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Federal Policymaking and the Poor
National Goals, Local Choices, and Distributional Outcomes
By Michael J. Rich PRINCETON UNIVERSITY PRESS
Copyright © 1993 Princeton University Press
All rights reserved.
ISBN: 978-0-691-08652-1
CHAPTER 1
Introduction
This book examines the relationship between federal decisionmaking systems and the distributional impacts of public policies. Its purpose is to sharpen our conceptual understanding of how governments in the American federal system interact to solve problems as well as to inform policymakers of the effects different decisionmaking systems have on program outcomes. The principal theme underlying much of the analysis concerns the role federal, state, and local officials play in determining the uses of federal funds, and how, if at all, these roles change over time. Two central questions are addressed. First, are policy outcomes different when federal officials—as opposed to state and/or local officials—have greater influence regarding the use of federal program funds? Second, do federal, state, and local governments differ in their responsiveness to the needs of the poorest citizens?
These are important questions for analysis because one of the most fundamental issues every political system faces is the extent to which government is used to redress inequalities. In the American political system, the widespread notion that equality is one of the most basic goals the nation's political system should promote has played an important role in shaping public policy. Many of the most acclaimed public policies have been governmental responses to promote equality: extension and protection of the voting rights of women, African Americans, and youth; directives that state and local legislative districts must be drawn in a manner consistent with the principle of one person, one vote; and a variety of mandates that ban discrimination in public accommodations, housing, schools, and employment, to name but a few.
While Americans have been quite willing to use government as an instrument to promote political equality and to further one's right to equal justice, they have been somewhat reluctant to support public policies that address economic inequalities. Indeed, one of the most conflictual debates in American domestic policy over the past three decades has concerned the extent and manner to which government should promote economic equality. And while most politicians have stopped well short of advocating policies that seek to attain equal incomes for all citizens, there are a number of policy responses that have been enacted to promote equality of opportunity, and some that have even gone as far as requiring equal levels of public services.
The Economic Opportunity Act of 1964, the centerpiece of President Lyndon Johnson's War on Poverty, is perhaps the best known example of the federal government's attempt to promote equality of opportunity. Efforts to promote equality of services, predominantly through the courts, have also occurred. Several states, for example, have recently declared their educational finance systems unconstitutional and directed state officials to redesign the manner in which elementary and secondary education is financed (for example, by less reliance on local property taxes and greater equalization in state aid distributions) in order to achieve greater equality in per pupil spending across poor and wealthy school districts.
Yet, redistributive policies are inherently difficult for any political system to implement, largely because they involve taking from the haves and giving to the have-nots. Two features of the American political system make the pursuit of redistributive policy especially difficult: democracy and federalism. While in theory democracy allows each citizen to play an equal role in selecting key public officials and in shaping policy outcomes, economic inequalities frequently result in political inequalities: poor people are less likely to vote, less likely to hold office, and less likely to exercise their voice in policy formulation, decisionmaking, and implementation, largely because they lack sufficient economic resources to participate in the political process. Political campaigns at all levels of government are becoming increasingly expensive, despite efforts to reform campaign financing practices, and the growing role of political action committees, in both campaigns and lobbying, poses formidable barriers to political participation of economically disadvantaged groups.
Second, the American federal system, in which power and authority is shared among national, state, and local governments, is a remarkably open system that allows individuals and groups access from a variety of points. Such a system, while opening up government to the people, also results in a system where the actions of one level often thwart or block those of another. As Thomas J. Anton notes, "The number of separate governments is so large that they are bound to bump into one another in the course of their pursuing their normal operations, and many of these collisions are bound to be sources of conflict." Both of these institutional features—democracy and federalism—add to the importance of building and maintaining coalitions, as it is exceedingly difficult for people and their governments to act alone to achieve desirable policy outcomes in the American political system. As this analysis will show, coalitions are especially critical for policies that seek to provide benefits for the poor.
