Can it start small, but end big? expanding social assistance in South Africa

Generating heated politics in South Africa is a proposal to introduce a universal basic income grant, known as “BIG”. The “gaps” in the existing system of social assistance grants have caught the attention of activists and politicians across the political spectrum. Most concur on the need to expand the system, but the issue of how its “gaps” should be closed is a matter of great political divergence. To cast light on the significance of these debates, I show how the system's “gaps” are more complicated than measurements of poverty and inequality may suggest. Following the social and economic relations that develop around social grants, my analysis foregrounds a tension in the existing assistance system. Social grants provide a critical source of income for recipients and their kin, assisting them to confront the challenging realities of current labor market conditions. At the same time, social grants act as conduits for historical forces to articulate with local conditions and reshape relationships between citizens, the state, and the market. This tension points to the ambiguity of the BIG proposal and of its potential to engender a larger transformation. My research in South Africa was supported by grants from the Human Rights Program and the Richter Fund at the University of Chicago. I would like to thank the South Africans I interviewed at welfare offices and legal advice centers about the social assistance system and the experience of receiving grants. I also thank Makhotso Pholosi, Tebogo Segale, Pumi Yeni, the staff at the Legal Resources Centre in Pretoria, and my advisors, Jean Comaroff and Jennifer Cole. A version of this paper was presented at the 2002 conference of the U.S. Basic Income Guarantee Network and I thank the members of the panel on the South African Basic Income Proposal for their input.     

Actuarial status of the Hospital Insurance and Supplementary Medical Insurance Trust Funds

This article, adapted from a summary of the 1983 Annual Reports of the Medicare Boards of Trustees, presents the present and projected future actuarial status of the Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) Trust Funds following the enactment of the Tax Equity and Fiscal Responsibility Act of 1982 and the Social Security Amendments of 1983. Although the Trustees characterize the outlook for the HI Trust Fund as slightly more optimistic than it was a year earlier, they report that the fund may be exhausted sometime between 1988 and 1996 unless benefits under the HI part of Medicare are reduced or financing is improved. The SMI Trust Fund, which is financed by premiums adjusted each year to reflect actual experience and by general revenue contributions, is characterized as actuarially sound. The Trustees note, however, the growing extent to which general revenue financing is becoming the major source of income for the SMI part of Medicare.     

FIFTY YEARS OF THE COMMONWEALTH GRANTS COMMISSION*

Abstract: The Commonwealth Grants Commission was established in 1933 to inquire into the payment of special grants to the States. It has retained this function to the present day, and has also conducted inquiries into grants to local government, the distribution of general revenue assistance to the States, and the financial position of the Territories. Although special grants had been paid for over twenty years before the establishment of the Commission, the principle upon which grants should be based had not been determined. The first members of the Commission, after debating the merits of grants based on financial need and grants based on disabilities due to federation, adopted in their third report the principle of fiscal equalization which the Commission still follows. Under this principle grants are assessed that enable each State to provide a standard level of service to its residents so long as it levies taxes at standard rates. The Commission operates as a semi-judicial body, receiving written submissions and conducting public hearings at which witnesses from the States and the Commonwealth Treasury are examined on oath. It also conducts an extensive analysis of State government finances and other information in arriving at its conclusions. Over the years many distinguished Australians have served on the Commission, and their work has contributed to the high reputation enjoyed by the Commission in carrying out its task of maintaining a balance in the fiscal position of the States.     

Asymmetric Effects of Intergovernmental Grants: Analysis and Implications for U.S. Welfare Policy

Theories of federal grants to states and localities suggestthat these grants have a stimulative effect on spending, causingrecipient governments to expand and contract programs alongwith changes in the grants. However, policymakers may responddifferently to grant decreases than to grant increases becausethey face political and bureaucratic pressures to expand programs.These asymmetric reactions may depend on specific politicalstructures. Pooled time-series regressions of data from theAid to Families with Dependent Children program across 46 statesfrom 1965 to 1994 demonstrate state government responses togrant changes. Bureaucratic pressures and proposals lead statesto expand their welfare benefits upon increases in federal grants,but not to contract them upon decreases in federal grants. Withregard to the 1996 welfare reforms, this study indicates thatthe switch to block grants will lead to little or no state reductionin welfare payments.     

State Fiscal Responses to Welfare Reform during Recessions: Lessons for the Future

The 1996 welfare reform transformed open-ended matching grants to states to fixed block grants. This article considers whether, given the new regime, states will be able and willing to meet the need for public assistance during recessions. The accumulation of large balances of unspent federal welfare funds helped states weather the first year or so of the current recession without having to cut programs for needy families. While new fiscal rules promoted positive reform during a period of economic prosperity, they may be leaving states and their most vulnerable citizens at serious risk as the economic and fiscal slowdown continues.     

The Alaska Permanent Fund: Politics and Trust

Trust funds are a particular way of governing resource flows. Governments use trust funds to bind policy decisions of future actors and remove resource flows from budget competition. The state of Alaska removed a portion of its oil revenues from political competition through the creation of the Alaska Permanent Fund. A unique feature of the Fund is that it pays annual dividends to Alaskan citizens, thus creating a citizen stake in the management of the Fund. Through this framework Alaskans have successfully protected a significant stream of revenue ($21 billion) from political demands.     

