Memo: Amending Graham-Cassidy To Ensure Choice

To: Interested Parties
From: Heritage Action for America
Date: September 21, 2017
Subject: Amending Graham-Cassidy To Ensure Choice

Conservatives are justifiably frustrated with the obstinance displayed by their moderate colleagues over the past nine months, a frustration that is likely exacerbated by the leading roles played by Senators Lindsey Graham (R-S.C.) and Bill Cassidy (R-La.) in a last minute effort to take action on Obamacare. Regardless of how Republicans and the conservative movement arrived at this moment, Graham-Cassidy should be evaluated on the policy, process and politics of this particular moment. While no one should be under the illusion that Graham-Cassidy delivers on the Republicans’ seven-year campaign promise to repeal and replace Obamacare, it could make important improvements over the status quo.

Policy. There is no sugar coating the shortcomings of Graham-Cassidy, but its most significant change to Obamacare is a new waiver system that would allow states to begin reasserting some of their traditional, pre-Obamacare role of regulating health insurance markets. In this way, Graham-Cassidy tries to seriously tackle Obamacare’s regulatory architecture. As Heritage Action explained in March:

“Obamacare’s beating heart was its regulatory structure: the benefit mandates, the one-size-fits-all community-rating rules, the limits on pricing structure and rules about where cost burdens must fall, and the federal review of decisions about insurance markets that can be handled perfectly well in the states. The goal, in the words of proponents like Sara Rosenbaum, was to restructure the insurance market by grafting onto it the ‘characteristics of a public utility.’ The law’s various other impositions on Americans — the coercive individual mandate, the taxpayer-financed subsidies necessary to help people purchase insurance far more expensive than they would otherwise desire, the massive tax increases — flow by necessity from this regulatory heart.”

Graham-Cassidy repeals the individual and employer mandates, and creates the aforementioned waiver system tied to massive block grants that effectively force the federal government to share the driver’s seat with the states. Specifically, Graham-Cassidy contains a modified version of the 1332 waiver reforms included in the Senate’s Better Care Reconciliation Act (BCRA) and a new waiver available to states tied to the new block grant mechanism, which is funded by the Obamacare taxes and savings from ending the Medicaid expansion. Taken together, these waivers are broad enough to allow states — should they feel compelled to act in the best interests of their citizens — to opt out of some of the most controversial and destructive Obamacare regulations. While shifting some regulatory responsibility to the states is preferable to Obamacare’s fully centralized structure, The Heritage Foundation cautions that “states are likely to spend the funding in ways that expand the number of people in government health care programs” that are “effectively government-controlled monopolies.” Heritage recommends the Senate amend Graham-Cassidy so states cannot use the new block grant funding to:

  1. expand Medicaid (though no more than 20 percent of a state’s grant can be used for that purpose),
  2. pay medical providers directly for providing services, and
  3. contract with managed-care plans to cover specified groups.

Process. According to reports, the Senate parliamentarian suggested that the fast track procedure Republicans hoped to use to repeal (and replace) Obamacare will expire after September 30, which is the end of the fiscal year. If accurate — and congressional Republicans are acting as such — it would give Senate Republicans just 10 days to use the reconciliation vehicle. At this point, it appears unlikely that the budget reconciliation bill could be used for anything other than Graham-Cassidy.

To be clear, hurdles still remain in advancing Graham-Cassidy. The Senate must have a budget score — typically provided by the Congressional Budget Office (CBO) — to review and score the bill, and the new legislative language must undergo parliamentary review to ensure it is compliant with the Senate’s onerous budgetary rules. The latter process is amusingly known as a ‘Byrd Bath’ because the main constraints surrounding the Senate’s consideration of a budget reconciliation measure stem from the Byrd Rule. As with the BCRA, it is likely the substance of Graham-Cassidy will change — perhaps significantly — during this process and it could substantially alter the policy analysis above.

Moreover, the House may not have an opportunity to amend Graham-Cassidy because any changes would require Senate approval. Those changes would require 60 Senate votes if, as has been reported, the privileged nature of the reconciliation bill expired after September 30. Finally, given that the FY18 reconciliation instructions are going to be designed for tax reform, it seems highly unlikely congressional Republicans will have another filibuster-proof vehicle to use until the FY19 budget cycle.

Politics. The politics of Obamacare are changing rapidly. From its inception in 2010 and through the 2016 election, the law remained unpopular with the American people. As Democrats and the media mounted an effort to save the law, Americans were left directionless by a Republican Party that promised repeal with no coherent vision for the future. As a result, opposition to Obamacare is hovering around 41 percent — the lowest disapproval rating at any point in the law’s lifetime.

Combined with multiple failed congressional efforts to unravel the law, many Republican lawmakers are actively seeking bipartisan repairs to the law. Although bipartisan efforts to improve and repair Obamacare are now on hold, it is likely they will reemerge if Republicans do not act to unravel Obamacare. The emergence of a bipartisan coalition committed to improving and repairing Obamacare will ensure the law ascends to the political equivalent of America’s other welfare and entitlement programs. A properly executed repeal effort in January would have eliminated this threat, but it is impossible to ignore that previous failures have shifted the political landscape in fundamental ways.

