Transcript of Proceedings
Compassionate Welfare Reform: Empowering Charities and Private Citizens
a conference sponsored by
MR. FUND: Thank you, Robert.
As someone who first wrote about these ideas almost three years ago, I have given a great deal of thought to Robert's concerns. I share much of his analysis and I think it's incumbent upon all of us, because we know about unintended consequences, each one of us in our own mind must reach a point at which we would recognize that we would have to pull the plug on this idea if we went too far down the path that Robert indicated.
Each one of us should think about what point in our own mind we would have to pull the plug.
Having said all that, I am still an unabashed supporter of the concept because let me tell you, all of the money that we're talking about is already going to these advocacy groups. We're not talking about extra money, they're already getting all of that money.
I have faith, ultimately, over time in the American people. I believe that what we need is a competitive model that can present success stories to the American people.
MR. FUND: Success stories to the American people. It may well be that in the first year 80 percent, 85 percent of the money goes to all of the traditional groups. That's the first year. But if there are genuine success stories, if there are programs that change the kind of lives that we saw earlier today, can present their case to the American people, either through television or magazines, or through radio, I really believe that the American people would respond, perhaps it would be 70 percent the second year. But over time, the American people would see that there are alternatives.
Our last presentation today is from Peter Ferrara. Peter is an old friend of mine. Peter has been in the forefront of three significant movements to change how we deliver social services. Social Security, a program which he embarked on 15 years ago, which is now bearing fruit; medical savings accounts, which are now incorporated as part of the Kennedy-Kassebaum bill; and now, of course, transcending the welfare state through charitable tax credits.
And Peter, I think, will have some specific suggestions on how we can have practical implementation of this idea, perhaps, avoiding some of the legitimate concerns that Bob Rector raised.
MR. FERRARA: Thank you very much, John.
Well, you know, I love Bob Rector. Bob Rector is a friend of mine and so I don't want you to take the fact that I'm about to stomp on him as an indication that I don't think he's really brilliant. His critiques of the welfare state have been the best that have ever been produced. And I have watched things that he has written even get repeated on CBS News and I haven't seen that done by anybody else. But the way he has redefined the poverty statistics about the poor and other things have really been effective.
It's just when he gets to the solutions part that I have a problem. I, too, participated in this debate a long time. And I remember last year, in last year's welfare reform debate, conservatives for a long time had fought for the idea of block grants to the States. And we, in fact, had arrived and we had governors supporting this now and both parties and a consensus and everybody was supporting this except Robert Rector.
And at that time he said, well, we can't have block grants back to the states, because the State bureaucracies are all a bunch of left-wingers and, in fact, the real problem is the state government, not the federal government, where Bob used to work in the federal welfare bureaucracy. And it's really the state bureaucracies who are the left-wingers and we can't have these block grants.
And so, now, today we come here and we're talking about another way of providing services to the poor which is the shift to the private sector and lo and behold we find out the real root of the problem is these private sector groups. It's not the Federal welfare bureaucracy, where Bob used to work. Those people really have figured it out now and they're just trying to get the slow-moving private sector to keep up with those advanced people at HUD and other Federal welfare bureaucracies.
Now, I think Bob is very overwrought about this, although I think he has some valid concerns. But the key factor here as to why this concern, I think, is overwrought is that this is a power to the people proposal. And that's why that approach will work.
It's the taxpayers who chose which one of these groups gets these funds. So, they're going to decide if it's going to be Bob Woodson's groups or it's going to be a bunch of people sitting around the campfire singing Kum-byah. And I think that if you put the power back in the people you will find that the funds will be shifted to the effective groups and that's the fundamental reason why this is overwrought.
The primary money is not going to go, you know, whenever you have fundraising operations that rely on grassroots donations in small amounts, it's the effective ones, it's the free market ones, it's the conservative ones that are getting the money in small donations from the grassroots. And you find that the left-wing groups have to rely on big dollar contributions from big millionaire contributors who also are secluded from the real world because they have so much money they never have to deal with the real world any more.
And, so, I think this in the fundamental design of the program means that the concern he raises is overwrought. The taxpayers are ultimately going to choose.
Another reason why this concern is overwrought is that, now, I haven't read the latest version of this bill, you know. The first paper actually that really I think developed this idea in detail was actually written produced by NCPA and was co-authored by myself and John Goodman and Merrill Matthews, as well.
And that paper discussed the way this should be done which is the money is only available to go to groups who use their funds to provide direct assistance to the poor. It's not available to groups who want to go lobby in Washington or do all these other things. And, so, the legislation needs to state that you are eligible to be on the list to receive these funds only if you are a group that is overwhelmingly providing direct services to the poor. And that does need to be carefully defined.
