Health & Human Services

Rubio Unveils Poverty, Income Inequality Plan

A key part of U.S. Sen. Marco Rubio's proposal is handing over funds and discretion to states.
by | January 9, 2014
http://www.rubio.senate.gov/
 

U.S. Sen. Marco Rubio of Florida announced yesterday plans to introduce anti-poverty legislation. His proposals come 50 years after a Democratic president, Lyndon Johnson, declared an unconditional war on Poverty. Rubio and fellow Republicans, such as Congressman Paul Ryan of Wisconsin, have deemed Johnson-era policies, such as Medicare, Medicaid and food stamps, to be failures. Rubio charged that they "foreshadowed the belief still held by liberals to this very day: that government spending is the central answer to healing the wounds of poverty."

Instead Rubio, a potential contender for the GOP presidential nomination, called for "the most fundamental change to how the federal government fights poverty and encourages income mobility since President Johnson first conceived of the War on Poverty fifty years ago." The current level of federal funding for anti-poverty programs would remain the same under Rubio's proposed changes, according to a fact-sheet released by his office.

Rubio's plan would place most federal anti-poverty funding under one agency. That agency would be in charge of "a revenue-neutral Flex Fund" for states "so they can design and fund creative initiatives that address the factors behind inequality of opportunity." The proposal echoes a similar idea put forward last September by Oren Cass, the former domestic foreign policy director for the Republican presidential nominee in 2012, Mitt Romney. That proposal, featured in a National Review guest column by Cass, would function similar to a block grant except "the funding formula would be pegged to the size of the population in need and would grow at the same rate as the poverty threshold itself."

In the same speech, Rubio called for replacing the federal Earned Income Tax Credit (EITC) with wage enhancements for certain low-paying jobs. The EITC has long received bipartisan support, in part because it's designed to encourage work and to get people off welfare; its longstanding popularity may be due to empirical research that shows the credit results in increased employment. The EITC, along with other refundable tax credits, helped roughly 1.4 million people stay out of poverty in 2012, according to a report by the U.S. Census Bureau last year.

The program is popular enough that 25 states have decided to offer a matching tax credit to the federal program. Last year five states enacted legislation to either create, expand or retain their own matching programs. The District of Columbia, New York City and Montgomery County have their own matching tax credits. Both San Francisco and Denver have experimented with temporary tax credits in the past.

The EITC has become a talking point for some on the right as the preferred anti-poverty program over raising the minimum wage. Conservative economist Gregory Mankiw penned a column last week in The New York Times explaining why he believes it is better for businesses (and the economy as a whole) than requiring higher wages. The American Action Forum, a self-described center-right think tank, released a report last year that also criticized the minimum wage and recommended policymakers focus on the EITC instead. The tax credit owes its origins to a Republican president, Richard Nixon, and experienced expansion under the Reagan administration.

Nonetheless Rubio cited some criticisms of the EITC -- that it largely excludes single adults without children and that the money comes in a lump sum, once a year. Rubio said his scheme for wage enhancements would be better because workers would receive income boosts on a regular basis, as they do with actual paychecks.

One conservative scholar, Robert Rector of the Heritage Foundation, criticized Rubio's flex fund idea as "extraordinarily bad," according to the website BuzzFeed. Rector articulated a concern that the policy would result in handing over too much money to states without strict guidelines for how it could be used. By contrast, Michael Tanner, a senior fellow at the Cato Institute, a libertarian think tank, said he was intrigued by Rubio's proposals, particularly the notion of consolidating the various offices and programs across the federal government that currently deal with poverty. As for the flex fund, "I would love to see states experiment," he said.

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