Allowing Obamacare’s regulatory architecture to remain firmly intact poses a serious threat to the long-term effort of enacting conservative health care reforms. Earlier this year, Heritage Action explained:

“[A]s harmful as Obamacare has been, its architects never had the opportunity to fully deploy the nearly unlimited regulatory apparatus at their disposal. Near-term political considerations and the disastrous performance of the exchanges forced the administration to scale back its ambitions. Indeed, the Obamacare statute vests so much power in federal regulators that it actually could have been worse.”

Tweaking Obamacare, as bipartisan working groups propose to do, is obviously insufficient. As Heritage Action cautioned earlier this year, Obamacare’s “elements are intertwined and inextricably linked, and so long as that [regulatory] heart beats, tweaks to the design of our insurance markets will only be able to help on the margins. The demand on the left to revive Obamacare — or something worse — will persist.” It should come as no surprise that in recent weeks the far-left wing of the Democrat Party flexed its muscle with the rollout of a national, single-payer health care scheme. Heritage Action warned of the left’s movement earlier this summer:

“Regardless of what happens [with the repeal effort], one thing is certain: Democrats will not stop in their quest for a nationalized, single-payer scheme. Conservatives cannot cede the playing field despite justified disappointment with the current process.”

In one very tangible sense, Graham-Cassidy has the potential to blunt the momentum for the left’s national march toward socialized medicine by restoring significant regulatory authority to the states themselves. When combined with significant sums of money, state governments may be reluctant to allow a national single-payer system to take resources from the state. To be clear, there is nothing inherently conservative in using massive sums of taxpayer money in the form of a new block grant — that amounts to a new entitlement to the state — but rather it is a political trade off that some conservatives find appealing given the left’s momentum.

Graham-Cassidy Should Expand Markets and Choice

A threshold question for conservatives is whether future legislative efforts to enact conservative health care reforms are best done from the baseline of Obamacare as it undergoes bipartisan tweaks, or a baseline in which Washington’s powers have been curtailed and states are allowed to innovate and experiment. Earlier this year, Heritage Action outlined the challenge with a federally concocted health insurance scheme:

“Conservative health policy is built on skepticism of these grand plans’ efficacy and with a different goal: to make markets freer and make insurance more consumer-driven. Achieving that goal is essential in the effort to rein in runaway health costs and limit Washington’s influence in Americans’ lives.”

In summarizing Graham-Cassidy, The Heritage Foundation concludes:

“If the Senate makes the recommended changes in the block grant program, Graham–Cassidy would provide an improvement over the status quo. However, without these changes, nothing would prevent states from simply expanding government health programs, which could result in transferring up to 8 million people from private coverage into government-run programs with no consumer choice.”

Repealing Obamacare’s regulatory architecture is essential for the future of pursuing conservative health care policy. And while clearly Graham-Cassidy does not repeal the regulatory structure, it does give states the ability to opt out of significant regulatory burdens and limit the influence Washington bureaucrats and technocrats have over the lives of the American people.

To ensure states do not use the new block grant funding to force individuals into restrictive, government-run health care programs, the Senate should remove three provisions of Graham-Cassidy that would permit states to use the funds to:

  1. pay medical providers directly for providing services to individuals;
  2. contract with managed care plans to provide coverage to specified groups of individuals; and
  3. expand Medicaid (no more than 20 percent of a state’s grant can be used for that purpose).

Make no mistake: If an amended version of Graham-Cassidy were to become law, there would still be an extraordinary amount of work ahead. States would have to innovate — rapidly — to begin restoring choice and competition in their health insurance markets. Conservatives would have battles to fight at the state level, as our Founders envisioned. Conservatives would continue to fight battles at the federal level as regulatory and statutory obstacles emerge from state innovation.

As Heritage concludes in its report, “Members of Congress should not be under any illusion that passing Graham–Cassidy relieves them of the burden of continuing to reform the health care system in a more patient-centered, market-based direction.”

 

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Claims and Responses: Chairman Bill Shuster’s 21st Century Aviation, Innovation, Reform, and Reauthorization (AIRR) Act (H.R. 2997)

At some point, the House could vote on the 21st Century Aviation Innovation, Reform, and Reauthorization (AIRR) Act (H.R. 2997), introduced by Chairman Bill Shuster (R-Pa.). The bill would turn the Air Traffic Control (ATC) system into a standalone government-sanctioned, non-profit corporation and reauthorize the Federal Aviation Administration (FAA) for fiscal years 2018-2023. While not perfect, the 21st Century AIRR Act represents a substantial improvement over American’s current aviation system that has fallen well behind our foreign counterparts due to excessive government regulation and a broken aviation finance system.

Below are some commonly made claims and straightforward conservative responses:

Fiscal

Claim: The Congressional Budget Office score shows H.R. 2997 will add $100 billion to the deficit.

