CLASP: State Experiences Show Safety Net Programs Don’t Need Massive Overhaul to Work Better

July 23, 2014 at 5:23 pm

As House Budget Committee Chairman Paul Ryan prepares to unveil his proposal to address poverty, Olivia Golden of the Center for Law and Social Policy (CLASP) today took a closer look at the experiences of six states to debunk common myths about the delivery of safety net programs.

Golden writes:

[S]ome commenters have criticized major anti-poverty programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) as so complex, rigid, difficult to administer, and impossible to package together that they need fundamental change.  These critics’ recommended changes include merging the programs into a block grant, allowing states discretion over major program provisions through waivers, or delegating discretion below the level of states, to local governments or case managers.

These proposals are deeply risky for families. . . . And we just don’t need to take those risks.  New information from the states continues to build the evidence that massive overhaul is simply not necessary to achieve the goal of more streamlined and integrated program administration.

Golden explained that the experiences of the six states involved in the Work Support Strategies (WSS) initiative — a project coordinated by CBPP, CLASP, and the Urban Institute that is designing, testing, and implementing more effective, streamlined, and integrated approaches to delivering key supports for low-income working families — offer lessons for how to improve safety net programs.

She concluded:

Rather than let myths drive suggested remedies to the safety net, let’s build on success and follow the evidence about what changes can really make a difference.  Rather than massive overhauls that would only undercut effective programs, we need to build on what some states are already doing:  delivering health and nutrition assistance, help with child care, and other core work supports smoothly, speedily, and as an integrated package to all eligible families.

Click here to read the full piece.

Fewer Poor Children Under Welfare Law, But More Very Poor Children

July 23, 2014 at 3:02 pm

There are fewer poor children in America but more very poor children since policymakers dramatically shifted low-income assistance from non-working families to working families in the mid-1990s, our new report explains.

We estimate that the share of children in deep poverty — with family income below half of the poverty line — rose from 2.1 percent to 3.0 percent between 1995 and 2005, after correcting for households’ underreporting of safety net benefits in Census surveys (see graph).  The number of children in deep poverty climbed from 1.5 million to 2.2 million.

These findings are consistent with other research, such as a study finding a significant rise in the number of households with children with monthly cash incomes equivalent to less than $2 per person per day — a standard of poverty more associated with developing countries.

The 1996 welfare law replaced Aid to Families with Dependent Children (AFDC), which had chiefly served families with little or no earnings, with Temporary Assistance for Needy Families (TANF), which offers less assistance and includes stricter work requirements and time limits.  At the same time, policymakers expanded assistance for moderate-income working families, such as by strengthening the Earned Income Tax Credit (EITC) and medical and child care programs and creating and later expanding the Child Tax Credit.

Some data sources don’t show a rise in deep poverty for children, but this appears to reflect their omission of a large share of the income from key public benefit programs.  Correcting for this underreporting reduces the deep poverty rate in any given year but reveals the increase in deep poverty over the decade as income from these programs — particularly public assistance (AFDC/TANF) — shrank.

Public assistance kept 2.4 million children out of deep poverty in 1995 but only about 600,000 children in 2005, after correcting for underreporting.

Policymakers need to take account of the significant rise in deep poverty among children as they consider proposals affecting support for poor families, including the poorest families with children.

Today’s Conflicting Court Decisions Won’t Affect Federal Marketplace Subsidies

July 22, 2014 at 3:35 pm

Two federal appellate courts issued rulings today that relate to the health reform law.  In a unanimous decision, a panel of the U.S. Circuit Court of Appeals for the Fourth Circuit upheld a lower court decision finding that individuals are eligible for premium subsidies to purchase health insurance through the federal marketplace, just as they can in state-based marketplaces.

In a 2-1 decision that has received considerably more media attention, the D.C. Circuit Court of Appeals overturned a lower court ruling and ruled that premium subsidies can be used to purchase coverage only through state-run marketplaces, and not through the federal marketplace.

What do these decisions really mean?

  • Premium subsidies for the millions of federal marketplace enrollees will continue to be available, as the Administration confirmed today.
  • The Administration will appeal the D.C. Circuit court decision to the entire D.C. Circuit, where it will likely be reversed, as Washington and Lee University School of Law professor Timothy Jost explained earlier this month.
  • That’s because, as we first noted two years ago, the merits of the legal theory challenging subsidies for federal marketplace enrollees are extraordinarily weak, relying on a distorted, incorrect reading of the Affordable Care Act and ignoring legislative intent and history.

