This Is Your Safety Net on Block Grants

Good old Ez Klein provides a highly efficient and important summary of what can happen when the federal government turns the administration of a program over to the states in the form of a block grant:

A block grant takes money the federal government is already spending on a program and gives it to the states to administer — usually with fewer rules and conditions. That’s it. The hope is that states will use the money more efficiently. But block grants can cost more, cost the same, or cost less than the funding mechanisms they replace. Block grants change how money is spent, not necessarily how much money is spent.

We’re talking about block grants because the Republican budget resolutions are coming out this week and as Ezra emphasizes, recent such budgets have used this mechanism to propose deep cuts in Medicaid and SNAP (food stamps). That is, they don’t just turn the programs over to the states with the same principle that funding will go up and down with need. They set the funding to some fixed formula, like population growth plus inflation, or, even worse, as was the case with TANF (Temporary Assistance to Needy Families), a fixed, nominal amount — it’s been $16.5 billion since 1996!

Clearly, this completely strips the critical counter-cyclical function from the safety net.

But while Klein said a lot about what could happen, Bernstein will show you what did happen. The first figure below, from this earlier analysis, shows how as unemployment rose in the Great Recession, SNAP rose with need while TANF’s fixed block grant prevented it from responding in the same way.

The next figure, from my CBPP colleague Donna Pavetti, shows how much more AFDC (TANF’s non-block-granted predecessor) rose with unemployment in the relatively mild early 1990s recession compared to how it hardly rose at all in the far deeper recent recession.

The final figure, also from Pavetti, switches from an unemployment metric to a poverty metric, showing how block granting led to a marked decrease in TANF’s response to need.

I’ve got a longer piece I’ve been working on which I hope to post shortly pointing out that this budget tactic by the R’s is completely predictable. They won’t raise tax revenue (though tax cuts are OK), they want to boost defense spending, they want to balance the budget in 10 years, and they won’t go after near-term entitlements (Soc Sec, Mcare), except the ones that help the poor. So that means cuts to SNAP and Medicaid, delivered through block grants.

That’s some deeply cynical and just downright mean-spirited budgeting.

This post originally appeared at Jared Bernstein’s On The Economy blog.