Response: The CBO’s cost estimate is incomplete and inaccurate, and it is expected to issue an updated score within the next couple of weeks. A proper assessment of the bill’s fiscal impacts (assuming the American Air Navigation Services (AANS) Corporation’s revenues stay on-budget, a decision with which the OMB disagrees) would yield a deficit increase of $1.5 billion to $5 billion over the next 10 years. This increase is only due to the corporation’s new ability to borrow, which shifts capital spending into the 10 year budget window but does not meaningfully change long-term capital outlays.

Claim: ATC corporatization is a bad deal for taxpayers because it gives away the nation’s ATC infrastructure for free.

Response: The nation’s ATC system has been paid for almost exclusively by excise taxes on users of the aviation system (primarily commercial passengers). Because the new the non-profit corporation would be funded exclusively by aviation user fees, requiring the non-profit to pay for the system upfront would simply result in double-charging aviation users for a system that they have already paid for. This would amount to a huge, unnecessary financial burden on fliers that would likely increase federal spending elsewhere in the government as Congress scrambles to spend the revenues generated by the “sale.”

Claim: Moving Air Traffic Control out of the government will lead to federal bailouts in the future.

Response: The argument that a future Congress may make the decision to bail out a non-governmental entity is essentially an argument against private enterprise. While Congress has repeatedly made misguided decisions to bail out various private industries (many of which were never government-owned), the unavoidable reality is that lawmakers are not legally allowed to bind a future Congress. Indeed, the question is whether conservatives would prefer to create a business with the off-chance of it receiving future taxpayer assistance (which they would be right to oppose), or continue with one that is permanently shackled to the taxpayer.

If bailouts are a true concern, maintaining government responsibility for an infrastructure asset does not reduce the likelihood of a general fund bailout whatsoever. The most instructive example is the federal Highway Trust Fund, which was designed as a user-funded mechanism for highway construction and maintenance. Since 2008, Congress has bailed out the Trust Fund with more than $140 billion in general revenue, in blatant violation of the 1974 Budget Act (which requires the fund to be at least 90 percent self-sufficient). Other examples of federal bailouts of supposedly dedicated funding streams — even those that violate the law and Congressional rules — abound.

In the case of air traffic control, the example of the UK’s privatized ATC system, UK NATS, is misguidedly pointed to as proof that a bailout is inevitable. While UK NATS did require a bailout in the early 2000s, this was the result of an unprecedented decrease in aviation activity following 9/11 (which also prompted the U.S. government to bail out its private domestic air carriers). Since then, corporatized ATC providers have taken the necessary precaution of establishing reserve funds to weather recessions and other drops in aviation demand. The AANS corporation will be authorized to do the same, and given the ample amount of current aviation revenues, will likely be able to amass such a contingency fund with ease.

Claim: The bill is a giveaway to labor unions and will allow current Air Traffic Organization (ATO) employees to retain their federal benefits.

Response: This iteration of ATC reform is a substantial improvement over last year’s version in regards to labor provisions. H.R. 2997 explicitly lays out harsh penalties — termination of employment and union decertification — in the case employees participate in a strike, work stoppage or slowdown (Sec. 91109). Furthermore, the bill requires speedy resolution of labor disputes (Sec. 91107) and prohibits supervisors from joining a union (Sec. 91104).

While the Heritage Foundation generally favors aggressive labor reforms — including Right-to-Work designation and a stronger shift to the provision of private compensation and pensions — the modest labor reforms included in the bill are improvements over last year. When those reforms are combined with the fundamental changes to the nation’s ATC system, it would be a significant improvement. In order to retain the current generation of Air Traffic Controllers (a large portion of whom could retire, yielding potentially crippling effects on the nation’s aviation system), the bill allows ATO employees the option of keeping the benefits promised by their current employer, the federal government. If members have an issue with current federal personnel compensation practices, they should address those issues through the normal legislative avenues.

In regards to future federal liabilities, the bill would reduce the federal government’s payroll, pension and benefit liabilities by moving the subsequent generations of air traffic controllers out of the government and onto private payrolls. These ATC workers would have otherwise been federal employees, and thus the shift constitutes a large transfer of long-term retirement and benefit responsibility away from taxpayers and onto the private sector. Indeed, in the near term, we can expect the institutional change to prompt some employees to retire earlier than they otherwise would have, which will reduce long-term benefit payments to these workers.

Claim: The bill removes federal oversight of ATC spending.

Response: The negative effects of the politically motivated budget cycle and bureaucratic, risk averse procurement process are prime reasons to move ATC out of the government into the private sector. Despite multiple attempts to reform the procurement process in the 1990s, the FAA still lags behind its foreign counterparts in developing and adopting technology upgrades. Recent reports from the DOT Inspector General confirm that the FAA has trouble accurately projecting the costs and benefits of its modernization programs and note that the FAA’s attempts to improve its procurement and acquisition processes have “not achieved the expected cost and productivity outcomes.” Continuing the current political and bureaucratic micromanagement of air traffic control—even through implementing further reforms—will only perpetuate the FAA’s flawed procedures. Sufficient oversight will be applied to the corporation’s ATC spending primarily through its own governing board (two seats of which will be held by federal appointees), as well as the Secretary of Transportation and continued regulation by the FAA.

