In The News

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.”

By: AIF Staff

Janesville, WI – Earlier this week, American Idea Foundation President and former Speaker of the House Paul Ryan spoke with Nic Dunn, host of the Sutherland Institute’s Defending Ideas Podcast, about the RISE Pilot Program, which represents a way for states to use modern technology to reform the social safety net so it promotes economic growth, independence, and employment.

As part of an in-depth conversation about how to improve America’s social safety programs, Ryan and Dunn talked about the shortcomings of America’s existing safety net, how the RISE Pilots would build on the lessons of the 1996 state-led welfare reforms, the false promises of Universal Basic Income (UBI), and the importance of technology in improving the responsiveness of our social safety net.  The full podcast is accessible here and excerpts of Speaker Ryan’s responses, edited slightly for clarity, follow.

The core purpose of America’s safety net & why reform is needed:

“In my view, the purpose of the American social safety net is to maximize human flourishing and to help people maximize their lives. That means a safety net that is wired toward upward mobility and independence.

We don’t have a safety net that does that now. We’ve learned a lot of things over the years, and I think we can apply those lessons given what we now know and the kind of technology we have today to really step-function improve our safety net so that it is wired toward upward mobility, self-reliance, and independence…This is not a partisan issue. It shouldn’t be a left-right issue. It’s just a “what’s the right thing to do.”

I’ve spent 30 years on this issue. As a staffer, I was part of the original 1996 welfare reform. So, I’ve been around the block on this issue. I used to chair the House Ways and Means Committee, which is the committee in charge of these policies. And I’m excited… [because] now we have the technology that can finally do what we’ve always wanted to do in this space to really and truly make a huge difference…

Just like 30 years ago this August 22nd, when Bill Clinton—a Democrat president—signed welfare reform, we can do it again through the states…. I’m excited about what we’re offering here at the American Idea Foundation: these RISE pilots.

I just think that the time has come for us to come together, left and right, with the technology we have today to finally really move the needle on upward mobility and poverty alleviation.”

Penalties, Cliffs, and Stagnation: The Shortcomings of America’s social safety net

“Today, [the federal government] spends $1.6 trillion—one out of every five dollars of federal spending – on the federal safety net. And that’s just the federal government, let alone state governments.

[The safety net is setup] in such a way that it truly traps people in poverty. It penalizes family formation and marriage. It is done in such a way that if you earn more as you are trying to get your way out of poverty, you lose more benefits than you gain in income, so you stay where you are….

We call them “benefit cliffs” and they put a massive marginal tax rate against upward mobility. When someone is navigating their way through poverty, signing up for the various programs from different levels of government and government agencies with different benefit restrictions and requirements, you add all that together and it’s very complicated. A person who is trying to work their way out of poverty by getting better opportunities—a pay raise, a side hustle, a new job—invariably loses more than they gain with that extra pay because of the benefits they now lose, the categories they now fall into, or the requirements they now trip….

These weren’t designed to be penalizing like this; it’s just the way government works. Frankly, now given the kind of technology we have, we can fix this and that is what we are proposing to do with these RISE pilots.

Using today’s 21st-century technology, we can design a system that we can test, run randomized controlled trials on in various states, and demonstrate that we can conjoin these benefits with good case management.

We can have a system where people go to one place with one app on their phone with digitized, programmable benefits harmonized with one another. As you experience an opportunity in your life— a pay raise, a new job, maybe a second job, maybe doing DoorDash while your kids are at school— you don’t lose more than you gain by getting that job. You ratably decrease all the combined benefits with the technology we have today so that it always pays to take that extra rung of the economic ladder up and out of poverty.”

A Better Way Forward: The Essence of the RISE Pilot Programs        

“We can build universal, digitized, programmable benefits where programmable money is on your phone in your Apple Wallet, PayPal account, or whatever you want. You can put all of these benefits in your phone, all harmonized together. They are programmable, so that they perform as intended:

If Utah has certain requirements on what you can use SNAP and WIC benefits for, you can embed those in the rules of the money—those dollars can only be used for that food.

