles getting benefits in 1995 down to about 
50 percent at the start of, chairman, your 10 year period. It 
is back up to 72 percent.
    The three major reasons food stamp costs have grown are the 
downturn in the economy, the increase, which will expire under 
ARRA and the significant increase since 10 years ago in the 
percentage of eligibles that get benefits concentrated among 
the working poor. We went in the last 10 years from 43 percent 
of eligible low-income working families getting food stamps to 
60 percent. I had in my testimony, it is somewhere in the 
slides, if you look at food stamp costs since 1995 as a share 
of GDP, they are way up now, but under the CBO forecast, by the 
end of the decade they come all the way back down and then go 
below the 1995 level as a share of GDP.
    Ms. Kaptur. May I just interrupt and say, Mr. Chairman, the 
cost of food has gone up so much. In Ohio, to buy two lamb 
chops, which I do not buy, $10.62. Now, who can afford that in 
the supermarket? All right, so the cost of food was not 
included in these charts either.
    Mr. Chairman, I just want to ask for the record if any of 
the panelists could submit for the record, how many people in 
the state of Ohio in each of the following categories would 
become increasingly food-insecure if the $122 billion cut were 
adopted: children, seniors, the severely disabled, the 
unemployed and families who are working. Does anybody have 
those figures?
    Chairman Ryan. I do not think they do. Time has expired. 
Ms. Wasserman Schultz.
    Ms. Wasserman Schultz. Thank you, Mr. Chairman. You know, 
it has been interesting to sit through this ironically-titled 
hearing, ``Strengthening the Safety Net,'' when the Ryan budget 
does just the opposite, because it achieves most of its savings 
by pulling the safety net out from under the most vulnerable. 
With that preface, Mr. Greenstein, could you help with some 
data? What percent of the Ryan budget cuts, in your analysis, 
come from programs that serve low-income Americans? And also, 
could you talk about your broader analysis of the impact that 
the Ryan budget has, in general, and what were your main 
findings?
    Mr. Greenstein. So there are $5.3 trillion in expenditure 
reductions, not counting interest savings over the next 10 
years. Our analysis, and it is conservative, the figure is 
probably too low, is that at least about 62 percent of that 
would come from low-income programs. They way we got that was 
for all the programs where there are specific figures, 
Medicaid, food stamps, and the like, including the specific 
figures, for the areas where there were not: non-defense 
discretionary and entitlement programs other than like Social 
Security, Medicare and so forth, for which there is not a 
specific number, we simply assumed that the percentage 
reduction in that part of the budget that you would have the 
same percentage reduction in the low-income component. If you 
take discretionary, since I do not think there are going to be 
those kind of reductions in veterans health or the FBI or 
things of that sort, the odds are that the low-income 
reductions would be bigger, but we did not assume that. And the 
figure ended up being 62 percent, or $3.3 trillion of the $5.3 
trillion in budget cuts.
    Ms. Wasserman Schultz. And just more specifically about 
SNAP caseloads, because obviously during the Great Recession 
and its aftermath, SNAP caseloads grew, making sure that people 
were not food-deprived, that was incredibly important. But as 
the economy recovers, and we have had many more people who, in 
order to make ends meet, are dependent upon SNAP. Can you talk 
about what we can expect would happen to SNAP caseloads as the 
economy improves?
    Mr. Greenstein. So I have been following the SNAP program 
since 1972, and the caseloads go up in every recession a lot. 
In every recession there is a lot of commentary that they will 
never come back down after the economy recovers; and after 
every recession, they do come back down. And that is the CBO 
forecast and, I think, that of most analysts.
    Over 90 percent of the funding in food stamps is right for 
benefits, and the remaining, a little short of 10 percent, is 
to make sure people are eligible, to make sure retailers are 
complying with the program, and they administer work 
requirements, which the program does have, and the employment 
and training program. It is hard to get much savings there. If 
you had to take $133 billion out of the program, which the 
budget does, you have to cut benefits. You have to cut 
eligibility, benefits, or both. It is unclear which states 
would do, perhaps a combination, but there is little question 
that you would have some numbers of millions of people who 
would no longer be able to get food stamps, and for those who 
did, most likely they would get smaller amounts, which is a 
concern, given the evidence that people do run out of food 