Political Economy of Grant Allocations: The Case of Federal Highway Demonstration Grants

This article examines the political economy of U.S. federalhighway demonstration grant allocations. Demonstration grantsare a rapidly growing segment of federal highway grants directlyearmarked for a congressional district by Congress, unlike themajority of highway grants where Congress determines a formulaand allocates funds accordingly to states. Our empirical analysis,considering the period 1983–2003, suggests that a state'sability to attract demonstration project grants is positivelyinfluenced by its contributions to the highway trust fund andpolitical variables, and it is not affected by the formula highwayaid and vehicle miles traveled in a state.     

Legal Constraints and the Choice of Educational Grant Structures

Recent empirical work suggests that legalconstraints are significant in choosingstate educational grant structures. Unfortunately, the literature has not takensuch constraints into account, thus callinginto question particular grant structurerecommendations. This paper studies theconditions under which a legislature, underorder to reform its educational grantstructure, prefers foundation grants overdistrict power equalization grants. Atheoretical model is presented in which thechoice is shown to depend on the legalbasis of the court's decision, and theempirical validity of this conclusion isdemonstrated using Connecticut data and aseparate model of school districtexpenditure choice.     

Incremental Thinking: "Report of the Commission on Intergovernmental Relations, (June 1955)"

Editor's Note : The budget reductions pushed through Congress by President Reagan have spurred interest in one of the oldest issues in American politics—the proper relationship among the various levels of government in the United States. One of the most important studies of this issue was issued by the Kestnbaum Commission on Intergovernmental Relations in 1955. The Commission attempted to devise a set of rules for determining which level of government should be responsible for particular activities. When the Commission issued its report, federal grants accounted for less than five percent of the national budget. During the next 25 years, they escalated to more than 17 percent of total outlays. But as a result of recent budget cuts, they are expected to be only about 13 percent in the mid 1980s. Clearly, states and localities will operate in a different fiscal and programmatic environment in the next decade than they did in the preceding two. This excerpt from the report of the Commission continues to be a relevant, though not universally accepted, statement of the principles that should govern intergovernmental finances.     

Federal Reimbursement for Mandates on State and Local Governments

One of the remedies sought by state and local officials for the growing burden of federal mandates is a mandate reimbursement law. A major purpose of mandate reimbursement is to deter Congress from imposing excessive costs on state and local governments by making it fully accountable for its actions. The paper begins by extending the economic theory of grants to mandates and reimbursed mandates. It goes on to assess the benefits and costs of mandate reimbursement, and to distinguish mandates that should be reimbursed, should a reimbursement program prove desirable, from those that should not. Then, using the economic theory of grants and mandates, the paper compares reimbursed mandates with two alternatives for accomplishing the same objective, compensating grants and procedural rules. It concludes that the latter are more promising than mandate reimbursement.     

The political determination of intergovernmental grants in Australia

Intergovernmental grants have been conventionally explained on the basis of either equity/efficiency and/or institutional considerations. This paper seeks to model Australian intergovernmental grants by including both traditional public finance variables and public choice influences; that is, grants are used by federal government politicians to purchase political capital, thereby enhancing their own chances of reelection. The models employed in this paper are tested for six Australian states for the period 1981–82 to 1991–92 using unsystematic grant transfers. The results provide support for these public choice considerations, and highlight the importance of incorporating institutional factors and controlling for misspecification in the error structure in estimates of this type.     

Do intergovernmental grants create ratchets in state and local taxes?

A large literature on the ‘flypaper effect’ examines how federal grants to states at time period t affect state spending (or taxes) at time period t. We explore the fundamentally different question of how federal grants at time period t affect state tax policy in the future. Federal grants often result in states creating new programs and hiring new employees, and when the federal funding is discontinued, these new state programs must either be discontinued or financed through increases in state own source taxes. Government programs tend to be difficult to cut, as goes Milton Friedman’s famous quote about nothing being as permanent as a temporary government program, suggesting that it is likely that temporary federal grants create permanent (future) ratchets in state taxes. Far from being purely an academic question, this argument is why South Carolina’s Governor Mark Sanford attempted to turn down federal stimulus monies for his state. We examine both the impact of federal grants on future state budgets and how federal and state grants affect future local government budgets. Our findings confirm that grants indeed result in future state and local tax increases of roughly 40 cents for every dollar in grant money received in prior years.     

Grant Levels and Debt Issuance: Is There a Relationship? Is There Symmetry?

Although previous work on fiscal federalism and grants has focused on the effects of grants on expenditures, no published research examines the impact of decreasing grants on state financing. This research addresses how decreasing levels of federal grant money to states affect states' long-term debt issuance, and whether the relationship is symmetric for increasing and decreasing grants. The model is tested with time series, cross-sectional data from 1984 to 1999. The results show that grants affect debt issuance, the effect is asymmetric, and direction of the effect differs for different types of debt issuance.     

