“Let’s Just Make It All Free”: A Conversation on State Welfare Policy with Matt Bruenig

David Trimmer is a staff writer and a second-year MPA student.

Matt Bruenig is the founder of the People’s Policy Project, a think tank that aims to “publish ideas and analysis that assist in the development of an economic system that serves the many, not the few.” He has also worked for the think tank Demos and the National Labor Relations Board. In April, I spoke with Matt Bruenig for a dynamic conversation about state welfare policies, including paid family leave and universal school meals, among others. We discussed how to effectively implement these programs and what policies he recommends states prioritize to ensure their residents have access to a stronger social safety net. 

Brief Policy Perspectives (BPP):  What, in your view, is the goal of social welfare? 

Matt Bruenig: In my view, the primary purpose of especially the cash welfare state is to provide income to people who are not currently working. I think in a society that distributes income using factor payments, which are payments to workers and payments to owners, you end up having … a third category of people who do not work and who do not own very much. This category of people needs cash, and that’s where the welfare state steps in to help primarily elderly people, children, disabled people, students, caregivers and the unemployed.

BPP: So how do the states’ roles in welfare policy differ from the federal government’s? And does the role change when the federal government is in gridlock, like it is today? 

Bruenig: Right now, their role is to run the food stamp program, unemployment insurance and Medicaid. It’s a very limited role. There are some paid leave programs and tax credits, but even those tax credits are often pegged to the federal tax credits. States are not the primary provider of benefits. They’re not providing old-age benefits, disability benefits or Medicare. All the states operate within that federal structure, and then they can make some adjustments. They can choose to adopt different rules about how generous they want SNAP or UI [unemployment insurance] to be. For Medicaid, they can choose whether they want to expand it or not. So, they can pull some of the levers on a federally defined regime of benefits. 

BPP: I wanted to talk specifically about some of those policies that you mentioned. We can start with paid leave. What do you see as some of the pros and cons of the paid family plans states have adopted? 

Bruenig: The main problem is that each program doesn’t have a minimum benefit available to all new parents. This is something that no one in the U.S. has even really considered. There’s this great pattern that comes out of the Nordic welfare states. There they say the structure of benefits should be linked to your prior earnings, but also there should be a minimum benefit that no one can fall below. That’s a great structure. Everyone gets something, and people who are making more get security because their earnings don’t collapse. This structure applies across the board; it applies to unemployment, disability insurance, and old age pension. So, it’s very easy anytime an income replacement benefit gets proposed to see if it follows that structure or not. 

In the case of all these state [paid family leave] programs [in the U.S.], they do not follow that structure. There is an earnings replacement but no minimum benefit. There are two problems with that. One, some people don’t have enough earnings history to get any benefit at all. This isn’t a small group. If you isolate women of childbearing age, which is just the easiest way to measure it, a third of them in a given year fail these tests. Not all of them have kids, but if they were to get pregnant, they would not qualify for benefits. The second problem is some people satisfy the work history requirements, but because there’s no minimum benefit, they may only be eligible for 50% of what they were earning. If you’re only earning the minimum wage, 50% of the minimum wage is not going to cut it. 

BPP: I think part of the problem is a lot of people think of paid family leave as a program where you take time off of work to take care of your child. So, as the thinking goes, if you didn’t work beforehand or you barely worked, then you shouldn’t get benefits. So how would you respond to those who say parents who didn’t work in the past year or two should not receive paid family leave benefits? 

Bruenig: Yeah, I think you’re right that part of the confusion is some people will say, if they weren’t working previously or weren’t working very much, then what’s the point of the benefit? I think there are a few basic answers to that. The first answer is once you have the child, the child presents a work limitation on you. The instant they’re born, regardless of what you were doing prior, you are now in a position where you cannot go to work. So, if you have a work limitation at that moment, then you should receive benefits to compensate for the work limitation. You see this in the other benefits like unemployment and disability insurance. 