Few would deny that public policies have distributional consequences. Even though the United States ranks near the bottom of the industrialized democracies in terms of the share of the national economy represented by government spending, the two trillion dollars spent by the more than 80,000 American governments in 1988 had a substantial impact on the well-being of many of the nation's citizens, both poor and rich. More important, the distributional impacts of the spending decisions of the American governments are far from uniform, precisely because so many governments have a hand in making decisions. As Robert Lineberry points out, "Public policies have complex and controversial distributive consequences. Thus, inequalities abound in policy choices. Policies act to make some richer and others poorer, some more powerful and others less, some prestigious and others less, some happier and others more dissatisfied." While most Americans believe government should help the "deserving poor"—that is, public policies should have differential distributional impacts that benefit the needy—many are deeply suspicious and resentful of programs that are perceived to benefit the poor in general, for fear that such programs will lead to welfare dependency and weaken work incentives.
In the recent past, conflict over the distributional impacts of public policies were frequently resolved by simply increasing the amount of funds available; in essence, making every one a winner, although some groups, presumably the neediest, would benefit more than others. Yet, growing budget deficits, especially at the national level, but also increasingly at the state and local level, have caused policymakers not only to rethink the feasibility of the expanding pie response, but to reevaluate whether government should be involved at all. The 1980s witnessed extensive debate concerning the level of government assistance to the poor, the types of assistance that should be provided, and who should pay for those programs. Charles Murray and others attacked the welfare state, questioning whether the many government programs that promoted redistribution were actually effective in reducing poverty. Others defended the American welfare state and provided evidence that public policies were effective in raising the basic standard of living of the poor. In the 1990s, debate concerning the role of government in promoting redistribution is likely to become even more conflictual, as efforts to increase assistance to the needy will likely only be possible by cutting or terminating benefits to those that are better-off.
In addition to debating the extent to which government should assist the poor, policy debate has focused on the means through which that assistance should be provided. Three issues have characterized much of this debate. First, should government provide direct cash assistance to the poor or should assistance be provided through programs that provide in-kind assistance, such as public housing, food stamps, and Medicaid? Second, should assistance be provided to poor people or to poor places? And third, what level of government should provide assistance to the poor?
Studying the Distributional Impacts of Public Policies
While redistribution has been a central theme in much of the nation's domestic policy debate, our approach to studying the distributional consequences of public policies has been deficient on both conceptual and empirical grounds. First, and quite surprisingly, we simply have not paid much attention to the distribution of public benefits. Studies such as Benjamin Page's Who Gets What from Government provide very useful national summaries of the size, scope, and variety of government benefits, but such studies are rare. Meanwhile, we have few rigorous and systematic empirical analyses that examine the distributional consequences of individual government programs, one of the principal means governments use to distribute benefits to their citizens. Thus, while Harold Lasswell's definition of politics as "who gets what, when, how" may be one of the most widely cited definitions, scholars have devoted relatively little attention to examining the distributional impacts of what government does, as compared to, for example, the voting behavior of citizens and legislators.
Our understanding of how and why government benefits are distributed is largely based on studies that use highly aggregated measures of government spending, such as total federal expenditures or expenditures for certain functions such as health, education, welfare, or community development. Those that have empirically studied the distributional impacts of public policies have generally chosen to focus on the net effect of public policies by examining the consequences of government taxing and spending decisions on different income classes. That is, which groups receive more from government than they pay in taxes, and which groups pay more in taxes than they receive in services? Other studies have attempted to answer similar questions regarding the net effects of federal policies for state governments. Such studies have concluded that while the federal tax system is generally progressive, and federal expenditures tend to favor the poor, at best, the American political system is only mildly redistributive.
Although focusing on the net effects of government policies gives one a bottom-line summary of the distributional impacts of public policies, such studies are not very informative regarding the processes that led to those outcomes. Most studies rely on relatively simplistic notions of public policymaking, and proceed on the myth that the distributional outcomes recorded are the results solely of national government decisions. Studies that examine the net effects of government policymaking assume that the factors that determine aggregate policy outcomes are the same as those that influence the outcomes of individual programs; further, many also assume that policy determinants are the same across state and local governments.