General Aviation

Claim: Corporatizing ATC will limit service and increase costs for rural users.

Response: H.R. 2997 not only exempts General Aviation users from charges (see below), but also prohibits the corporation from engaging in economic discrimination, requiring it to serve all users regardless of their location or fee-exempt status (Sec. 90701). (However, the case can be made that instituting user-fees for General Aviation aircraft would increase the economic incentive for the Corporation to provide such areas service, thus further strengthening the guarantee of service. However, the General Aviation lobby has steadfastly resisted the implementation of any user fees whatsoever.)

Furthermore, the bill instructs the Secretary of Transportation to ensure that proposed changes do not negatively affect access to rural airports (Sec. 90702). In fact, there is reason to expect corporatization to benefit rural users by reducing the cost of ATC services through expanding the contracting of tower services (currently suspended by the FAA) and implementing digital remote towers (a cost-reducing practice employed in other countries, but not by the FAA).  

Claim: Corporatizing ATC puts the major airlines in control.

Response: The AANS Corporation will be governed by a 13 member board of user-stakeholders. The composition of the board is detailed below:

As the legislation clearly outlines, the major airlines will control only one of the 13 board seats, while regional air carriers (who service smaller and rural airports) will hold one other seat. This hardly amounts to a controlling share of the board. Even if the airlines managed to align a majority coalition of board members on an issue, such as raising fees, the new fee structure is still subject to public review and approval by the Secretary of Transportation, who must consider whether the fees “adversely impact the ability of the user to use or access any part of the national airspace system” (Sec. 90313(d)(1)(B)), providing another (arguably excessive) level of oversight. Furthermore, any fees deemed discriminatory are subject to challenge in court.   

Claim: The bill will result in future fees for General Aviation.

Response: Because the current tax regime results in considerable subsidies for General Aviation ATC usage and airport infrastructure, the Heritage Foundation has proposed free-market changes to reduce the subsidies that flow from everyday travelers to those that own their own private aircraft. However, to appease General Aviation interests, H.R. 2997 specifically exempts General Aviation aircraft from ATC user-charges in Section 90313(d)(7), thus implementing a prohibitive price control, maintaining extant subsidies, and rejecting common international practice. Because this exemption is subject to the periodic review by Congress through the authorization process, members voice concerns that a future Congress may remove this statutory protection. Because legislation cannot bind a future Congress, the only solution would be to amend the Constitution to exempt a business from charging General Aviation aircraft for the services it provides — an exceptionally poor idea on procedural, constitutional and policy grounds.

Even if a future Congress were to remove the statutory exemption, any change to the corporation’s fee structure would still have to go through the normal approval process, which requires approval by the corporation’s board (on which General Aviation elects two representatives) as well as the Secretary of Transportation, ensuring checks on the prospect of a fee increase. As the experience in Canada has shown, user charges for single propeller aircraft amount to just $70 per year, while business jets are charged on a distance-weight basis, the international norm (with the exception of the U.S.). Concern that such fees have a slight chance of being implemented in the future does not justify the opposition to much needed changes to the nation’s ATC system.

Claim: Rural and General Aviation airports will lose their federal funding.

Response: While localizing the responsibility for airport funding is a free-market policy supported by the Heritage Foundation, H.R. 2997 increases rural airport funding in the Airport Improvement Program and Essential Air Service program without major programmatic changes.

Claim: Corporatizing ATC has devastated General Aviation pilots in Canada.

Response: This is a falsehood perpetuated by the GA lobby in the U.S. Bernard Gervais, the president of the Canadian Owners and Pilots Association (the Canadian counterpart to AOPA, which opposes the legislation), has written that GA is thriving in Canada, that his 15,000 pilot-members “are largely satisfied with the service we receive from Nav Canada,” and requested that AOPA “stop using Canada as your example.” In reference to the false claim that Canada’s GA user-charges (common in every country except the US) have negatively affected GA, he responded: “Things are working out pretty good. Would anyone go back to a government-run system? No.”

National Security

Claim: The bill will give away the national airspace to a private company, limiting interoperability with military controllers and jeopardizing national security in times of war.

Response: H.R. 2997 retains federal ownership of the national airspace; it simply restores the authority to conduct civilian air traffic control operations to a private, non-profit enterprise. In the event of an existential security threat, the president can transfer authority over air traffic operations to the Department of Defense (Sec. 225 and Sec. 90906). The FAA’s regulatory/safety arm will continue to set air traffic control procedures and training standards for both military and civilian air traffic controllers. The military’s 8,000 air traffic controllers will continue to train and operate alongside civilian air traffic controllers. The only difference will be that civilian controllers will not be FAA employees; they will be employees of a non-profit corporation.