The other thing is if you don’t want to view it as an income replacement for workers who have work limitations, you can also view it as payment for childcare. There’s a recognition that when an infant is born, it has to be cared for, and whoever is caring for it, we should provide them benefits. So even if you didn’t work in the last couple of years, you are now doing the childcare function, and you should be paid. 

The last thing I’ll say is people think that these earnings history tests and work history tests run perfectly. That’s just not reality. You’re going to have a lot of people who satisfy the work history test, but they’re not going to be able to prove it. You see this with benefits like food stamps or Medicaid. So, one of the advantages of having a minimum benefit is whenever someone is in that situation, at least they will have the minimum benefit.

BPP: At least everyone is getting something, and you don’t run into these issues where there might be a system failure. I want to switch gears and talk about The New York Working Family Tax Credit, which is a proposed bill to provide low-income families $1,500 per child and then scale down to $500 for families making over $25,000 or $50,000, depending on how they file. You argued that administering this program would be a nightmare. What design choices did they make for you to come to this conclusion? 

Bruenig: So, this is one attempt to try to do something on the state level after the 2021 CTC [Child Tax Credit] lapsed. So, they decide to do a $1,500 per child tax credit but have it start phasing out at $25,000 or $50,000 if you’re married. 

Under the old-school child tax credits where you’re paying it out at the end of the year, the phase-out is kind of annoying, but it’s not impossible to administer because [the government] knows their income. It doesn’t actually give you the money when you need it; it gives you the money a year after. For example, if I claim a benefit for 2022, I actually get that benefit in 2023.

For this bill, they don’t have the information they need to run an income test because it’s an advanced quarterly payment. So how do you determine if one person has too much income to get $1,500? The information literally doesn’t exist. You don’t know what someone’s income is before it’s been earned. So, then they got to figure out what to do about this. 

The answer is they’ll guess what your income is going to be for the year. They don’t say what they’re going to do in the bill, but the probable answer is that they’re going to look at your income from the last year and base it on that. They just assume you’re going to earn around the same amount you earned last year. That’ll be true for most people, but incomes change pretty significantly from year to year for a lot of people. And since they’re starting their phase-out so low, that’s a threshold that a lot of people might be in. A lot of those guesses are going to be wrong. 

What do we do about that? Maybe we can adjust your benefit in the middle of the year, but you’re not normally reporting your income in the middle of the year. You’d have to contact the tax office and say you’re making too much or not enough money. That’s a bureaucratic nightmare. A lot of people won’t do that, and they’re going to get underpaid or overpaid. Now what do you do? 

The answer is they’re going to withhold a third of the benefit for the last payment. So, the quarterly payments are not even equal to a quarter of the total benefit. It’s three smaller payments, and then the fourth payment is a jumbo payment. The point is they can essentially garnish it if you were overpaid.  But even garnishing the jumbo payment is not enough to claw back all the money you might need to claw back. So, they have this other process where they’re saying we will claw your payments back unless you can prove your overpayments were a reasonable mistake. It’s just a mess. If you just gave everyone $1,500, you’d be done with it. 

BPP: It seems like this creates a colossal administrative headache to try to marginally phase out benefits for people who make slightly more. 

Bruenig: Yeah, that’s to save a small amount of money. This is the big thing that I try to push over and over again. If you want to say when people start making over $25,000 or $50,000, we want to knock your benefit down a little bit, you can just do that through the tax code. It’s the same thing as a phase-out. You can achieve the same thing but without this other apparatus where you have to make guesses and mid-year adjustments. You can get rid of all that and slightly tweak the tax code. The problem is we’re still in the process of getting people to understand that. People still think that a phase-out is special.

BPP: You mentioned that a few states are starting to implement universal school meal programs. Minnesota and New Mexico are the most recent ones. Why have they adopted this approach rather than providing free or reduced meals to low-income students only? 