Yet, the net effect of government taxing and spending, while an important indicator of a government's commitment to redistribution, is not the result of a single comprehensive policy decision. Rather, it reflects the results of the accumulation of hundreds of policy outcomes, some of which are meant to target a disproportionate share of funds to the poor, some that are designed to distribute funds on a per capita basis, and some that are neutral in the sense that those that receive a service also directly pay for it in proportion to their use.
Even within the same policy area there is substantial variation in distributional outcomes. For instance, few poor people can take advantage of the tax incentive that allows a home owner to deduct the interest paid on a home mortgage from their federal income tax liability. In 1990, this deduction was equivalent to the federal government enacting a $39.7 billion program to provide cash payments to home owners, which was about three times greater than the $13.8 billion in fiscal 1990 outlays under the various federal low-income housing programs.
In short, understanding the distributional impacts of federal spending requires analysis of the various programs and activities funded by the national government. As Thomas J. Anton and his colleagues point out: "A considerable literature on national budgeting, furthermore, makes clear that federal resource allocation takes place through a fragmented process of program-by-program calculation, involving individual program managers, agency and departmental leaders, O.M.B. officials, relevant congressional committees, and often supportive clientele groups.... The politics of federal spending is very much a politics of individual federal programs."
In addition to focusing on an overly aggregated measure of policy outcomes (the net effect of government taxing and spending), previous research has given too much attention to the influence of national institutions in shaping public policies and not enough to the important role that state and local governments play in federal policymaking. Not only do state and local governments enact their own fiscal policies, which also contribute to the citizen's overall balance of payments and quality of life, but state and local governments play an especially important role in national policymaking. As Samuel Beer has observed, state and local government officials, and the organizations that represent them, have become important participants in shaping national policy. Indeed, it is difficult to point to a major piece of domestic policy in which state and local government officials did not play a role in influencing its design.
Perhaps most important, however, is the impact individual state and local governments have on determining how national policy is executed and carried out. Most national policies are far from uniform in their application because of the different ways in which state and local governments apply them to their own situations. Contrary to popular myth, most federal policies are not carried out by pointy headed bureaucrats in Washington, or even those in the field, but by state and local government officials who exercise a considerable degree of discretion and autonomy in spending federal funds. In short, decisions state and local officials make regarding the use of federal program funds have considerable consequences for the extent to which national policies achieve their redistributive goals.
Welfare benefits, for example, vary widely across the fifty states because state governments have been given the authority to determine eligibility and benefit levels. The maximum monthly grant for a family of four under the Aid to Families with Dependent Children program, the nation's principal social welfare program, ranged from a low of $147 in Alabama to almost $800 in California and nearly $900 in Alaska during fiscal 1989. Similarly, local governments play important roles in determining the distributional impacts of place-oriented federal programs. Decisions local officials make regarding the types of activities funded, where they will be located, and who will be eligible to receive them under programs such as compensatory education, employment and training, and community development block grants, among others, have important implications for who will benefit from federal aid programs.
Studies of federal grant programs, however, have generally focused on examining different horizontal slices of programs and have failed to capture the dynamics of interaction among the different levels of government. Too often studies of federal programs proceed on the presumption that the national government is a unitary decisionmaker, a presumption that does not fit well with the reality of federal policymaking. Most studies tend to emphasize the role of national political institutions (Congress, the bureaucracy, the President, the courts) and assume that policy outcomes are uniform across subnational governments. Thus, we have studies of how a bill becomes a law, and studies of federal programs in particular states or communities, but rarely do we have studies that systematically explore the interactions between the different levels of government and the impact those interactions have on policy development and policy outcomes.
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Excerpted from Federal Policymaking and the Poor by Michael J. Rich. Copyright © 1993 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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