Cooperation between civilian and military ATC operators has not been a major issue for any U.S. allies that have removed their civilian ATC operator from the government, including Canada, the U.K., Australia, and New Zealand. Indeed, the joint U.S.-Canada North American Aerospace Defense Command (NORAD) is fully integrated with Canada’s private provider of air traffic control. While structural changes inevitably stir up objections from individual bureaucrats who are accustomed to the status quo, these considerations have resulted in the support of Secretary of Defense Mattis for ATC corporatization.

Claim: Corporatizing ATC could hand over U.S. airspace to foreign powers or terrorists.

Response: Again, H.R. 2997 maintains federal ownership of the national airspace. All board members of the AANS Corporation will be required to be U.S. citizens, and the bill establishes a process to ensure that current government screening of employees for suitability, security and medical concerns remains in place. U.S. citizenship will remain a requirement for positions that require a security clearance. Furthermore, it is likely language regarding the primacy of security screening could be made more explicit through a member-driven process.

It is worth noting that the FAA currently employs many foreign-born workers through its contract tower program and the DOD employs some 35,000 non-citizens. There is absolutely no reason to expect ATC corporatization to increase security threats to the national airspace.

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Immigration Reform Brief

History of DACA (and conservative/constitutional critique).

Current U.S. law, written and passed by Congress and signed by the President, makes it unlawful for foreign nationals to enter or stay in the country without authorization. Despite this clear provision of law, an estimated 11.4 million people live in the United States without authorization.

In 2012, then-President Obama — under tremendous political pressure from his base — issued a memo through the Department of Homeland Security (DHS) titled “Deferred Action for Childhood Arrivals” (DACA). DACA sought to grant temporary legal status to individuals who were under 30 years old and brought to the U.S. as minors (frequently referred to as “Dreamers”). The roughly 1.7 million eligible recipients would be required to work or go to school, but could ultimately defer their deportation for two years. Recipients could renew their status.

Conservative legal groups challenged these actions in court as an unconstitutional overreach of executive power. Several states sued the federal government, and appeals courts ultimately ruled in favor of states to enjoin (or prohibit) an extension of DACA. Since the issuance of the DACA memo, and during debate over a larger amnesty, the number of people unlawfully crossing the U.S. border has increased significantly.

In 2013, debate began on a comprehensive immigration bill (the now infamous “Gang of Eight” proposal) that would have included amnesty for most of the unlawful immigrant population, including “Dreamers.” The Senate passed the Gang of Eight amnesty bill, which included a partial codification of the 2012 DACA memo (known as the “DREAM Act,” which the Senate failed to pass in 2010), but the proposal died in the House.

What the Trump administration did.

In response to another impending lawsuit against DACA, the Trump administration officially rescinded the unconstitutional Obama-era program on September 5th, with an effective enforcement date of March 5, 2018. Rescinding DACA fulfills a key campaign promise made by then-candidate Donald Trump to end the program and begin enforcing U.S. immigration laws. By including a six-month delay, the Trump administration is providing Congress with an opportunity to address the larger issue of illegal and legal immigration legislatively.

Effective immediately, the government will no longer accept new applicants for the DACA program — capping the program’s participation at roughly 690,000. However, pending applications and those wishing to renew their applications will continue to be processed until October 5.  

Possible congressional action.  

The day after his administration announced the end of DACA, President Trump told reporters that he’d “like to see something where we have good border security, and we have a great DACA transaction where everybody is happy and now they don’t have to worry about it anymore.”

In setting up a straight DACA codification for border security trade, the president risks repeating the mistakes of the Immigration Reform and Control Act of 1986. That law provided amnesty for 2.7 million illegal immigrants and the promise of future border security and internal enforcement. As President Reagan’s Attorney General Edwin Meese III wrote in 2013, the 1986 amnesty “encourage[d] millions more to risk entering the country illegally in the hope that one day they, too, might receive amnesty.”

Americans witnessed this dynamic in full force as the Obama administration’s unlawful DACA program came into effect and Congress debated a more sweeping amnesty in 2013. As The Heritage Foundation explained in 2014, DACA was “creating a powerful magnet for more illegal immigration, since children and their families have hope that they might receive some sort of amnesty, or at least not be deported, if they make it into the U.S.”   

A simple trade would also ignore another major flaw in our nation’s immigration system: family-based chain migration policies. As The Heritage Foundation previously wrote, DACA — or the DREAM Act, would allow illegal immigrants that gain legal status to “convert to non-conditional status immediately (and use his green card as a platform to bring in family members).”

Conservatives have long-opposed family-based chain migration policies, preferring instead to move to a skills or merit-based immigration system. Senator Tom Cotton — the Senate’s top immigration hawk — told the Washington Examiner’s Byron York that failure to fix America’s legal immigration systems means legalizing DACA recipients “creates a whole new class of people who will then be eligible for a green card and citizenship — namely, the extended family members of those who will receive legal status who can, through chain migration, get legal status themselves.”

Moving forward, it is imperative the executive and legislative branches learn from past mistakes, and work together to build a national consensus for an immigration policy that makes sense for all 320 million Americans, not only a sympathetic group put into an untenable situation because former President Obama illegally bypassed Congress.

Pathway to conservative immigration reform.

