IF THE country is in a recession, the poor will be among the leading victims. That is true not just because theirs are the marginal jobs, but because the states rather than the federal government control much of the nation's assistance to the poor, and the recession is already hurting the states.
Under matching formulas, the states control the funding levels of the main national welfare program, Aid to Families with Dependent Children; the so-called JOBS program that Congress approved in the last year of the Reagan administration to move dependent families off AFDC; and Medicaid, related to welfare and the costliest of all aid for the poor. The federal government, apart from setting certain minimal standards, simply matches what the states put into these vessels. The funding levels in turn determine how many people can be how generously served. The states control benefit levels and eligibility standards for unemployment insurance as well.
In AFDC, benefits were allowed to fall well behind the high inflation rates of the 1970s and early 1980s; they lost more than a fourth of their purchasing power. In 1986 and 1987 they recovered slightly; states increased them more than inflation. But now they have begun to sag again, even as the AFDC caseload has increased. As the caseload increases further, the typical pattern in recessions, states in already straitened circumstances are hardly likely to increase benefits; the program will lose even more ground.
Nor is welfare reform, in the form of the JOBS program, likely to come to its early rescue. Recessions are hardly the best of times to move people from welfare to jobs that are in short supply, and even willing states face constraints in the money they can raise for the program, a costly undertaking if done right. The amounts always were going to be relatively small and the progress incremental; now that is likely to be even truer for a while. The states even in the first year failed to take advantage of all the matching funds available.
Medicaid meanwhile is already growing so fast that, along with prisons programs, it consumes almost every incremental dollar in the typical state budget, is crowding other "human services" programs for the poor and has become a prime target for cost-cutters. Its costs are being driven up by inflation, higher for health care than for goods and services generally; demography in the sense that nearly half of Medicaid provides long-term care for the expanding number of medically indigent elderly; and to a lesser degree than the accompanying rhetoric would suggest, what the governors call mandates -- federal requirements that they expand coverage, particularly to all poor children. Most states at this juncture will broaden Medicaid where forced to but otherwise will be disposed to trim it where they can.
The pressure to cut is the greater, because there are also strong claims to increase spending on education and highways, still the largest consumers of state dollars and programs with wider appeal than aid to the poor -- and because the alternatives to cuts are tax increases, no more attractive in the current climate to governors (several of whom were defeated on tax issues in the last election) and state legislatures than at the federal level.
The squeeze is on, and the states are not just its victims but among its chief transmitters.