Bruenig: Well, I think it’s probably because of the COVID era when everything was free for a couple of years. I don’t know that you get it done without that. It would be nice to say how they’ve realized that it’s not wise to means test these school lunches since you save so little money, and now you don’t need this elaborate fee system that you have to run, but the unique thing that happened that caused this outcome that you don’t usually see in the U.S. welfare policy is because of COVID, they made all these meals free. That was enough to awaken people. 

Then states had to make a decision at that point; are we going to go back to how it was? And I guess a few said no, why go back to how it was? This is great; it doesn’t cost hardly anything, so let’s just make it all free. 

BPP: I enjoyed the article you wrote about how school buses are free. Rich kids don’t have to pay the bus driver a few dollars to use the school bus, and it doesn’t seem like there are any problems that arise from the school bus being free. So, why shouldn’t lunch be free? 

Bruenig: That’s another example of status quo bias. They’ve been doing free school buses for over 100 years, and no one thinks about it. I spent a lot of time looking into high school football as well. I think about that in the context of Texas, obviously a very conservative state, but the amount of money that is spent on their football programs is crazy. Stadiums, weight rooms, pads and all that are not cheap, and if you want to play football in high school, you just sign up. It doesn’t cost you anything, and no one bats an eye about it. But then you have a bizarre situation for many high school football players, where they have all the top-of-line gear and equipment, but they can’t get lunch. Well, how do you think they’re going to play if they’re hungry? 

BPP: Now that states are beginning to adopt universal school meal programs, do you think they’re going to embrace universal programs in other policy areas? 

Bruenig: I’d like to think that, yeah. But you’d be surprised. I think back to Build Back Better when they had the childcare part of the bill, and then they had the pre-K part of the bill, and the policies worked radically differently! How can this be the case? They’re basically the same thing! 

Well, we have one group that’s the childcare people, and they just write about childcare, and the other group is pre-K people. They still haven’t quite managed to figure it out, so that’s why I would be skeptical. 

When you get to a new issue, it’s siloed from all the other issues, and people don’t apply similar design principles. The idea of someone who’s working on the entire welfare state is a novel thing. I may be one of the only people who does that. That’s just not seen as a category, but this is the appropriate way to approach this because the benefits need to fit together. 

BPP: I see the issues in the welfare state as building blocks. You can have a paid family leave program, but if there’s no childcare after, I don’t know what you’re going to do with your child if you can’t afford to put them in a daycare center. They all need to build off of each other in order to maximize well-being in society. 

Bruenig: Yeah, that’s the zero-to-five question, and it needs to be answered together. Parents will take care of children when they’re born, then the childcare center, or maybe parents as well with the home childcare allowance or some combination of the two. Then at some point, we say you need to put your kid into pre-K around three because it is important for their cognitive development. All that needs to fit together; that’s why I tried to do with the Family Fun Pack. If you look at these other welfare states, you’ll find them organized this way. Here we got different people working on different policies. The idea that the childcare policy and paid leave policy will be developed separately from one another is ridiculous. And yet, that’s how it’s done. 

BPP: I have just one more question. If you could go to each state and propose one welfare policy for them to adopt, what would you go for? 

Bruenig: For me, on the state level, the most obvious path is to focus on pre-K and childcare because we already have universal K-12. It’s an impressive service that’s hard to develop, so take advantage of that and bring it down to ages four, three, two and one. We’ve seen that in some states that have done free pre-K. I think that’s an easy route for a state to go. Just build off those capabilities, put some more money in it and go that route. 

The way they pass that is to just change one sentence in their education statutes and say all the school districts must also provide coverage for ages three and four to start off, and then allocate money to them unless they can do it themselves through taxes. Then you just let those institutions run. 

Editor’s note: This conversation has been condensed and edited for clarity. 

This piece was edited by Executive Editor Lancy Downs.

Photo by Allison Shelley/The Verbatim Agency for EDUimages.

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