Plug the Inversion Loophole Now

July 22, 2014 at 2:53 pm

The New York Times’ latest “Room for Debate” feature asks how the United States can stop corporations from moving their headquarters overseas — known as corporate “inversions” — to avoid taxes.  In my contribution, I explain that inversions are a high-profile part of the problem that multinationals’ profits aren’t taxed anywhere, because tax rules let companies claim they earned the profits in in zero- or low-tax havens.

I point out that Pfizer — whose inversion plans made recent headlines — could keep billions in profits permanently untaxed by inverting.  Ed Kleinbard, USC law professor and former staff director for Congress’ Joint Committee on Taxation, explains in detail in a new Wall Street Journal piece how companies can lower their tax bills through an inversion.

In the Times, I recommend swift, targeted anti-inversion legislation:

Slashing U.S. corporate taxes won’t solve an inversions problem created by profits that already aren’t taxed. Instead, U.S. policymakers should first swiftly enact targeted anti-inversion legislation to protect the U.S. tax base.

That’s why Senate Finance Committee Chair Ron Wyden should be applauded for his pledge today (during a Senate Finance Committee hearing on inversions and international tax reform) to immediately try to stop U.S. firms from incorporating overseas for tax purposes.  “Let’s work together to immediately cool down the inversion fever … The inversion loophole needs to be plugged now,” Wyden said.

Then, any eventual corporate tax reform could raise revenue by eliminating inefficient business tax breaks for both domestic and foreign profits and reducing opportunities and incentives for corporations to engage in international tax avoidance, and level the playing field between domestic and multinational companies, as we’ve previously explained.

Click here to read the full “Room for Debate” piece.

Why the 1996 Welfare Law Is Not a Model for Other Safety-Net Programs

July 22, 2014 at 2:25 pm

House Budget Committee Chairman Paul Ryan’s upcoming poverty plan will likely showcase the 1996 welfare law, which replaced Aid to Families with Dependent Children (AFDC) with Temporary Assistance for Needy Families (TANF) — a block grant with fixed federal funding but broad state flexibility — as a model for reforming other safety net programs.  A careful examination of the record, however, indicates that the 1996 law’s results were mixed and that if the goal is to reduce poverty, especially among the most disadvantaged families and children, there are serious downsides to embracing the 1996 law as a model.  The record shows:

  1. A booming economy contributed far more than welfare reform to the gains in single mothers’ employment in the 1990s, and many of those gains have since disappeared.  A highly regarded study by University of Chicago economist Jeffrey Grogger found that welfare reform accounted for just 13 percent of the rise in employment among single mothers in the 1990s.  The Earned Income Tax Credit (which policymakers expanded in 1990 and 1993) and the strong economy were bigger factors, accounting for 34 percent and 21 percent of the increase, respectively.While the booming economy helped many families move from welfare to work during the 1990s, the labor market situation is much weaker today.  The share of single mothers without a high school degree with earnings rose from 49 percent to 64 percent between 1995 and 2000 but has since fallen or remained constant almost every year since then.  At 55 percent, it’s now just slightly above its level in 1997, the first full year of welfare reform (see first graph).
     

  2. TANF provides a safety net for very few families and failed to respond to increased need during the Great Recession.  The welfare law’s relatively modest contribution to raising employment among single mothers came at a substantial price.  TANF now serves only 25 of every 100 families with children that live below the poverty line, down from AFDC’s 68 of every 100 such families before the welfare law (see second graph).  The Great Recession provided the ultimate test of whether states could do better than the federal government in providing a safety net for poor families, as the welfare law’s proponents had claimed, and the results are very unsettling.  As the number of unemployed Americans doubled in the downturn’s early years, TANF caseloads rose by just 13 percent nationally; in 22 states, the number of assisted families rose little or not at all.  In the face of rising need, many states scaled back their TANF programs to save money — tightening time limits and cutting already low benefit levels despite the lack of available jobs — leaving the poorest families poorer.  As a result, TANF emerged from the downturn an even weaker safety net.
     

  3. TANF does little to help recipients succeed in today’s labor market.  Chairman Ryan has spoken of the importance of helping people get the skills they need to move out of poverty.  Yet TANF’s extensive restrictions on what are considered acceptable work activities discourage states from providing TANF recipients with opportunities to increase their education and job skills.  Restrictions on participation in vocational education and GED or high school completion programs leave many recipients unable to compete in today’s labor market.  And although most states’ cash assistance caseloads fell substantially in the late 1990s, states generally haven’t used much of the freed-up resources to improve the job prospects of poor parents with barriers to employment.  Only 8 percent of state and federal TANF dollars directly support work activities for cash assistance recipients.  Even when you add in funds that support working families like child care assistance and the refundable part of state earned income tax credits, states spend only one-third of their federal and state TANF dollars to promote and support work.