One of the most important lessons of the 1986 amnesty was that in order for immigration reform to be successful, it must be accomplished through a step-by-step process.

First, enforce U.S. immigration law: The Trump administration is already beginning to enforce current U.S. immigration laws and should continue to do so. Deporting illegal immigrants, denying amnesty and simply enforcing the law sends a strong signal to potential offenders not to enter or stay in the U.S. illegally.

Second, secure our borders: Congress should approve funding to build more secure fencing along the southern border and implement a comprehensive surveillance system to monitor the border that includes cameras, sensors and drones. Doing so will make it more difficult to enter the U.S. illegally.

Third, crack down on unauthorized labor: Improve internal enforcement through E-Verify, while prosecuting companies who hire illegal immigrants.   

Fourth, defund sanctuary cities: Municipalities who wish to disobey federal immigration laws should be denied federal security grants.

Fifth, reform the legal immigration system: Move away from the blanket chain-migration and replace it with a rational, skills based-migration system. There are lessons from the Canadian and Australian models that might best serve the United States’ immigration system.

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FAQ: Rep. Garret Graves’ Supplemental Nutrition Assistance Program Reform Act of 2017 (H.R. 2996)

What does this bill do?

This bill ensures the food stamp program (SNAP) has meaningful work requirements for able-bodied adults without dependents (ABAWDs) by:

  • eliminating statewide or partial waivers from the ABAWD work requirement;
  • shortening the three-month rule, which permits ABAWDs to receive food stamps without working or participating in other work activity, to one month;
  • lowering the 15 percent exemption rule, which permits states to exempt 15 percent of ABAWDs each month from the work requirement, to 5 percent; and
  • adding supervised job search as an activity that satisfies the work requirement (minimum 8 hours per week).

What are the goals of this reform?

The goals of this reform are threefold: to promote fairness, to promote self-support, and to prevent fraud.

  • Fairness in the welfare system is based on the principle of reciprocity between taxpayers and welfare system: welfare should never be a one-way handout. Aid should always be given to those in need, but constructive behavior should be required in exchange.
  • By requiring work or constructive “work activities” in exchange for food stamp benefits, this policy aims to increase self-support among able-bodied recipients without dependent children.
  • Many ABAWDs have discretionary incomes that are often used for counterproductive or non-essential purposes. For example, recent data shows that over 50 percent of ABAWDs on food stamps smoked cigarettes during the past 30 days, at an average cost of around $111 per month. The available evidence also indicates that many ABAWDs have high levels of unreported income. Having an unreported or off-the-books job enables a recipient to receive the maximum food stamp benefits without regard to actual earnings received. Requirements to engage in work activity interfere with the recipient’s informal employment and will often push the individual to leave the assistance rolls.

As President Ronald Reagan eloquently put it: “Welfare needs a purpose: to provide for the needy, of course, but more than that, to salvage these, our fellow citizens, to make them self-sustaining and, as quickly as possible, independent of welfare. We should measure welfare’s success by how many people leave welfare, not by how many are added.”

What requirements currently exist for ABAWDs on food stamps?

  • Under federal policy, ABAWDs are limited to three months of food stamp benefits in a 36-month period, unless they are working or are involved in a “work activation” program at least part-time.
  •  However, under the 1996 welfare reform law, a state could request waivers from the ABAWD work requirement for the entire state or parts of the state if the state or area has higher unemployment rates or a “lack of sufficient jobs.”
  •  In 2009, the Obama Administration also applied a blanket waiver to the ABAWD work requirement as part of the American Recovery and Reinvestment Act (ARRA), suspending the entire requirement through FY 2010 for all states. The number of ABAWDs on food stamps increased from 1.9 million in FY 2008 to almost 4 million in FY 2010.
  • States are still able to receive statewide or area-specific waivers from the ABAWD work requirement based on high unemployment or “lack of sufficient jobs.” As of late 2016, eight states and the District of Columbia have statewide ABAWD work waivers, 26 states have a partial waiver, and roughly 1,500 counties are “labor surplus areas” as designated by the Department of Labor. Due to the large number of exempted counties, the current ABAWD work requirement is virtually meaningless.
  • The number of ABAWDs on food stamps remains high at around 4.2 million.

Will this policy save taxpayers money?

An ABAWD work requirement similar to the proposed legislation was implemented in the state of Maine in December 2014. The result was an almost immediate 80 percent drop in ABAWD caseload. Based on the experience of ABAWD work requirements in Maine and other states, the nationwide work requirement provided in this bill could save taxpayers nearly $10 billion per year.

Is this policy controversial?

This policy codifies in SNAP the principle of fairness between taxpayers and welfare recipients. There is broad support among the public for this principle. Polls show:

  • Nearly 90 percent of the public agree that “able-bodied adults that receive cash, food, housing, and medical assistance should be required to work or prepare for work as a condition of receiving those government benefits.” (Source: Heritage Foundation poll)
  • Support for work requirements in welfare is consistent across party lines, with 87 percent of Democrats and 94 percent of Republicans agreeing with this statement. (Source: Heritage Foundation poll)
  • Similarly, 83 percent of American adults favor work requirements for welfare recipients, while just 7 percent oppose such requirements. (Source: Rasmussen poll)

Won’t this change increase hunger among ABAWD recipients?

