Changes in federal policy traditionally have been the most likely way to address benefits cliffs—a sudden decrease in public benefits that can occur when recipients experience even a modest increase in income. But in a recent op-ed, American Enterprise Institute scholars Angela Rachidi and Nic Dunn argued that there’s much more that states can be doing without simply raising eligibility standards, which can contribute to the already burgeoning federal deficit. Spotlight spoke recently with Rachidi, a senior fellow and Rowe Scholar in the Center on Opportunity and Social Mobility at AEI. The transcript of that conversation has been lightly edited for length and clarity.
Let’s start with you walking us through your recent piece about states playing more of a role on welfare reform, and specifically the benefits cliff.
The issue of the benefits cliff is largely one that's created by the federal government because they authorize most of the safety net programs and then design the rules. And then, the administrative agencies develop the rules and regulations that kind of guide the implementation of the legislation. So, there's often the view, and which is mostly correct, that states don't have a lot of ability to address the benefits cliff. What Nic and I were trying to argue based on a report that we did with several others is that while all of that is true, there are some things that states can actually do, given some flexibilities that the federal government does give them. We were trying to make the argument that states can do that and that they should step up and try to implement some solutions to the benefits cliff problem.
And what are some of the things that states can do?
There are a number of things. As we outlined in the report, they can request waivers of existing law in SNAP, and in Medicaid. There's a provision, for example, in SNAP that actually allows states to exempt 15% of their caseload from the benefit formula rules. And so, states could figure out how to structure a new benefit for at least a small share of their population. There are other things we put in that report, like doing a more frequent eligibility check because then benefits are recalculated. So, if you're concerned about the phase out of benefits being too abrupt, if you're doing more frequent checks, then it won't be as abrupt.
There are legislative things states can do as well. BBCE (Broad-Based Categorical Eligibility) and SNAP is kind of an interesting one because it sort of allows states to address the benefits cliff, but it also creates some other issues. States should be thinking more about BBCE and how it can be used more effectively on the administrative side and through requesting waivers.
The other dynamic here is that a lot of states are doing things to address benefit cliffs, but the common solution is to expand eligibility, to the extent they can, higher up the income scale so that benefits can phase out more slowly and gradually. What we argued in our report is that it is an unsatisfying solution because you're expanding the safety net and that brings concerns about cost, especially given the fiscal situation that the federal government's in. And then there's also concerns just about expanding the reach of these programs, given all the other related issues like work disincentives, creating dependency, the negative health aspects of SNAP and just a variety of things. We're coming at it from the perspective of limited government and wanting to support self-sufficiency, not to support more government dependencies.
So, directly to your question, yes, states are addressing it, but they're tending to do it by expanding programs, where we took the approach of, there's still things you can do within the programs by just fixing things that can help reduce benefit cliffs.
And is the administration encouraging states on this specific issue to do more experimenting? Certainly, they are in a lot of other ways on safety net programs.
We called for that in our report and I think there are some discussions, but there hasn’t, to my knowledge, been anything formal yet. But that's certainly something we would encourage.
And from the congressional standpoint, is there anything the Hill could or should be doing to push policy in this direction?
There's actually a new bill out from Senator (Jon) Husted (R-OH)and there's a House version from (GOP Rep.) Blake Moore out of Utah. Okay. It's called the Upward Mobility Act. Matt Weidinger and I put a blog post out on it recently. Husted actually is arguing for much of what we put in our report about giving states more flexibility to combine safety net program funding sources and giving states flexibility through demonstration projects, kind of like the pre-welfare reform era with the use of waivers. That type of legislation is something that we argued for in our report and something that Congress certainly could support.
Is there anything else on this topic that you want to emphasize?
Just that point about the common solution too often is to expand eligibility. There is a lot of work that's happening around benefit cliffs at the state level. I don't want to give the impression that states are not already trying to address this issue, because they are. It's just our argument is that it's not fiscally sustainable given the situation at the federal level.