As these benefits are combined in one digital app seamlessly, you can ratably decrease benefits to make sure everyone keeps more than half of every extra dollar they earn.

That’s what RISE pilots do.

We design a flexible benefit that is technologically up-to-date with the 21st century so you have programmable benefits. You can track and audit spending to ensure governments don’t have waste, fraud, or abuse. You can have perfect privacy protection and ensure a benefit assigned to a person can only be used by that person.

We have it designed so that the marginal tax on upward mobility—the benefit cliff—is always below 50%. Every time you get an extra dollar of earned income, you will always make and keep more than 50 cents of that dollar without losing as many benefits….

It can perform the way we always dreamed welfare benefits should perform: Reward upward mobility, don’t penalize people for getting married, don’t penalize people for working, and don’t penalize people for making more money or taking better opportunities.

What we are proposing is to pilot this in states. We have technology providers lined up to do this.

We shouldn’t just assume this is the best idea ever and guaranteed to work; let’s run randomized controlled trials on each of these programs in states, test them, and see what works.

With digitization, you can see in real time how it’s performing and how people are responding. You can even do A/B testing on a real-time basis if a state wants to, perfecting the idea and measuring outcomes.

I am convinced that, like what we did in 1996 but with today’s technology, we can take those same principles—pro-marriage, pro-work, pro-upward mobility—and build these benefits together digitally.

I’m also a big believer in case management: having case managers help poor families navigate their way out of poverty, using a system with accountability so a person is going to work, school, or training to get the support they need to climb out of poverty permanently. Then you measure as you go to decide whether the idea is worth expanding.”

States should lead the safety net reform efforts again

“Why states? First, it’s faster. Second, you can try different ideas—something in Indiana, Wisconsin, New York, or Utah—so the best ideas bloom faster.

I believe in federalism. States are different, so we can customize per the needs of where we live and how our systems work: customization, experimentation, and speed.

It takes a long time to get big things through the federal government. The Evidence Act took me five years just to get agreement to measure whether programs work. Welfare reform took an entire generation. Governors are executives who want to solve problems and work across the aisle, making them better focused on policy while Washington gets stalemated. States are the faster, better place to prove out ideas before taking them national.”

A counter to flawed Universal Basic Income plans:

“At the American Enterprise Institute, we did a taxonomy on all the various tests of Universal Basic Income and the results are clear: It reduces work and actually reduces income. Layering UBI on top of our dysfunctional safety net program will just add another benefit cliff and make it even harder for people to become self-sufficient.

Work is more than just a paycheck: it’s dignity, meaning, better behavioral health, better mental health, better physical health, and longer life expectancy. The children of people who work—especially married parents—do far better. The data and evidence are clear that UBI is not the way to go.

Our social insurance system is about 100 years old, written for the Industrial Revolution which took 80 years to unfold. The AI revolution is taking single-digit years and moving fast. Our government stabilizers, like unemployment insurance, were designed for a different time. In examining this, one thing we have consensus on is that universal basic income is not the way to go.

Given the technology and data we have today, RISE pilots are the way to go so we can test and experiment. We spend $1.6 trillion a year in the federal government alone on poverty alleviation. We clearly can spend that money better given what we now know in technology and economics. That same technology that will displace yesterday’s jobs can, when applied to our safety net, solve problems policymakers have dreamed of solving for decades….

Paying people not to work does two bad things: it hurts the very person you’re paying, for the reasons we described, but it also takes that labor out of our economy. The more labor force participation we have, the faster our economy grows, creating more opportunities for all of society.

Taking tens of millions of able-bodied people out of the economy guarantees slowed economic growth, making everyone worse off. It hastens our debt crisis and leaves less money for national security, Social Security, Medicare, or Medicaid.

Getting people working helps solve all of our problems: it grows our economy, grows productivity, and provides dignity to the worker.”