By: AIF Staff
Washington, DC – Last week at the Bipartisan Policy Center, American Idea Foundation President Paul Ryan joined a panel of experts from the private and public sectors to discuss the future of the Earned Income Tax Credit (EITC).
The event, which was the latest in a quarterly series hosted by the American Idea Foundation, featured a wide-ranging conversation between Ryan and JPMorgan Chase CEO Jamie Dimon, moderated by BPC President Margaret Spellings, and remarks from Maryland Comptroller Brooke Lierman.
Former Speaker Ryan and Dimon discussed how to improve poverty-fighting policies like the Earned Income Tax Credit and how to better utilize technology to administer these credits. Ryan touched on his past work to advance pro-growth reforms via the Tax Cuts and Jobs Act and his ongoing efforts to expand the use of evidence-based strategies to fight poverty.
Excerpts of Speaker Ryan’s remarks follow. Video of the event is accessible here.
Why expanding economic opportunities for working families, via policies like the EITC, matters:
“This is a bipartisan issue. The EITC, which was originally a Milton Friedman idea called a “negative income tax” going back in the day, has had bipartisan roots and it has been proven to be very effective. When I was Chairman of the Ways and Means Committee, I worked feverishly to expand the EITC and a couple of reforms, which we can get into, have yet to materialize, but if you are pushing for a society that is known by upward mobility and you’re striving for equality of opportunity, the best tool that we’ve had in the arsenal is the EITC….
“You don’t think of Congress as this bipartisan place. Most people who watch the news don’t see it that way, but the EITC is [bipartisan], so let’s keep it that way and let’s figure out how we can make it better.”
On the future of the EITC and the need for technological innovation to improve its effectiveness:
“When I was Ways and Means Chairman, I was not a fan of the lump-sum concept of it where you wait until the end of the year and get a lump-sum. I would rather have it embedded in the paycheck itself so that each pay period you have that higher pay so you can budget more accordingly. It’s impressive that people can pay for one thing [using a lump-sum EITC payment] but it would be better if it was embedded in your paycheck, and you had higher wages that you could recognize. It really demonstrates the “make work pay” notion.
“The reason that we couldn’t fix this when I was running the Committee in charge of this is technology. The IRS and the Treasury literally did not have the technology to be able to do this and as we toyed with the idea, we could have converted it to a Social Security credit but that would have eviscerated the program. So, by now, surely technology can solve this problem and as you look at the digitization of money and the digitization of benefits – and there’s a longer conversation to be had here – I think that’s the key because you can do two things:
- Make sure [the EITC] goes to who it needs to, like the 300,000 people in Maryland who qualify for it but don’t get it. I mean, technology could help solve that.
- If we have program integrity problems, which are waste, fraud, and abuse, technology can clear a lot of that up and fix a lot of the administrative difficulties that we have….
“There are a lot of things that technology can do to make [the EITC] work better and make it work for cheaper and so that’s something to me that Congress should wrestle with. It is not that controversial, and it will help shrink the score of what it takes to expand this. We have a lot of expiring provisions in tax law in the next session of Congress and there is when you’ll have a churn of tax policy where you probably have an opportunity to make some of these expansions.”
A bipartisan consensus on the need for a social safety net, the debate centers on how best to deliver it:
“There’s a consensus in America. You don’t see it when you turn on the television at night because you have these entertainers in Congress… but we agree on the social contract which was litigated and debated in the 21st century. We want health and retirement security for all Americans. The government is going to provide this, and the question is: How does the government do that? But we all agree on the social contract, and we all want a safety net under which people can get back on their feet. Let’s have a good debate about how this works but we have a remarkable consensus in this country about the social contract of health and retirement security and we all want faster economic growth.”
The role of the American Idea Foundation in advancing evidence-based strategies:
“What my Foundation does is we work with economists at the University of Notre Dame who run 75 randomized controlled trials a year on what we think are successful poverty programs around America. We find out what works so we can then scale and replicate. Government can do that too.
