By: AIF Staff
Janesville, WI – Former Speaker of the House and American Idea Foundation President Paul Ryan recently sat down with Kate Odell, host of the Wall Street Journal’s Potomac Watch podcast, to discuss efforts to reform America’s social safety net through a state-led pilot project called the RISE Pilots. The in-depth conversation focused on using 21st-century technology to eliminate systemic “benefit cliffs” that penalize upward mobility and trap families in poverty. Speaker Ryan also detailed the role of individualized case management and contrasted his data-driven RISE program with the structural deficiencies of Universal Basic Income (UBI) models.
The podcast followed a Wall Street Journal op-ed written by Ryan and Les Ford, entitled “Americans are getting caught in the Safety Net,” and a corresponding white paper, detailing the RISE (Resources for Independence, Stability, and Employment) Pilot Programs
Excerpts of Speaker Ryan’s responses from the interview follow and the entire podcast is accessible here
The Moral High Ground of Work-Based Welfare
“Look, I think we occupy the moral high ground because helping people live the best versions of their lives, maximizing their potential in life, and getting up and out of poverty—that’s the moral high ground, and I think that’s what we occupy with these kinds of ideas…. The data is really clear: The best way to help people get out of poverty is work.”
How “Benefit Cliffs” Trap Families in Poverty
“The basic point on benefit cliffs is that a person who is in poverty will have a list of benefits. Those benefits will all have cutoff levels at varying degrees because there is a one-size-fits-all, cookie-cutter approach across the country. If they seek an opportunity or get presented with an opportunity—a new job, a pay raise, or maybe a single mom doing DoorDash as a side hustle while her kids are at school—and they make that extra money, it triggers a reduction or an elimination of their benefits. Because of these benefit cliffs, they end up losing more in benefits than they gain in income. So, they stay trapped in poverty.”
Universal Basic Income Perpetuates a Cycle of Poverty
“If you do universal basic income, you’re just throwing another program on top and creating a much steeper benefit cliff. You’re basically saying to people, “Don’t work, stay where you are. We’ll just give you money so you can stick in your current condition of life.”
I think it’s the most insidious idea. I think it’s going to absolutely reduce people’s ability to get out of poverty, and it will take people out of the workforce, which will slow down economic growth. So, not only will it reduce labor force participation rates and slow down people’s participation in the economy, but it will also segregate the poor from the rest of society and keep them where they are.
It’s the worst thing you could possibly do if you believe in upward mobility, if you believe in individuals rising out of poverty, living lives of independence, and shaping their destiny however they want to in their own pursuit of happiness. That’s what we want to do when we’re talking about fighting poverty.
What RISE accounts do is use technology to make the welfare reform condition-based. Food stamp money goes for food, housing assistance goes for housing, and heating goes for heating. If you work, you get this. If you don’t work, you don’t get this. You can conditionalize and program the money to perform as intended. You combine the benefits so it’s easy to figure out, which is really good for getting rid of waste, fraud, and abuse at various government agencies.
Most importantly, you gradually phase down the benefit as a person earns more money so that they are always better off when they earn more money. They will always make more than 50 cents on the dollar with that additional income that comes with that additional opportunity. There is always an incentive to make more, earn more, and grow yourself out of poverty. That’s the beauty of these RISE accounts.”
The Punitive Marginal Tax Rate on Upward Mobility
“In our op-ed, we show a hypothetical person in Washington, D.C. For that person who’s making $11,000, in order to overcome that benefit cliff, they’d have to make $65,000, because the loss in benefits would exceed the income gained by any incremental opportunity. That is a massive tax on upward mobility. In economic speak, it’s a massive marginal tax rate against upward mobility, so it traps people in poverty where they are. If you do universal basic income, you’re just throwing another program on top and creating a much steeper benefit cliff.”
Leveraging Blockchain and Digital Wallets for Conditional Aid
“We’re working with a company called Digital Asset that runs a Canton protocol. Canton is a blockchain Layer 1 privacy network, which basically is another way of saying you can have all of these benefits distributed and combined in one benefit stack—one digital wallet with all the various protocols that manage the conditionality of the welfare. If you have an Earned Income Tax Credit and you get that because you work, you can have it embedded in the person’s paycheck versus a lump sum at the end of the year. If you have SNAP benefits, which are food stamps, the money performs only if it’s spent on food, and so on. You can combine these benefits and then phase down those benefit cliffs so that the person always makes more money as they earn more income.”
Breaking the Cycle of Intergenerational Poverty
“When parents don’t work, they are not passing on the attributes of work to their children. What does work get a person? It gets them a life of dignity, meaning, and purpose. They have better health outcomes, both psychological and physical. They obviously have better economic income outcomes, and they have better life expectancies. It is really clear that working makes a person better off, makes them more fulfilled, and gives them better lives. That is quantifiable. But the example that is set for the children is just as important. Making sure that you can, in my opinion, break the cycle of intergenerational poverty—which is the toughest, most difficult form of poverty to go after—is what I focus on in my foundation.”
Utilizing Case Management and Federalism in the States
“I’m a huge believer in case management. My foundation spends a lot of time in this area. The randomized control trials that have been run on case management are very, very good. It’s being scaled around the country. A lot of different groups do case management: Catholic Charities, Lutheran Social Services, Salvation Army, and governments do it.
What case management is, is you have a poverty navigator. A family would be attached to a case manager. Think of it like a social worker—a person that is knowledgeable about all the various benefits that are there for their eligibility and who can help them build a plan to get them up and out of poverty…. What case management really does is act as a massive accelerant to helping a person get up and out of poverty. Having that person help you do that is critical for all welfare reform ideas out there, but particularly if you’re onboarding a new technology…”
“What a state can do is they can get waivers from the federal government, and this particular federal government is very pro-waiver, but they can also use their TANF money. TANF is a pot of money that states have from the old 1996 welfare reform, which has a lot of discretionary money to do things like this—to do pilots. So, they already have federal money in accounts right now in the states that they can use to fund these RISE pilots, and they can get other waiver dollars in addition to it. The money is there to do these pilots.
The question basically is: is today’s governor… satisfied with the condition of the poor in their state, or do they want to try a new idea based upon long-standing principles and great economic evidence with new technology to build a system to get their citizens out of poverty? … If there’s a governor that wants to do that, then there are pilot projects on the shelf ready for them to use.”