Andrew Harnik/AP Photo
President Biden signs the American Rescue Plan Act, March 11, 2021.
On Thursday afternoon, Joe Biden signed the first major legislation of his presidency, the American Rescue Plan Act. The $1.9 trillion bill allocates a ton of money to various state-administered welfare and social services programs that desperately needed an infusion of cash, both in the 12 months since the COVID crisis took off and the 25 years since welfare reform became a national political priority. The size of the commitment has drawn not altogether inappropriate comparisons to LBJ’s Great Society initiatives.
Beyond the top-line cash assistance, in the form of stimulus checks and child tax credits that will do an immense amount in the way of temporarily ameliorating some of the country’s most acute childhood poverty, the bill also allocates a $300-a-week federal boost to unemployment insurance, extends new pandemic-era UI eligibility programs through September, curtails health insurance premiums, boosts funding for the Affordable Care Act’s Medicaid expansion, and otherwise directs hundreds of billions of dollars to states to help offset the costs to their beleaguered social programs after a year of heavy use.
Those generous and necessary financial commitments functionally end the slash-and-burn welfare reform Clinton years of the Democratic Party. But the Biden administration has some work left to do. These investments are temporary; the child tax credit increase ends in a year and the increased health insurance subsidies in two. The unemployment programs phase out in early September. As the administration turns to making some or all of these programs permanent, it should take another crucial step toward improving the structure of our biggest social programs, by federalizing them.
Take, for instance, unemployment insurance, which whipsawed in amount as the federal government boosted it by $600, then zero, then $300, on top of whatever states were kicking in. Even in a state like California, which has administrative capacity far beyond other smaller, redder counterparts, laid-off workers had serious difficulty accessing benefits. As David Dayen reported for the Prospect, “in March, 87 percent of claimants received their payment within two weeks of filing, by June that number had dropped to 52 percent.” There were numerous unnecessary delays and denials. By August, 1 in 5 claimants—1.2 million Californians—had not been paid.
Verification and eligibility standards remained a major challenge for outdated and overwhelmed state unemployment insurance programs all year long, while more sophisticated assessments on how much money recipients had been making before being laid off were entirely impossible to conduct, making the aid process even clumsier. Unemployed individuals experienced wildly different outcomes based on the state they happened to live in. And that’s before you get to the rampant unemployment insurance fraud, conservatively estimated at $36 billion, seen in California and across the country.
Of course, the federal government, which was already paying for, and continues to pay for, unemployment insurance through a federal loan program that states tap, would make things much smoother for the unemployed by simply managing the system itself. The government could deliver near-immediate payments to a Federal Reserve bank account for every American with a Social Security number, and even calculate those payments based on a percentage of income, given that they have that information at the ready. States were underfunding these programs to begin with, across 50 separate outdated and inefficient delivery processes. Many state systems run on COBOL, a decades-old computer programming language; there’s just no need to subject people to this. It would be better, more efficient, more impactful, and no more expensive to have the federal government enact its own system, and fewer people would fall through the cracks.
The current situation with state-administered Medicaid programs is perhaps even more ridiculous. The American Rescue Plan offers a lot of money to entice states to embrace and expand Medicaid, which was broadened as part of the Affordable Care Act. But states with Republican governors have refused Medicaid expansion, or insisted on punitive work requirements for eligibility, even though it costs them next to nothing: The federal government already fronts 90 percent of the Medicaid expansion cost.
Red states’ entirely ideological and not at all fiscal opposition to Medicaid expansion has been overcome in some states by popular support for ballot measures; in other places, governors have thwarted expansion successfully. That means that in places like Georgia, Republican regimes have repeatedly turned down millions of dollars in federal money.
In fact, there’s a provision in the ARP that incentivizes those states that haven’t expanded Medicaid to the degree that it literally pays them to expand. Of course, this, too, will make little difference in places like Texas, Florida, and Georgia, which still won’t adopt the program, or take the free money. (The ARP now contains $2 billion for Georgia’s Medicaid expansion, thanks to its Democratic senators, which will likely be refused by its Republican governor.)
Which means that we’ve arrived at a point where the federalist approach to health care just no longer holds up. Federalizing Medicaid has been a hot-button issue in Democratic politics for the last decade, and numerous liberal think tanks have endorsed it as a logical next step since the passage of the Affordable Care Act. Medicaid expansion is extremely popular, and won on the ballot in 2020 in places like Oklahoma, where Democrats don’t have the faintest hope of competing. And, as Jon Walker has pointed out in the Prospect, federalizing Medicaid can be done via reconciliation. The moment is now to act on that.
We’ve arrived at a point where the federalist approach to health care just no longer holds up.
There are opportunities, too, to bring more of public education provisioning under federal control, another hugely important and expensive social service that cash-strapped states have signaled they will target for cuts in coming years. The ARP has almost $130 billion in block grants for education, and it could be expanded further.
If the pandemic year has shown us anything, it’s that states are not up to the task of administering these benefits as quickly and efficiently as the federal government. Reassigning crucial social welfare programs like unemployment and health insurance and education to the federal government would not only improve outcomes and efficiency, it would also save a ton of money in administrative costs. Given that many of these states, especially Republican-led ones that have refused Medicaid expansion, are facing revenue and budgetary shortfalls and unforeseen costs associated with dealing with the pandemic, it would present considerable financial relief for them as well.
Of course, congressional Republicans cheered the pushing-off of these programs to the states because they knew they’d be less equipped to deliver them. In fact, the entire Trump administration coronavirus strategy was, in essence, do nothing and let the states fend for themselves. As the Biden administration seeks to undo the legacy of Trump, undoing this clearly failed federalism is a crucial place to start. The task, now, for the Biden administration is to make these changes last.
Federalizing social programs would be a huge step toward expanding the welfare state and ending poverty permanently. If passage of further legislative packages proves even more difficult, as Republican opposition increases and the Senate’s Democratic moderates dig in their heels, it would be an easy step to protect the gains of the ARP and secure Biden’s presidential legacy from the get-go.