And when it is defined that way, then we don't have to worry about how the administrator of Catholic Charities USA defines direct assistance to the poor, he's going to have to worry about how the IRS defines it and how the IRS auditors define it. And now we can ask who's Bambi and who's Godzilla in that context. Because some of these people who might have their own notions better be careful to follow the law or this may be a way of cleaning out some of these private charities and putting some people where you go if you engage in tax fraud.
Now, also, another reason why I think his concern is overwrought is that the fact is these private groups, whether their organizers have left-wing philosophies or not, are in fact more effective than the government in providing assistance to the poor.
And I don't want to go through a whole litany of these, Bob Woodson's groups, for example, or he can identify many groups that are very effective and these are not left-wing groups that he's identified. These are groups that are being very effective. And you see the ideology of the administrators or the bureaucrats in these private groups is not the same problem that it is in the government. You see in the government they have the power of coercion. So, every crazy idea that they have they can cram down your throats. But in the private sector they have to rely on voluntary contributions and the same is true with this charitable tax credit. They have to rely on voluntary contributions.
So, however mushy-minded they like to be in their favorite moments, they can only be successful and exist in the private sector to the extent that they are effective or can convince the public that they are being effective in performing their mission.]
So, you have another limitation here on this problem because however, you know, whatever their personal beliefs may be, they have to put together an effective institution in order to be able to attract these tax credits. So, their ideology is not the same concern there that it is in the public sector.
Now, let me go back here to a couple of points I want to make and the way it is to be done here, how it should be best structured to be most effective. I commend the authors of this bill for picking up what I think is a revolutionary idea and advancing it. However, I think to really be effective you have to go back to the original idea and follow it so that it will be most effective.
Now, the original idea said that you got to take the welfare program and block grant them back to the States, and not just the AFDC, but food stamps, and public housing and Medicaid and the rest of them. Then you'd adopt this tax credit and to the extent that people exercise this tax credit in the particular state, to give funds to the private sector, you reduce the amount of the block grant that goes to that State.
So, if 1,000 people in Texas contribute monies to effective centers for the homeless in that state, then the block grants to that State will be reduced commensurately. This is how you create the privatization effect of this tax credit idea. And this is how you create the competition. It's not really going to work as well as it should if the offset is to some form of corporate welfare which occurs, you know, because of some CBO estimate or whatever, automatically in the federal budget.
It has to be, to be most effective, this needs to be offset directly against Federal welfare spending in a competitive way that is contingent on the degree to which taxpayers in each State exercise that credit. And then what you have here is the direct competition.
Now, in order to keep the funds in the public sector, you force the public bureaucrats to make their programs more effective. This is how you're going to get the rest of the states to adopt Governor Thompson's welfare reform in Wisconsin is by telling them that unless they are effective the taxpayers now have the power to take the money away from them.
And, so, you create this competition, but it's really something more than competition because, again, you go back to the power of the people aspect. It is empowering taxpayers to make a choice and it is empowering them to re-allocate the funds to the groups that are most effective. So, you get an immediate reallocation of these hundreds of billions we're spending on these assistance programs, you get a reallocation away from groups that are ineffective towards groups that are effective.
So, if it's going to work most effectively, then it needs to be structured in this way at least over the long run. You know, I applaud an effort to get it start here. I think it's good to get a start. But I think we have to keep in mind what the original idea was and how it's going to work in the end.
And, finally, I want to say a word about tax reform because that, of course, is a major concern of us at Americans for Tax Reform. And the question arises, well, here you are posing a tax credit but you're also proposing a flat tax and how are these things consistent?
Well, I think that if this plan is structured the way that it was originally intended, then it is perfectly consistent with the concept of a flat tax because the tax credit in this case is not just a give away to a tax payer or another loophole for the taxpayer but it is a rebate back to the taxpayer of funds which no longer should go to the Federal Government because they've been reallocated to the private sector.
So, to the extent that you have provisions in the Tax Code which are not just a deduction or a credit to give a loop hole or favoritism to one taxpayer or another, but, in fact, are refunding tax funds in circumstances when that's appropriate such as where they don't use a public service and, therefore, should get their money back or where they choose an alternative service in the private sector as opposed to a service in the public sector, then I believe it is we, at Americans for Tax Reform, believe that it is perfectly consistent with the concept of tax reform.
And if it's done in the way that it was originally intended this concept is perfectly consistent with what is the whole free market agenda in Washington today which is a power to the people agenda on issue after issue. What we're talking about is taking power away from centralized, big government in Washington, and restoring it back to the people whether that's school choice or medical savings accounts, or the taxpayer choice tax credit.
Thank you very much.
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