before the end of the month.
    The Institute of Medicine is currently conducting a study 
of whether the level of benefits in SNAP is adequate. I do not 
know where they will come up, but enough questions have been 
raised in the research that they thought it warranted a study. 
I think the results will come out the end of the year.
    Ms. Wasserman Schultz. Having gone through an exercise 
myself on trying to subsist on what it would be like if I were 
on a food stamp budget, I can attest to it being extremely 
difficult, if not impossible.
    Just lastly, as recently as 2008 and 2009 in my home state 
of Florida, nearly 350,000 families with children were living 
in poverty. Can you talk about the impact, in the time I have 
remaining, of what that would mean for those families if we 
changed the SNAP program, the food stamp program, from a safety 
net program into a block grant program?
    Mr. Greenstein. Well, the effect would be by far the most 
severe during economic downturns. The food stamp program 
automatically responds in recessions, block grants do not.
    Ms. Wasserman Schultz. And that is because a block grant, 
you are giving a finite amount of money. You are saying this is 
what you have. Do with it what you will.
    Mr. Greenstein. And under the TANF block grant, there is no 
adjustment even for inflation, and the total amount of federal 
money in the program is lower in nominal terms today than it 
was when the program started because of the elimination of the 
supplemental grants.
    I do not know what the specifics would be in food stamps, 
but based on prior proposals maybe it would adjust for 
inflation, maybe it would not, but that does not necessarily 
take into account population growth. It certainly does not take 
into account downturns in the recession. And block grants do 
very badly in adjusting for changes in need across states. Not 
all state economies, poverty rates and so forth move at the 
same rate.
    My particular concern is about the people both Ron Haskins 
and I have been talking about on this panel, at the very 
bottom. The people who have difficulty holding a job. The 
people who are worse off as a result of the welfare law, 
recognizing other people are better off.
    In 1995, my distinct recollection is that when the Ways and 
Means Committee marked up the welfare law, Democrats on the 
committee said this is going to harm poor children and leading 
Republicans on the committee said we are maintaining food 
stamps as a floor. No children will be hungry. The fact that 
TANF is a block grant actually, in my view, makes it all the 
more important that food stamps retain its entitlement 
structure and be that floor under the poorest families.
    Chairman Ryan. Thank you.
    Ms. Wasserman Schultz. Thank you very much.
    Chairman Ryan. Thank you. In closing, I will make a couple 
points of clarification. There is a lot to talk about spending 
cuts. The budget we passed increases federal spending from $3.6 
trillion a year to about $4.9 trillion a year over the 10-year 
period, instead of the $5.8 trillion, which is what the 
president proposes. So we are talking about rates of increase 
here, not even talking about actual cuts.
    With the respect to how to structure block grants to say, 
programs like SNAP, when your formula, as ours proposes, is 
eligible population plus inflation, then if the eligible 
population increases because of a recession, then the formula 
reflects that. So you can measure for these things, account for 
these things in your block grant formula so long as you write 
your block grant formula appropriately, and that is what we are 
proposing. But Mr. Van Hollen, I want to yield to you. Do you 
have a UC you want to ask for?
    Mr. Van Hollen. I do. Thank you, Mr. Chairman. First of 
all, I want to thank all the witnesses for their testimony. I 
do, Mr. Chairman, think going forward, we should keep in mind 
this distinction between means-tested health programs and other 
programs. I think as we have seen, the overwhelming amount of 
funds are in the health programs, and the growth is in those 
programs, and I do not think that the Welfare Reform Act work 
incentives apply many lessons to there, as we have heard today.
    I would ask you, Mr. Chairman, for unanimous consent to 
submit for the record a report from the Saint Camillus Food 
Pantry in Silver Spring, Maryland, a food pantry in my 
community that serves over 6,000 families, on the issue of food 
security.
    [The information follows:]
    
    
    
    Chairman Ryan. Without objection. Gentlemen, thank you very 
much for spending your morning and into the afternoon with us. 
We appreciate your time traveling out from Chicago, Dr. 
Mulligan and everyone else. This hearing is adjourned.
    [Whereupon, at 12:44 p.m., the Committee was adjourned.]

                                  
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