We Can Help Working Families Immediately

Margy Waller
Margy Waller Visiting Fellow, Economic Studies and Metropolitan Policy, The Brookings Institution

March 3, 2000

Try this quiz. Do you know which presidential candidate said, “I want to cut middle income and lower income Americans’ taxes. I don’t want to cut rich people’s taxes,” to an audience of New Hampshire citizens?

Which candidate told an audience at a church in Brooklyn: “The foundation of our effort should be the guarantee that no one who works full time year round should have to live in poverty”?

Another candidate told a group of reporters in Chicago: “If you are a single mother with children, and you live on the outskirts of poverty, and you work hard, as you move toward the middle class, you pay an enormous [tax] rate.” And which candidate told an audience in Iowa, “We have a challenge … in helping hard-working families find the time that they want and need with their children-without sacrificing their standard of living”?

Answers: McCain, Bradley, Bush, Gore. Tough quiz, right?

Everyone has a plan (or at least a rhetorical one) about how to help working poor families. The world has changed. Since federal welfare reform passed in 1996, the will to support poor working families seems to cross all political lines.

But, low-income families don’t have to wait for a new president or an act of Congress. States now have the opportunity and the resources to design and fund work supports for low-income families.

The booming economy has lifted state finances in recent years, and budget surpluses will greet many states’ lawmakers when they gather this spring. Beyond surpluses in their own budgets, states have left billions of dollars in unspent federal welfare block grant funds in the federal treasury. When welfare was converted into a block grant, states were allocated as much federal funding as they got in the early 1990s, when caseloads were at their highest point in history.

What used to be a way to finance cash assistance is now a funding source that can support all low-income working families, and those moving to work. But, it won’t help families if it doesn’t get used. While saving some block grant dollars in a rainy day fund may be prudent, as of October 1, 1999, states had not spent almost $2.6 billion in available block grant dollars. Another $4.7 billion had been dedicated to state programs but not yet spent.

Even more money is available to states if they choose to take it. Recent changes in Medicaid, as well as adoption of the new children’s health insurance program, now permit states to leverage billions of federal dollars to expand health insurance coverage to low-income parents and children.

Here are just a few concrete steps states can take:

  • Tax credits: States can reward work by using unspent federal welfare block grant funds or available state surpluses to establish or expand refundable state earned income credits that use the tax system to directly supplement low wages. Eleven states now have such a benefit modeled on the federal Earned Income Tax Credit.

  • Child care: States can use unspent welfare block grant funds or budget surpluses to improve child care quality, expand services during non-traditional hours, or establish a child care subsidy program that serves all low-income working families, not just those receiving, or working their way off of, public assistance.

  • Health insurance: States can claim federal funding to cover virtually all low-income families without seeking permission from the federal government, as they had to in the past. State or local resources can match federal funds at very favorable rates. Depending upon the state or population to be covered, a state dollar can tap from one to five federal dollars to finance health insurance expansions.

Should the federal government cede responsibility for low-income working families, and especially their children, entirely to the states? No. But, states can help families now—not months, or even years in the future, after presidential campaign promises have been painstakingly shaped into federal legislative reality

Helping low-income, working Americans and their children is no longer a controversial idea—not when presidential candidates are fighting over whose ideas are bigger and better for low income working Americans. So, why wait to do it? States can act now—and they should.