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Larry Talks with Congressman Paul Ryan

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July 26, 2014 | comments

The Larry Kudlow Show

First District Congressman Paul Ryan spoke with Larry Kudlow about his ideas for “Expanding Opportunity in America.” Excerpts of their conversation follow.    

Larry Kudlow: Welcome back, everybody. I’m Larry Kudlow, and this is The Larry Kudlow Show. Let’s get right to it. We are honored to have as our guest Congressman Paul Ryan of Wisconsin: Chairman of the Budget Committee, former vice-presidential candidate, and one of the very, very best thinkers in the Republican Party. If I may editorialize, I hope he runs again, but that’s not the subject of the interview. Paul, welcome back. You know, I was thinking about your new plan to solve and ameliorate poverty, and I just came upon one of my favorite quotes from the Gospel of Matthew. Jesus is warning to feed the hungry, welcome the strangers, and clothe the naked; what we do to the poor and destitute, “the least of these my brethren,” we do to the Lord himself. You are trying to help the least of these my brethren. Tell us what your central thoughts are, please.

Paul Ryan: Well, hey, good morning, Larry. Nice to be with you. That’s precisely the idea, and I’m trying to do it in a way that’s effective, that actually works. And I’m trying to do it in a way that brings out the best in our society and puts the role of the government in a proper place, so that we can bolster instead of crowding out what we commonly call civil society, good works, and communities. . . .

And so we’re proposing a number of reforms, but all of which are tailored at getting a person back on their feet, and getting the government to not displace these good local works and the communities, but to help them. And do it in a way that we measure and focus on outcomes so we get the best outcome.

Larry Kudlow: You talk about “Opportunity Grants,” Paul Ryan. “Opportunity Grants,” which, as I understand it, would really move the authority and much of the funding from the federal government, which probably knows nothing—one-size-fits-all—to the local governments and the state governments. Can you briefly describe your Opportunity Grants?

Paul Ryan: Yes. So, we did welfare reform in 1996. That was one program. It was very successful. It moved kids out of poverty. It was the biggest social change at the federal level we’ve had in a generation; it was very successful. But it reformed one program; we have dozens others. And so we say, let’s take eleven welfare programs and collapse them into one funding stream, and give states the ability to take that single funding stream and create an Opportunity Grant, whereby you can customize and tailor-make support for a person based on their particular needs, to move them from where they are to where need to be and where they want to go.

And the whole purpose of this is, when you look at all the formulaic and bureaucratic rules and programs in the federal government, it ends up—and you know this issue well—it ends up giving a high marginal tax rate to people who want to go from welfare to work. Because of all the rules and the regulations and the confusions, they in many cases lose more in benefits when they take that extra step to go get a job. And so it disincentivizes them to move out on their own. And so you want to get at that issue. More importantly, the government displaces a lot of groups that are doing a good job locally. So what we say is, have states collapse these funding streams so that you can customize aid to the person based on their need, get the able-bodied person on welfare to work, and make sure you break up the monopolies of service providers.

Right now, you go to these welfare agencies to get a bunch of different programs, you don’t really talk to anybody—you just get the benefits. And that’s about all it is. It’s very confusing, and they disincentivize work. And so, what we’re saying is, you can go to your state welfare agency for your single stream, you know, Opportunity Grant, but they also, in the state, have to give options—other service providers. It could be charities like Catholic Charities, or for-profit institutions like America Works, which does this. And they are measuring the performance. You’re testing the results. They are measured on whether they actually get people out of poverty, into work, and on their plan. And so you might customize a benefit for one woman who needs transportation and child care, for one guy who needs, you know, addiction counseling and job training, and for another person who has different needs. And so, you customize it, you tailor-make it, and a person basically signs a contract. It’s called “case management.” You manage their case per their need.

Larry Kudlow: So this is the civil society part, too.

Paul Ryan: Exactly. . . .

Larry Kudlow: You know, some of it’s food, some of it’s training, some it’s work habits. You know what I mean? So, teaching—I don’t know how to say this—but teaching character, and discipline.

Paul Ryan: It’s all of that. So, actually, we worked quite a bit with Catholic Charities on this proposal. I was informed by a lot of what they do, and they were doing it with their own private donations. And just think how much more you could scale it if the government resources are here to play.

And so the purpose is, the government shouldn’t be the front lines. The government shouldn’t be dictating this on the ground. The government should be the supply lines and the rear guard. And it should be providing the resources that these good works can actually produce to produce outcomes, and to customize to people’s needs, because poverty is complex.

People have different problems. Some of it is situational: You know, there was a death in the family, an illness, or you lost your job and you need a helping hand for a temporary period to get back on your feet. Some of it’s generational, systemic. There are deeper issues. Addictions, or you have no family support, you know. You name it. And so, you need to be able to customize it, and you have to do it in a way that emphasizes work, that emphasizes that it’s limited in duration but customized to a person’s needs, so that it has accountability. It has expectations. If we’re going to take hardworking taxpayer dollars and apply them to this area, which we always have and we will, there has to be some accountability in exchange for that. And that accountability is, you know, you want this aid to work and be effective. And so, get behind the institutions that are doing that, and then measure them. Hold them accountable—the institutions.

Larry Kudlow: So, you got work requirements.

Paul Ryan: We do that so that we can replicate the success all over the place.

Larry Kudlow: So, you’ll have work requirements; you’ll have time limits.

Paul Ryan: That’s right; that’s correct.

Larry Kudlow: And I think that’s important for people to understand . . .

