There’s a great illustration of this phenomenon going on right now. Ironically, it’s welfare reform, which Ryan and Rubio cite as their model. In 1996, Washington made Aid to Families with Dependent Children (i.e., “welfare”) into a block grant called Temporary Assistance to Needy Families (TANF). Because TANF wasn’t adjusted for inflation, its real value declined 28 percent between 1997 and 2011. In the late 1990s, when the economy was booming, that wasn’t a problem because it was easy to find jobs and fewer people needed TANF. But then the economy cooled and then it collapsed. Because TANF is a block grant, it couldn’t meet rising need. So many states began cutting the amount of assistance they gave or making it harder to qualify for any assistance at all.
By 2011, according to the Center for Budget and Policy Priorities, TANF benefits in South Carolina for a family of three equaled only 14 percent of the poverty line. In 2012, the New York Times’s Jason DeParle interviewed some of the mothers who had lost their TANF benefits. He found that they “talk with surprising openness about the desperate, and sometimes illegal, ways they make ends meet. They have sold food stamps, sold blood, skipped meals, shoplifted, doubled up with friends, scavenged trash bins for bottles and returned to relationships with violent partners—all with children in tow.”
Why were these desperate women able to sell food stamps? Because unlike TANF, it’s a still federal entitlement, and thus rose 45 percent between 2007 and 2009 to meet the increased needed sparked by the Great Recession. But that could change, since Rubio and Ryan want to block grant food stamps too.
If Rubio, Lee, and Ryan propose turning the battle against poverty over to the states, Paul and Cantor want to turn it over to the free market. Paul’s big idea is “economic-freedom zones.” As he explained in Detroit, any community where the unemployment rate exceeds 12 percent would see its personal, corporate, and payroll taxes slashed and its capital-gains taxes suspended. The idea, as Paul acknowledges, originated with Jack Kemp, who began championing low-tax, low-regulation “enterprise zones” as a response to poverty in the late 1970s and 1980s. But according to the economist Bruce Bartlett, who worked for Kemp during that time, there’s an important difference between Kemp’s proposal and Paul’s. “When Kemp began talking about this,” Bartlett notes, “it was an untried idea. Now they’ve been created and they don’t work.”
The evidence backs Bartlett up. In 1994, after reviewing “enterprise zones” in 37 states and the United Kingdom, Duke University economist Helen Ladd declared, “the zones have not proved to be a cost-effective means of providing jobs.” A 2002 study by two University of Iowa academics concurred: “Most of the evidence suggests that zones have almost no influence on local growth.” A 2008 National Bureau of Economic Research paper on California’s enterprise zones found that, there too, “the program is ineffective in achieving its primary goals.” In fact, Detroit itself, the city where Paul delivered his speech, already has 16 “Renaissance Zones,” which are exempt from most city and state taxes. But according to Lyke Thompson, director of the Center for Urban Studies at Detroit’s Wayne State University, “none of that stuff has made a really powerful difference in the city.”