Under the legislation, an ABAWD will have his benefits terminated only if he refuses to perform a small amount of community service or other constructive activity. The recipient can have his benefits continued or restored simply by performing the required activity. Individuals who are truly at risk of hunger will choose to perform rather than refuse the required activity.

Isn’t the real issue that welfare is discouraging upward mobility through welfare cliffs?

  • There are no welfare cliffs with respect to ABAWDs.
  • There are no welfare cliffs in the welfare system generally.
  • Multiple randomized controlled experiments show that it is not welfare cliffs or phase-out rates in welfare programs that discourage work, but rather the anti-work incentives that come from giving something for nothing.
  • Seeking reductions in “welfare cliffs” by lessening benefit phase-down rates can only greatly expand the welfare state and substantially increase welfare dependence by needlessly making millions of additional people eligible for welfare. These are long-time staple liberal policies.
  • By contrast, requiring work or other constructive activities was the core of the successful welfare reform in the 1990’s; the historical record shows this policy reduces welfare costs, dramatically reduces welfare dependence, increases employment, and reduces poverty.

Shouldn’t promoting federalism through state flexibility be the main goal for any welfare reform, including food stamp reform?

  • While promoting federalism and maintaining state flexibility is important, the priority of welfare reform should be to free Americans from poverty and government dependence by encouraging work and self-support. This priority was at the core of welfare reform 20 years ago.
  • True federalism would turn fiscal responsibility for operating and funding the SNAP program over to state governments. True federalism does not mean taxing citizens at the federal level and then turning the revenue over to states to spend as they choose. This policy has always resulted in wasteful spending; historical experience shows that state governments spend their own money far more prudently than they spend federal funds.
  • In 2016, means-tested spending on cash, food, and housing assistance was over $350 billion; the federal government provided over 90 percent of these funds. Similarly, the federal government provides over 90 percent of all SNAP funding. As long as the federal government is paying for SNAP or any other welfare program, federal legislators have an obligation to ensure the funds are spent according to conservative principles: specifically, aid should not be a one-way handout, but should be given in a manner that promotes work and marriage and reduces unnecessary dependence.
  • States that wish to provide food stamps to ABAWDs without a work requirement can do so by creating a separate state aid program with state revenue.

Will this bill increase a state government’s administrative costs?

A work activation program can operate at a fairly low cost.

  • For example, a rigorous, closely supervised 16-week job search program would cost about $250 per recipient. In one year, ten million work-capable food stamp recipients could receive this type of program at an annual cost of around $2.5 billion. This would cover all current work-eligible recipients who are non-working or underemployed, as well as many new work-eligible enrollees.
  • In addition, administrative costs would be lower than expected because most ABAWDs will likely drop off the rolls. Maine, for example, expected large numbers of ABAWDs to enroll in its training and community service programs, but most ABAWDs refused to participate despite vigorous outreach efforts by the state government to encourage participation. This indicates that these individuals had other means of supporting themselves, such as unreported income.
  • To cover to the small administrative costs of the program, states would be free to use SNAP Employment and Training (E&T) funds or Social Service Block Grant funds. Under current law, states could also use a portion of their Temporary Assistance to Needy Families (TANF) funds; these funds are supposed to be used to promote work and marriage, but most states redirect a substantial portion of the funding to unrelated activities.

Looking at the bigger picture, it is important to understand that welfare spending is growing out of control, not because of administrative costs, but because the current system provides very generous benefits to tens of millions of Americans.

  • On average, administrative costs associated with federal welfare programs are less than 10 percent of means-tested cash, food, housing, and medical spending. More than 90 percent of this spending reaches low-income households as benefits.

Where has this policy been successful before?

Maine, Kansas, and Alabama have implemented ABAWD work requirements for food stamps with great success:

  • 80 percent of ABAWDs on food stamps left the rolls after Maine implemented a work requirement for ABAWDs. A preliminary report published by the Maine government found a 114 percent increase in total wages for ABAWDs who left the food stamp rolls, less dependency for those who remained on the rolls, and between $30 million and $40 million dollars in annual taxpayer savings.
  • Kansas saw a 75 percent reduction in its ABAWD food stamp caseload after reinstituting its work requirement. ABAWDs who left the food stamp rolls “saw their incomes increase by an average of 127 percent, and roughly half of those who left the rolls were employed with reported incomes above the poverty level.”
  • Alabama saw a caseload reduction of 85 percent in the 13 counties that participated.  

Have the states who have instituted these changes seen an uptick in their local work force participation?

Yes. For example, once the state of Kansas established work requirements, thousands of food stamp recipients moved into the workforce, promoting income gains and decreases in poverty. Forty percent of the individuals who left the food stamp ranks found employment within three months, and about 60 percent found employment within a year.

