Offering an invisible hand: the rise of the personal choice model for rationing public benefits.

AuthorSuper, David A.
PositionArticle
  1. INTRODUCTION

    As the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 (1) was in debate, both supporters and opponents focused on what changes it would make in formal eligibility rules for means-tested programs. The legislation's champions emphasized its new work requirements that were widely popular with the general public, but generally avoided talking about reductions in benefits. The message they sought to convey was that assistance would remain available to those who demonstrated their willingness to try to help themselves through work. (2)

    Opponents, in turn, tried to portray the legislation as hardhearted and predicted that states would impose eligibility rules denying assistance to numerous innocent families. (3) True, the legislation itself contained few explicit restrictions on eligibility for cash assistance that were vulnerable to political attack. Its opponents, however, forecast a "race to the bottom" in which states would restrict eligibility rules to avoid attracting migrants from less generous neighbors. (4) The change from a program with federal matching funds to a fixed block grant would increase states' financial incentives to restrict eligibility for means-tested programs.

    Both PRWORA's supporters and its opponents focused single-mindedly on formal eligibility rules. Yet formal, explicitly substantive rules are only one way in which the government rations public benefits. Systems that lead to procedural denials of substantively eligible claimants, that discourage claimants from seeking or continuing to receive benefits, or that give third parties influence over whether a claimant will receive benefits also have a rationing effect. The importance of such informal rationing systems had been growing for some time, but the 1996 welfare law moved them to the center of public welfare policy. Personal choice--and its manipulation--have replaced formal rules as the dominant theme in public benefits law.

    The widespread embrace of the personal choice model represents a sea change in American public benefits law. Under this model, states have sought to restructure both their formal and informal rationing systems so that a claimant's failure to receive benefits can be attributed to the claimant's own choices rather than to those of the state. Instead of explicitly declaring a claimant ineligible for benefits, the state agency may act more subtly to influence the process through which claimants make choices. Alternatively, it may establish rules that interpret claimants' ambiguous actions as choices. Such attempts to influence claimants' choices may result from deliberate state policy decisions, but they also may result from the independent actions of local administrators and eligibility workers responding to perceived signals or incentives to reduce caseloads.

    This personal choice model of public benefits law differs fundamentally from any that came before it. Appreciating the importance of this new model for rationing public benefits requires some historical perspective. Public benefit programs for low-income people in this country have gone through four major periods. During the first and by far the longest period, these programs were almost exclusively local creations. This period began in the early days of the Republic and lasted until the Great Depression. (5) Although commonly referred to as the "poorhouse era," (6) the cost and administrative demands of maintaining institutions for all people in need of public aid quickly proved insuperable. Thus, the vast majority of families receiving aid were not sent to the poorhouse. (7) In theory, however, aid provided in the community ("outdoor relief") was seen as an alternative to institutionalization. (8) The poorhouse remained a potent symbol of the moral opprobrium associated with receipt of public aid and a deterrent to those who might consider seeking public assistance. (9) In this period, local officials had virtually unlimited discretion about what, if anything, to do for (or about) destitute families. The guiding philosophy of the era was that poverty was a manifestation of immorality.

    The poorhouse had fallen into general disuse by the Civil War, but the highly localized and nonprofessional character of the system continued until local governments' financial ability to relieve the poor collapsed during the Great Depression. (10) Responding to this collapse, and to advocacy by social workers, President Roosevelt and Congress federalized a significant part of the financing of poor relief. (11) This new system preserved a great deal of local discretion, but administration of programs soon passed from general government officials (such as township trustees) to professional social workers. These social workers sought to remedy the poverty of low-income families the way they might try to remedy alcoholism or other antisocial behavior. Nonetheless, the moral condemnation of low-income people became less universal; for example, in Edwards v. California, the Supreme Court explicitly rejected the notion that immorality and poverty could be equated. (12) The guiding principle of this era was the exercise of social workers' professional judgment.

    The turmoil of the 1960s, and changes within the social work profession, made this model unsustainable. (13) The welfare rolls exploded in response to migration from the rural South to northern and western cities, the banning of overt racial discrimination, and welfare rights advocacy (14) States and localities struggling under the costs of this expansion decided that they could not afford to continue to hire enough licensed social workers to give them the small caseloads required for them to practice their profession. A few years later, a new legalistic model arose, spurred by two factors: first, President Johnson's funding of legal services programs as part of the War on Poverty; and second, the Supreme Court's recognition of statutory and procedural due process claims asserted by claimants for public benefits in King v. Smith (15) and Goldberg v. Kelly, (16) respectively. Social workers were largely removed from programs' administration, policymaking was further centralized, and in place of professional judgment came a complex set of statutory and regulatory rules that at least purported to be objective. The dominant figure in this era, replacing the township trustee and the social worker, was the lawyer. The guiding principle of this era was constraining discretion through uniform rules. In place of the poorhouse or the social worker's clipboard, the physical symbol of the era might be a volume of the Federal Supplement or perhaps of the Code of Federal Regulations.

    The legalistic era of public benefit programs ended with the restrictions on federally financed legal services Congress enacted in 1995 (17) and the elimination of the legal entitlement to cash assistance the following year in PRWORA. As in the earlier transitions, however, the collapse or debilitation of the old regime became apparent well before it was clear what new system would take its place. This Article describes and analyzes the evolving principles of this new order of public benefit programs. It finds that while some of the trappings of the old regime linger--notably formal eligibility rules--the new regime has increasingly marginalized them in favor of a heavy practical and rhetorical emphasis on claimants' choices. The primary focus of public policy increasingly is to manipulate those choices. Rather than be guided by the actions of lawyers (or the social workers or township trustees of eras past), the professionals we now venerate are economists, even if relatively few of them may actually be involved in program management. Persons wishing to affect policy thus must adopt the analytic methods and tools of economists, modifying rules to adjust claimants' incentives rather than to reach a particular outcome directly. This Article concludes that while greater reliance on claimants' genuine choices can both improve the distribution of benefits and leave claimants with more autonomy, such choice-based rationing systems raise serious concerns of equity, efficiency, and democratic legitimacy.

    The stakes involved are substantial. In each of the two years following the start of the most recent recession in March 2001, states' assistance caseloads under the Temporary Assistance for Needy Families (TANF) block grant declined about 2% from their already historically low levels. (18) By contrast, in the first two years after the previous recession began in July 1990, Aid to Families with Dependent Children (AFDC) caseloads rose 11% and 7%. (19) Over the two years following March 2001, the number of people participating in the food stamp program, which has been restructured much less than cash assistance programs, increased 11% and 9%. (20) As far as those relying upon media accounts are likely to be aware, however, cash assistance programs' eligibility rules still offer aid to those in need. (21) It is of course possible that these changes can be accounted for by families that are making free and voluntary choices not to receive aid for which they are eligible. Nonetheless, it seems important to investigate the possibility that some other, hidden process is working to deny aid to increasing numbers of families at the very time when the economic downturn is making employment less available. (22) The consequences of extreme poverty for the health, (23) education, (24) social adjustment, (25) and long-term well-being (26) of the children in these families are too great for an anomaly of this kind to be ignored.

    This Article examines the implications of the pervasive emphasis on incentives and choices in public benefits law: the creation of a new system of informal rationing that has eclipsed the importance of formal eligibility rules, sharp changes in those formal eligibility rules themselves that...

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