By: AIF Staff
Washington, DC – Earlier this week, former Speaker of the House Paul Ryan delivered the closing address at a virtual conference, hosted by the Brookings Institution and the American Enterprise Institute, on the recent policy developments surrounding the Earned Income Tax Credit.
Ryan, who took questions and was introduced by Brookings’ Isabell Sawhill, shared his view on provisions in the American Rescue Plan Act that expanded younger Americans’ access to EITC, increased the size of the benefit for childless adults, and raised the income cap for those eligible for the credit.
Some notable excerpts of Speaker Ryan’s remarks, edited lightly for clarity, follow.
Long-sought EITC reforms expand economic opportunities, but pay-fors are needed
“If you ask me what is the one thing that the government does that is the most effective at fighting poverty, I would say it is the Earned Income Tax Credit. There are just no two ways about it. If I had to pick one strategy, the EITC is the most effective poverty tool we have. It achieves its intended effect and it does so without reducing labor force participation.”
“All three of those [EITC policy changes] are things that I was pushing for back when I was Budget Chairman in 2014. Sometimes it takes a while for policies to actually occur. This is one of those things that I think has long had bipartisan appeal and I’m glad that this has happened. Having said that, when we proposed these things, we always had pay-fors. We always found ways of creating physical space to pay for it. This is temporary, we’ve done these things via emergency legislation. So, I think we’re going to have a pretty good debate about whether this gets extended.
“I think it’s good policy and therefore I think it should. But I do think we have to be mindful of our fiscal situation. There are less important things that could be cut to pay for this, so I do believe we’re going to have a pretty good conversation about how to pay for the extension of these policies, when we go from emergency relief and we take into account our debt and our deficits, which are coming back with a vengeance.”
Conservative debate on EITC: Healthy, necessary, and conducive to sound policy development
“There’s a bit of debate on our side of the transom on family policy versus labor and I see this is actually a good debate. It’s the hot topic in conservative circles these days and we have a number of competing proposals, some of which make more sense and some of which make less sense in my own opinion. But at the core of these proposals, there’s a perceived conflict. There’s this belief that support for families and family formation comes at odds with policies that promote labor force participation.
“The EITC is a labor force-promoting idea that came from our side of the aisle. It came from Uncle Milty, Milton Friedman, who proposed the negative income tax. So, there’s a long history on our side of promoting labor force participation and tools like the EITC, but we’ve got some new proposals and they want to focus on family formation, like Senator Romney, who is a very close personal friend of mine, has a child allowance.
“There are a number of people who are pushing these ideas that would help support families with kids and on the positive side, they would reduce poverty by a lot. But it’s also possible that they could have negative effects on labor force participation. My one concern is that we’re being forced into this debate of choosing.
“If we look at child allowances, my concern is, if we do this, it’s a pretty new program and we’re not sure of all the effects of this. I would much rather see a state take the lead and play with a child allowance and beta test it. They would see what the drawbacks are and what are the unintended consequences. Does it actually reduce labor force participation? Because I think this is something that you just wouldn’t want to put nationwide right way and frankly, I think there are some other tools that are already in place to kind of give us what we need.
“But I think we’re better off in this battle of ideas and it’s a good thing when we know what works and then figuring out ways of finding the fiscal space to pay for those things… We also have had large expansions to the CTC and the EITC. These are preferable in the sense that we have a good understanding of their effects. I think if we are going to spend money in this area, this is where we should be looking first.
“I don’t think the overall goal between family stability and labor force participation need to be in tension. I think one of the things that we can look at is reducing marriage penalties with the EITC. A lot of people on our side of the aisle are looking at just doing that, building on the current program because we generally know the effects of it….”
Good policy discussions lead to better outcomes for American people:
“I will say, I’m excited to see the energy in this space, especially on the conservative side. When we get folks like Senator Romney or Rubio or whomever on the conservative side putting out interesting, innovative proposals to reduce poverty, we end up in a much better place for policymaking. And policymakers trend towards where the action is, so if we are spending a lot of intellectual capital here, the political capital will follow.”