The Government Accountability Office (GAO) released an overview of the 82 different federal programs it counted (including six "refundable" tax credits that you can receive even if you don't have any income tax liability) targeting low-income individuals, families, and communities. In 2013, obligations for these programs, spread across more than a dozen different federal agencies amounted to $742 billion, 21 percent of all budget outlays that year.
A significant portion of these costs came from a handful of these assistance programs.
The Four Major Low-Income Programs Identified by GAO, Cost in Billions | ||
| 2013 | 2015 |
Medicaid | $287.5 | $370 |
Supplemental Nutrition Assistance Program (SNAP) | $79.7 | $76 |
Earned Income Tax Credit (EITC, refundable portion only) | $57.5 | $60.1 |
Supplemental Security Income (SSI) | $56.5 | $55 |
Total | $481.2 | $561.1 |
While two of these programs costs are now smaller as the economy has shown some improvement, Medicaid spending has increased by nearly a third as 28 states plus the District of Columbia have used federal enticements included in Obamacare to increase Medicaid eligibility to 138 percent of the poverty level. (Alaska may soon be joining this list if its Governor's unilateral attempt to expand Medicaid isn't blocked by the courts.)
A few of the other more expensive programs include Pell Grants ($31.9 billion, in 2013), the refundable Child Tax Credit ($21.6 billion), Housing Choice Vouchers ($17.9 billion), and the Temporary Assistance for Needy Families program ($17.3 billion). GAO's list also includes relatively smaller programs including eight employment and training programs ($6 billion) and two energy programs ($3.4 billion).
GAO estimates that in 2012, the latest year for which there is full data, 106 million people, or one-third of the U.S. population "received benefits from at least one or more of eight selected federal low-income programs: Additional Child Tax Credit [the refundable portion of the Child Tax Credit], EITC, SNAP, SSI, and four others."
GAO's report captures data prior to the implementation of the brand new health care insurance premium credit included in the so-called Affordable Care Act. This credit, which started in 2014, is eligible for certain filers up to 400 percent of the federal poverty level to purchase health insurance through the "marketplace exchanges."
Based on the current budget data, the refundable portion - the payments that exceed a filer's tax liability - cost taxpayers $13 billion in 2014 and will increase to $28.5 billion in 2015. CBO forecasts the premium credits will cost between $712 and $822 billion over the next ten years.
Reforms could achieve savings by eliminating many of these fragmented, complex, and often duplicative programs and either block granting a portion of the funds to states - especially as an option to fix Medicaid - or replace the programs with a unified refundable credit.
House Budget Committee Chairman Tom Price offered a block grant proposal for Medicaid earlier this year that would permit greater flexibility to states to serve their citizens. This option would also have the advantage of reducing the federal bureaucracy.
A sole refundable credit option would reduce federal overhead and provide welfare assistance that empowers individuals to make decisions on how to spend money to do things such as find health insurance coverage that isn't locked into substandard Medicaid policies. Moreover, a properly structured and administered refundable tax credit could minimize discouragements against employment, a common side effect of welfare and wealth transfer programs.
However, a portion of these savings would have to be redirected into program integrity efforts to minimize fraud, waste, and abuse. For example, in a separate report, GAO calculated that the Treasury made $17.7 billion improper payments via the Earned Income Tax Credit in 2013.
Milton Friedman was the original proponent of replacing welfare programs with a negative income tax. In 1968 discussion with William F. Buckley, Friedman explained how his proposal would work, see the video below.