About That Farm Bill…

Recently, everyone in Washington has been obsessing over the chance of a government shutdown and intraparty fighting between House Republicans and conservative Senators (Ted Cruz, Mike Lee, etc.). It’s been interesting to guess Speaker Boehner’s strategy – or lack thereof – and how Senate Republicans will act once they are put on the spot. But September 30 isn’t just when the government shuts down, it’s also when the current farm bill extension expires. That’s a big deal and it’s not getting the attention it deserves. Let’s recap what’s happened so far:

  • The Senate passed a $955 billion farm bill in early June by a 66-27 vote that included a $3.9 billion cut to food stamps.
  • In mid-June, House leadership suffered a surprising and embarrassing defeat when its farm bill failed by a 195-234 margin. Boehner and company had needed Democratic support to pass the bill – which cuts $20.5 billion from food stamps – as many conservatives didn’t think the cuts were severe enough, but a last-second amendment from Rep. Steve Southerland (R-FL) that Boehner allowed into the bill caused Democratic support to plummet.
  • In July, House leadership split the farm bill in two: one was all about agricultural policy and the other about food stamps. The House passed a farm bill without food stamps a a few days later, consisting of crop insurance, commodity and conservation programs and other small things by a 216-208 vote with no Democratic support.
  • Today, the House is taking up the food stamp part of the farm bill. This time the cuts are much bigger – $40 billion in total – and will attract few in any Democratic votes. The drastic cuts are expected to draw more Republican support so that the bill can pass.

That’s where we are right now. If the House passes that bill today as it’s expected to do – though it’s not a given – then the Senate and House would conference with all three bills and return a compromised version to each chamber where the two houses would vote again. If both pass, then it heads to the president’s desk. If anything goes wrong during that process and President Obama doesn’t sign a farm bill by September 30, then we would revert to a bill passed in 1949 and a bunch of strange, unknown things would happen. Basically, Congress can’t let that happen.

Let’s assume that today’s bill passes and the House and Senate head to committee. Liberals were already furious at $3.9 billion in cuts so they aren’t going to accept $40 billion. Certainly, both sides in committee can find a compromise between those two numbers. But Senate Democrats and House Republicans are both going to be highly reluctant to support $10-20 billion in food stamp cuts, albeit for opposite reasons. If such a bill comes out of committee, it will be very interesting to see who votes for it. Will Boehner have enough Republicans in the House? Will he have to break the Hastert Rule if the cuts aren’t that severe? Will Senate Majority Leader Harry Reid have trouble convincing his Democratic colleagues to support it? We could end up seeing a bill passed with a lot of moderate Republicans and Democrats in each chamber supporting the bill. That’s actually what a compromise looks like and both liberal and conservative activists will go home angry.

But a lot can go wrong here. House Republicans are already very wary of leadership throughout this budget fight and Senate Democrats could even filibuster the bill if enough of them are outraged by the cuts. The latter scenario is unlikely obviously, but not impossible. Public opinion doesn’t play much of a role in this since everyone is focused on the fiscal battles so neither side will necessarily take the blame. That also means that neither side has much incentive to compromise.

Once again, Democrats and Republicans are finding themselves far apart on a bill they have to pass. This could get very messy.


Does Welfare Reduce Work Participation?

Michael Tanner and Charles Hughes of the libertarian Cato Institute published a report (PDF) this week evaluating the total amount of welfare benefits that individuals can collect on a state-by-state basis. What they found was pretty alarming:

The current welfare system provides such a high level of benefits that it acts as a disincentive for work. Welfare currently pays more than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit, and in 13 states it pays more than $15 per hour. If Congress and state legislatures are serious about reducing welfare dependence and rewarding work, they should consider strengthening welfare work requirements, removing exemptions, and narrowing the definition of work. Moreover, states should consider ways to shrink the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.

That’s quite a finding, but it doesn’t really hold up under scrutiny as Josh Barro explains. But that’s not what I want to talk about. I want to assume that those findings are correct and look at their outcome on work. Tanner and Hughes include a table in their report that lists every state and the percent of adults receiving Temporary Assistance for Needy Families (TANF) benefits who are in work activities. Work activities does not necessarily mean employed; it also includes job search activities as well. So, to see if welfare disincentives people to work, we can look at which states have the highest work participation and compare that to the welfare packages they offer, right? After all, if states with substantial welfare packages also have low work participation rates, that’s a sign that welfare may act as a disincentive.

But looking at the benefit levels themselves isn’t helpful. What matters more is the purchasing power of those packages. That’s what people really care about. Five hundred dollars in SNAP (food stamps) benefits will buy you a lot more in Fargo, North Dakota than in New York City and that impacts people’s desire to work. I couldn’t find a measurement of the differences in cost-of-living in different states – possibly because it varies so much within states themselves – but Tanner and Hughes actually provide a metric that can be used as a proxy for cost-of-living: median salary. In fact, they present welfare benefits as a percent of the median salary for each state. Median salary is not a perfect proxy, but it is still a pretty good measure of the cost-of-living in each state.

Now, comparing the welfare benefits as a percent of the median salary to the work participation rate in each state can give us a better idea of the incentive effects of welfare. So, that’s what I did. Here’s a graph of the results with a best fit linear line attached:

Welfares EffectsThere’s certainly a negative correlation between welfare purchasing power and work participation, but it’s not that strong. In particular Idaho’s work participation rate of 87.9% along with its small welfare purchasing power (36.9% of median salary) is impressive. But this analysis isn’t quite right. You may be looking at the welfare benefits as a percent of median salary and are shocked to see so many percentage over 100 percent. That’s because just about no one actually qualifies for all eight of the welfare programs that the Cato Institute includes. As Barro points out in his article, most people on welfare receive SNAP and Medicaid benefits and nothing else.

However, Tanner and Hughes predicted this rebuttal and calculated the maximum amount a person can receive from just SNAP, TANF and Medicaid benefits. They were also nice enough to include a table of those benefits as a percent of median salary in each state. I then compared those numbers to work participation and look what I found:

Welfare Effects2The correlation is positive now! State’s with greater welfare purchasing power have higher work participation rates. The correlation is even less than in the previous graph so it’s not particularly meaningful. In addition, correlation does not equal causation. This could be a complete coincidence. But it should at least make you pause whenever you hear conservative claims that welfare causes people to forego their job search and mooch off other taxpayers. The evidence on it is very unclear.