Paul Ryan: Have to have that.

Larry Kudlow: Now, one of the things you mentioned a moment ago, and this is one of my, you know, favorite pet peeves, frankly, I think, for both of us, going back to the great Jack Kemp. And by the way, one of the great things about your initiative, you actually got out into the rest of the country.

Paul Ryan: Oh, it was wonderful.

Larry Kudlow: And to the Spanish groups, the African American groups. That’s what Jack always taught. That’s what the Republican Party has forgotten. I always talk about that.

Paul Ryan: I think that’s right.

Larry Kudlow: I love that. I just love that you’re doing that.

Paul Ryan: Well, I learned it from Jack. I mean, you and I are old friends of Jack, and I learned it from Jack. I just thought to myself, “You know what? We lost this.” Ever since welfare reform, which was in the late nineties, we have atrophied as a party; we have ignored this space. We need to get back in, because we have fantastic principles and a lot of energy and good ideas to bring to this.

Because what we’re doing—the status quo is not working, and if it was, I’d be defending it. But it’s not, and so I’m trying to find a way of reforming it. And so, when you get out into the communities, you know—Outcry in the Barrio in San Antonio, or the boot camp in downtown Indianapolis—I mean, it is incredible. We have these great programs in Milwaukee. They have this one high-school program that’s been replicated to twelve high schools, where, in one case, we had fourteen gangs in an inner-city high school. There are no gangs now two years after the program got started, because we have mentors who have credibility, who were from gangs, saw the error of their ways, who were talking to these young kids who are in the schools saying, “Don’t make the mistake I did. Here’s how you get your life together. Don’t listen to that person. Don’t be violent; don’t do this.” And it’s working.

And so, you want to get behind these great works that are happening. And you want everybody pulling in the same direction—the charitable sector, the private sector, the public sector. And the problem with the War on Poverty is the government has inadvertently displaced that, and it has basically told the common taxpayer, “Pay your taxes; this is the government’s responsibility. If there is poverty, or problems in your community, you don’t worry about it. Just pay your taxes, send your money to Washington, and we’ll handle it.” Well, that’s not going to cut it anymore. It doesn’t work, and it has resulted in isolating the poor from our communities. We need to re-integrate people so that everybody in this country can find opportunity. So that everybody can find the American idea, which is that it doesn’t matter what your birth right, or birthplace, or background is, you can make it in this country. And we’ve got to reconnect people to that notion.

Larry Kudlow: Your staff has me on a—they have both of us on a short leash, because you’re a busy fellow today.

Paul Ryan: Yeah, I have to go to the Rock County 4-H Fair this morning.

Larry Kudlow: Let me just ask you quickly, Paul, a couple last details. One thing that interests me a lot: you want to double the Earned Income Tax Credit, I guess for people—

Paul Ryan: For childless workers. It’s right now very, very low. This is an old Uncle Milton—as you know, Uncle Miltie—idea, from Milton Friedman. If you read Hayek, he proposes a similar thing. We basically say, “Cut corporate welfare; cut wasteful spending”—I’ve identified where we should do that—“and bring childless adults to a better place by doubling it to about a thousand dollars.” What the evidence shows us is that it does pull people into the workplace. . . .

And the ETIC, which needs some reforms, which I think in the Ways and Means Committee we need to tackle, should take its effectiveness and apply it to these young adults who are falling through the cracks in society, who are at the prime of their lives, who need to get pulled back into the workforce. And making work pay—giving more rewards for work—is clearly something we ought to do. And it helps us with this marginal tax rate problem we have.

Larry Kudlow: As I understand it, Paul—I went on the Tax Foundation website—the Earned Income Tax Credit phases out at $20,000 a year. So, if you get a job—let’s say the person goes into your program—you get a job, you work your way up the ladder, you get raises, I guess if you go past $20,000, you lose the Earned Income Tax Credit. Now you’re going to be pushed into an almost 15 percent marginal tax rate, and you may lose certain benefits along the way.

Paul Ryan: Oh yeah, no, the marginal tax rate gets as high as 80 percent.

Larry Kudlow: Right, so it ain’t worth it! It ain’t worth it to work.

Paul Ryan: Right, so, you combine the EITC with other welfare benefits, the eleven we collapse into one funding stream that can be more flexible per person’s needs. You’ll have single moms making $20,000, with two kids, who will lose 80 cents on the dollar just by going to work because of lost benefits.

Larry Kudlow: Right, that’s incredible.

Paul Ryan: That’s what we’re trying to fix here. Because it’s a huge, irrational decision. It’s a disincentive to work. Obamacare just makes it worse.

Larry Kudlow: Casey Mulligan of the University of Chicago has written about this. He says it’s one of the causes of this long recession that we’re engaged in. Paul, did you do anything with the child tax credits? Is that necessary?

Paul Ryan: We didn’t do anything with the child tax credit. The only part of the tax code I touch is the EITC. As you know, I’m a huge—I’m a fan of tax reform. And that to me is a subject for tax reform, which, I didn’t want to bite off more than I could chew with just this proposal.

Larry Kudlow: All right, great stuff. A whole new approach using the state and local levels on many different areas, and I’m going to just say: making it pay to work, making it pay to have discipline, and making it pay to have local counseling. I hope I do you justice. Again, Paul, the Gospel of Matthew: “It’s the least of my brethren.” Those are the ones we have to look out for. You’re doing it. Congratulations.

Paul Ryan: Thanks, Larry. Have a good one.

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