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September Legislative Calendar: An Opportunity for Fiscal Responsibility

Congress will return from August recess September 5th and have a mere 12 legislative days to address a number of “must pass” legislative priorities including the expiration of discretionary appropriations that must be renewed within the constraints of the Budget Control Act (BCA) for fiscal year 2018, the debt limit, the Federal Aviation Administration (FAA), the National Flood Insurance Program (NFIP), and the State Children’s Health Insurance Program (SCHIP). On top of this, Congress will also need to provide significant funding for Hurricane Harvey relief efforts.

During the Obama administration, Congress exercised little fiscal restraint (outside of the Budget Control Act of 2011) and routinely passed last-minute, short-term continuing resolutions or trillion-dollar spending packages with little to no reforms. The failures of the past must not continue. In November of 2016, the American people elected the party of “fiscal responsibility” to lead all three branches of the federal government. The Republican Party now has a clear opportunity to live up to its name by enacting fiscally responsible legislation into law this September.

Appropriations/Budget Control Act

On fiscal year 2018 appropriations, Congress should follow President Trump’s lead by sticking to the spending levels established under the BCA. Congress should break the Obama-era firewall between defense and non-defense spending and fully fund the U.S. military via corresponding cuts to domestic programs. Because the BCA has been the most effective mechanism for controlling the growth of discretionary spending, Congress should extend the overall cap through 2021. Longstanding conservative policy provisions should also be included in the appropriations measures.

Debt Limit

Our national debt is quickly approaching $20 trillion and has already exceeded annual U.S. gross domestic product (GDP). This kind of spending-induced government debt slows economic growth, restricts job creation, wage increases, and business expansion. Before Congress agrees to raise the debt limit any further, it should deliver on candidate Trump’s promise to “start to pay down our $19 trillion in debt.” Even a small step toward this promise, such as strengthening the statutory pay-go that removes the exemption for non-trust fund, mandatory spending programs, would send the right signal to the American people that the Republican Party is committed to addressing the structural nature of America’s annual deficit.

Federal Aviation Administration

The FAA’s legal authority expires September 30, 2017 and is long overdue for reform. America’s current aviation system has fallen well behind our foreign counterparts due to excessive government regulation and a broken aviation finance system. But thanks to the persistent work of Chairman Bill Shuster (R-Pa.), the House Transportation and Infrastructure Committee recently introduced the 21st Century Aviation Innovation, Reform, and Reauthorization (AIRR) Act (H.R. 2997), that would turn the Air Traffic Control (ATC) system into a standalone government-sanctioned, non-profit corporation and reauthorize the FAA for fiscal years 2018-2023. While not perfect, this bill would free air traffic control services from federal government bureaucrats and allow the new entity to innovate and improve while ensuring flight safety and saving taxpayer dollars.

National Flood Insurance Program & Hurricane Harvey

The NFIP is also set to expire September 30, 2017. Through the NFIP, the federal government maintains a monopoly on virtually all primary flood insurance for homeowners and businesses, and owes nearly $25 billion to U.S. taxpayers. The program has failed to adequately map flood risks and actually promotes development in flood zones through generous subsidies, which worsens the devastation of natural disasters. In the wake of Hurricane Harvey, reforming the NFIP is needed now more than ever. Additional borrowing authority may be necessary in order to cover claims to policyholders in the areas impacted by Harvey, but this should be accompanied by reforms that would initiate the phase-out of the national flood insurance monopoly in favor of a private insurance market.

Additional funding authorized for Harvey relief efforts should meet the requirements of emergency designated spending: necessary, sudden, urgent, unforeseen, and not permanent. Funding that does not meet this criteria should be fully offset and remain within the BCA spending caps. It is imperative to avoid the mistakes of congressional efforts to respond to Sandy in 2012.

State Children’s Health Insurance Program

This joint federal-state low-income children insurance program is also set to expire September 30, 2017. Originally designed as a federal-state partnership, the program has largely become another expensive federal program that has failed to provide the quality of care or choice our families and children deserve. Congress should convert SCHIP funding into a defined contribution program, thus giving parents the option of enrolling their children in any health plan of their choice, including, if available, employer-based coverage. Congress should require the states to share more of the cost of the program by limiting federal payment over time to coverage for children at, or below, 250 percent of the federal poverty line.  

Conclusion

While addressing all of these expiring legislative priorities in a fiscally responsible way is a challenging task, Congress has all the necessary tools at their disposal to do the right thing. President Trump and Republicans in Congress were voted into office, in part, to help get our fiscal house in order. The month of September provides Congress with multiple opportunities to do just that and show the American people it can effectively govern.

Related:
Heritage Foundation: A September Action Guide for Congress in 2017 (2017)
Heritage Foundation: Blueprint for Balance: A Federal Budget for Fiscal Year 2018 (2017)
Heritage Foundation: 2017 Debt Limit Should Trigger Spending Limit—with Enforcement (2017)
Heritage Foundation: 2018 FAA Reauthorization: Potential for Positive Air Traffic Control Reforms, But More Policy Improvements Needed (2017)
Heritage Foundation: The National Flood Insurance Program: Drowning in Debt and Due for Phase-out (2017)

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