In the United States, not all social safety net programs are the same. The wide array of different eligibility requirements and funding mechanisms can make it difficult for the public to understand how our safety net functions.
One of the most important differences between federal safety net programs is whether they are designed as entitlements or block grants. If you’re like me and you’re new to the public policy world, it might be surprising to find out that not every safety net program is an entitlement. This is only something I’ve learned doing work on an updated version of Scioto Analysis’ Ohio Poverty Measure.
An entitlement program is not just another way of saying a safety net program, instead it is an important financial designation. It means that everyone who is eligible for the program will receive benefits as long as they claim them. The largest entitlement program is social security.
Block grant programs, on the other hand, have a fixed amount of money allocated by Congress. Often, the federal government hands out cash to the states and state-level policymakers decide how these funds get allocated to the people who need it. One example is housing subsidies. Once the money allocated for housing subsidies runs out, no more people get benefits until more money comes in.
Block granting an entitlement program can have major consequences for how many people are helped by the program. Consider the Temporary Assistance for Needy Families (TANF) program. TANF is a Clinton-era version of a program initially established in 1935 as the Aid to Families with Dependent Children (AFDC) program under the social security act. In 1996, the Personal Responsibility and Work Opportunity Reconciliation Act replaced the entitlement program AFDC with the block grant TANF.
The immediate result was a sharp decline in the number of people receiving benefits. The Center on Budget and Policy Priorities estimates that TANF reached 2 million fewer people than AFDC would have in 2019.
What are the advantages of entitlement vs block grant design? A major tradeoff policymakers should consider when entertaining the idea of block granting an entitlement program is cost certainty vs. program reach. One fact about block grants is that they are much less sensitive to changing economic conditions. If there is an economic downturn, the program’s budget won’t immediately balloon. Instead, policymakers will be able to pull the lever more precisely to ensure the budget doesn’t get overwhelmed.
However, this inherently means that people who need benefits to get by probably won’t get them immediately. As we saw when AFDC became TANF, block grant programs reach far fewer people than entitlements. It also means that block grant programs are less effective as automatic stabilizers. Entitlement programs kick in automatically to provide support to individuals and the macroeconomy during recessions, while block grant programs are too rigid to respond without additional policymaker action.
With entitlement programs, the risk of underestimating costs can be offset by better economic projections. Still, there is the risk that policymakers don’t allocate enough resources to a program and it fails as a result.
Recently, Minnesota made free school lunches an entitlement program in their public schools. The program proved to be adopted much more widely than policymakers projected, causing it to already be over budget. There doesn’t seem to be any risk of the program getting shut down, but policymakers are going to have to make budgetary adjustments going forward. The most obvious example of an entitlement program potentially growing too large is social security.
Block grants can be an effective tool for policymakers to control the costs of safety net programs at the outset. For state and local governments that have balanced budget requirements, this can be an important consideration. However, policymakers should be aware of the tradeoffs. A safety net that doesn’t reach the people who need it the most is not very effective at its central goal: cushioning the impact of market economies on workers and families.