“The last time I was here with Patty Murray, a progressive Democrat Senator from Washington state. We wrote the Evidence Act five years ago. The five-year anniversary was just a week ago. Why I think we’re really on the cusp of something good here is the Evidence Act says that the federal government has to open up its data so that the world, the private sector, the economists and the researchers can look at what does work and what does not work.
“The government, until just very recently, never did this. We would measure success on anything the government does by effort, by how much money are we spending, by how many programs are we creating. We did not look at outcomes and did not look at results. The Evidence Act is turning government to do that and what you invariably find out when you’re measuring yourself on Key Performance Indicators and results like the private sector always has done, you will then get us towards this “results-oriented governing,” which requires the integration of the private sector so we get the best practices.
“We’re kind of on the cusp of a new wing of social science with Evidence-Based Policymaking. We are skating to where the puck is going — I’m a Wisconsin guy so we talk in hockey analogies – but skate to where the puck is going to be, which is: What does work? What are the best practices? Forget about the old-school, government and press release effort [to fighting poverty]. Let’s make sure we are results and outcome based, and I think using the best technology, the best ideas, and testing them via randomized controlled trials and pilot projects can get us to that answer.”
Breaking up the monopoly on poverty-fighting by utilizing RCTs, pilot projects & private-sector innovation:
“[People] used to throw this idea out there which is: The War on Poverty is the government’s responsibility. It’s not yours, just pay your taxes and they will handle it. That didn’t work.
“My point is: Why don’t we decentralize this and make it competitive? Let’s have the private sector and the not-for-profit sector participate with all their sophisticated technology and help us solve these problems and you can do that in government.
“The point is, if you bring private sector know-how to help us deliver government goals like fighting poverty and delivering government benefits, we can save money and get to the goal faster, but it does require a big political leap of faith for some people who do not think these things should be inherently non-governmental. We still have that problem, so the answer, I think, is let’s try some randomized controlled trials in discrete ways. Let’s do some regulatory sandbox type of ideas to see if [a solution] does work and if this can be proven and built out….
“Let’s start with some tests. You can do them in a state. You can do it in a county. You can do a randomized control trial. You can do a pilot project. Let’s do that, build it out, and take it from there.”
Utilizing Evidence-Based policymaking strategies & private sector know-how:
“The good thing that BPC and other institutes do is they have all this evidence and data. We are actually in the world doing evidence-based policymaking and if we know what works and what doesn’t work, we can get past the ugly politics and get to just executing these proven things that we all now have consensus on.
“You have to accept that the private sector is going to have a big role in this. Why? Because the private sector knows how to do this. They have technology; they’re digitizing; they’re innovating constantly so let’s put that to work and put that intellectual capital toward delivering these government services. Some people are still stuck on this 20th century notion that this is all government and the government is supposed to solve poverty and supposed to deliver health care. It hasn’t. It doesn’t do it well. So, in this 21st century world that we live in with technology and how ubiquitous it is in our lives, let’s use the people who know how to do it to help deliver on these goals.”
Impact of America’s broader fiscal challenges on future economic growth:
“We have tremendous challenges. Our dollar as the world’s reserve currency is under duress even though we are probably the healthiest looking horse in the glue factory. We are in serious trouble of losing that privilege because our debt is out of control. We’ve discussed this here quite a bit, but we don’t have the kind of economic growth we need.
“Economic growth does not solve every one of our problems, but you can’t solve any of our problems without economic growth.
“The good thing is we know the dials that we can turn to get [faster economic growth]. A lot of it is about getting people in the workforce, getting people equipped and so if we can focus ourselves on upward mobility and the skills and tools that they need to live their best lives in a society focused on upward mobility, we can get that bogey.“And so, to me, it is about the things I described. It is about the digitization and the rebuilding of our safety net so that it works in the 21st century to get people working. It is getting the incentives right. It is getting not only our tax policy right but then getting our debt under control. You have to reform entitlements if you’re going to stop this debt crisis and if you’re going to be able to get these programs working the way they’re supposed to in the 21st century.”