Recalibrating Policy Orthodoxy: The IMF Since the Great Recession

This special issue reviews patterns of policy stability and change at the International Monetary Fund (IMF) since the Great Recession and attempts to explain their causes. The contributors show that the crisis ignited a reassessment regarding how the IMF would position itself as a pivotal player in global economic governance. Some new ideas and evidence definitely found their way into IMF decision making, but this process was often tempered by the nature of the institution and the powerful interests that control its governing structure. Where change did occur, its causal generators could be found in some combination between IMF staff politics, a string of innovations coming from academic and IMF economists, and the emerging economic powers' creative leveraging of institutional fora both within and inside the Fund.     

Voters AS A Hard Budget Constraint: On the Determination of Intergovernmental Grants

Recent empirical literature has shown that the determination of intergovernmental grants is highly influenced by the political bargaining power of the recipient states. In these models federal politicians are assumed to buy the support of state voters, state politicians and state interest groups by providing grants. In this paper we provide evidence that the fiscal referendum reduces the reliance of states on matching grants received from the central government and thus the possibility of interest groups and state bureaucrats to obtain more grants. If referendums are available, voters serve as a hard budget constraint.     

Quality of care assessment: policy relevant issues

This paper reviews the quality assessment literature, presents a study which compares five different methods of assessing quality of care, and proposes policy recommendations. Results are: (1) Most quality assessment issues are a century old. (2) The results of assessment of quality of care are dependent on the method used; therefore, more methodologic research is needed. (3) The use of lists of criteria, concerning what a physician does, to assess quality of care could result in decreased efficiency in the health system by requiring the performance of ineffective procedures. (4) It is not certain that examination of the level of care rendered will increase the health level of the population; therefore, any national program which assesses quality of care must be prospectively evaluated. (5) A quality assessment system must be concerned with both the population who received services at the institution, and the population who did not but for whom the institution is responsible.From the Carnegie-Commonwealth Clinical Scholar Program of the Johns Hopkins University.Supported in part by grants 5R01HS00110 and 5T01HS00112 from the National Center for Health Services Research and Development and by the Carnegie Corporation and Commonwealth Fund. Dr. Brook was a Carnegie-Commonwealth Clinical Scholar and is now a Commissioned Officer in the U.S. Public Health Service stationed at the National Center for Health Services Research and Development. This paper does not represent the official position of this agency.     

Money for our people? Decentralisation and corruption in Romania: the cases of the equalisation,infrastructure and pre‐university education funds

In spite of the attempts, in the most recent years, to introduce simple, accountable and rule‐based mechanisms governing the flows of funds for Romanian local governments (LGs) there is evidence showing that deviations from the norms are still widespread and undermine the stated goals of many policies. This article aims to explore to what extent the political factor (party affiliation, i.e. local informal power networks) interferes with the allocation of public funds as far as three main areas of decentralised policy are concerned: (i) the general purpose equalisation transfers; (ii) the Roads Fund grants and (iii) the transfers for financing the pre‐university education. These components represent a relatively large share of the local budgets and are illustrative for two important attributions Romanian LGs perform today: maintaining the local infrastructure and providing essential social services. Through a set of variables—measuring, on the one hand, the real pattern of resource allocation and on the other hand, the intensity of politicisation in the three areas—we tested the hypothesis that intergovernmental financial flows in Romania are to a large extent captured by rent‐seeking groups. It turns out that this is indeed the case with the funds for infrastructure, and much less so with the transfers financing pre‐university education. Some conclusions from these contrasting situations are drawn which reflect on the broader discussion, the link between decentralisation and corruption. Copyright © 2005 John Wiley & Sons, Ltd.     

Real and perceived effects of changing the grant system from specific to general grants

The paper is based on a study of the 1993 Finnish grant reform, changing from a system with earmarked matching grants to a system with general, non-matching grants. The analysis of cross-sectional data confirms the “fly-paper effect” and also that matching grants have a stronger stimulating effect than non-matching grants on local expenditure. The fly-paper effect is then modified to take account of the distribution of power inside local government. The change to general grants without central government supervision might mean more power to the central management in the local government and a diminished power for sector officers and groups dependent on the sector services. Perceptions of principal actors in the local government budget process were that the reform changed the distribution of power, in some municipalities to the disadvantage of locally small weak groups that could benefit under the old system of earmarked matching grants.     

An Implicit Contract Theory of Intergovernmental Grants

A central puzzle in the economic analysis of intergovernmentalgrants in a federal polity is the conflict between the predictionsof the standard theory and empirical observation. Standard theoryhas no explanation for the widely observed fact that "moneysticks where it hits," that is, for the "flypaper effect" fromspecific, non-matching grants. This effect is observed whengrants that apparently are the economic equivalents of generalrevenue grants have the consequences to be expected from matchingspecific grants. We propose a resolution. Most grants are accompaniedby an implicit as well as an explicit contract between grantorand recipient. The purpose of these contracts is to influencethe behavior of the recipient, by making the size of the streamof grants conditional upon the recipient's responses to thewishes of the donor.