Off the Charts Blog | Center on Budget and Policy Priorities

House Budget Committee Chairman Paul Ryan says the safety net doesn’t do enough to promote work, but his budget — which gets nearly two-thirds of its $5 trillion in non-defense cuts from low- and moderate-income programs — proposes deep cuts in the very programs that help low-income working families make ends meet, raise their families, and provide better opportunities for their children.

As our new paper explains, the Ryan budget would:

• Allow important improvements in refundable tax credits to expire and potentially layer further cuts on top. Numerous studies have shown that the Earned Income Tax Credit (EITC), by “making work pay,” has raised employment rates, particularly among single mothers, and reduced welfare receipt.  January’s American Taxpayer Relief Act extended important improvements to the EITC and the Child Tax Credit (another tax credit available only to low- and moderate-income working families) through 2017. 

  The Ryan budget lets these improvements expire in 2018.The Ryan budget also requires hundreds of billions of dollars of unspecified cuts in the part of the budget that includes these refundable tax credits.  To meet this target, Congress likely would cut the refundable credits substantially.

• Add millions to the ranks of the uninsured. The Ryan budget repeals health reform’s coverage expansions and adds large cuts in Medicaid (and the Children’s Health Insurance Program) on top, greatly increasing the number of uninsured low- and moderate-income Americans.  Most of those affected would be in working households.

  These proposals would also increase work disincentives for some poor workers.  For example, working-poor parents in the typical state lose Medicaid eligibility when their earnings reach just 61 percent of the poverty line, or $11,900 for a family of three.  Under health reform, a parent who raises her earnings above this level could receive either continued Medicaid coverage (assuming the state takes up health reform’s Medicaid expansion) or subsidies to buy private coverage through an insurance exchange.  Under the Ryan budget, if she raises her income even to just $12,000, she would lose access to coverage in many states.

• Cut SNAP (food stamps) by nearly one-fifth. The Ryan budget converts SNAP to a block grant starting in 2019 and cuts funding dramatically.  If states absorbed the cut solely by restricting eligibility, they would need to drop 12 million to 13 million people from the program.  If they absorbed the cut solely by shrinking benefits, the reduction would be more than $50 per person per month in 2019.  That benefit cut — $1,800 for a family of three over the course of a year — would lower the maximum SNAP benefit to just 73 percent of the Agriculture Department’s estimate of the minimum amount a family needs to afford a bare-bones, nutritionally adequate diet.

  SNAP helps some 6.4 million working households afford food.  Given the depth of the cuts that states would have to make, it is a safe bet that millions of people in low-income working households would lose some or all SNAP benefits.

• Cut grants that help low- and moderate-income students afford college. The Ryan budget freezes the maximum Pell Grant award for ten years, proposes eligibility cuts that would make it harder for low-income students to qualify for the maximum grant, and makes deep cuts in Pell funding (see our paper for details).  These changes would result in many fewer students having access to grants and in smaller grants for those who do — limiting access to college, a key gateway into the middle class, for many low- and moderate-income students.  Once again, most of the students affected would be in working families.

The Washington Post’s in-depth story on how SNAP (the Supplemental Nutrition Assistance Program, formerly food stamps) helps the residents and economy of Woonsocket, Rhode Island highlights many of the same points as our extensive SNAP chart book.  Three facts in particular stand out.

1. Work rates among SNAP households that can work are high. SNAP has become increasingly effective in supporting work among households that can work, like the example of Rebecka and Jourie Ortiz in the Post story.  Among SNAP households with at least one working-age, non-disabled adult, more than half work while receiving SNAP, and more than 80 percent work in the year before or after receiving SNAP.  Work rates are even higher for families with children:  more than 60 percent work while receiving SNAP, and almost 90 percent work in the year before or after receiving it (see chart).
2. SNAP enables households to buy nutritious foods. The purchasing patterns of SNAP households mirror those of other low- and moderate-income households.  SNAP recipients spend over 85 percent of benefits on fruits and vegetables, grains, dairy, meat, and meat alternatives.
3. SNAP provides an economic boost to the community. Retailers in Woonsocket, and in town and cities throughout the nation, rely on the food purchases that households make with their SNAP benefits.  In fact, SNAP provides one of the most effective forms of economic stimulus during an economic downturn.  Economists estimate that in a weak economy, for every dollar that households redeem under SNAP, the gross domestic product grows by about $1.70.  The Congressional Budget Office rated an increase in SNAP benefits as one of the two most cost-effective of all spending and tax options it examined for boosting growth and jobs in a weak economy.

Policymakers should keep these facts in mind when considering the impact of House Budget Committee Chairman Paul Ryan’s proposal to cut SNAP by nearly a fifth over the next decade.

With President Obama and lawmakers of both parties vowing to achieve further deficit reduction, the stakes are high for low- and moderate-income Americans.  Moreover, as we explain in a new paper, if deficit reduction targets programs that provide supports and foster opportunity for low-income families, the adverse effects could be felt for decades — and not just by the low-income families and individuals who receive this assistance.

The economy’s future strength will depend in part on tapping the talents of as many Americans as possible.  If we shortchange investments that expand opportunity, the nation and our economy will be weaker than otherwise.  As recent data and research show, various key federal programs both ameliorate poverty in the short run and have important positive impacts over the long run.

Census data show that, as a group, programs that help families struggling to afford the basics are effective at substantially reducing the number of poor and uninsured Americans.

Overall, public programs lifted 40 million people out of poverty in 2011, including almost 9 million children (see chart).  While Social Security lifted the largest number of people overall out of poverty, the Earned Income Tax Credit (EITC) lifted the largest number of children.  Together, the EITC and Child Tax Credit (CTC) lifted 9.4 million people — including nearly 5 million children — out of poverty in 2011.

In addition, Medicaid provided access to affordable health care to more than 60 million people in 2009; thanks to Medicaid and the Children’s Health Insurance Program (CHIP), children are much less likely to be uninsured than adults.

Some leading researchers in the field have conducted a comprehensive review of the available research and data on how safety net programs affect poverty.  They found that the safety net lowers the poverty rate by about 14 percentage points (even after accounting for any potential negative effects on work incentives, which the research finds to be small).  In other words, one of every seven Americans would be poor without the safety net.  That translates into more than 40 million people.

Policymakers can make some money-saving changes in programs for low- and moderate-income individuals or families without unduly burdening those populations.  But the achievable savings through greater efficiencies in means-tested programs are modest.  In particular, the largest means-tested program — Medicaid — already provides health care coverage at a substantially lower cost per beneficiary than private coverage.

A more balanced approach to deficit reduction that includes adequate new revenues to complement additional spending cuts can further reduce deficits while maintaining the resources to invest in key building blocks of future prosperity, including effective services and supports for poor families and children.

We’ll take a closer look at how the safety net supports work and its positive long-term effects in future posts.

Click here to read the full paper.

A congressional hearing this morning examined the Administration’s policy of giving states waivers to test new ways to help recipients of Temporary Assistance for Needy Families (TANF) move from welfare to work.  Unfortunately, this focus on waivers takes policymakers’ attention away from what really needs to happen:  improvements in the program’s complex and rigid work requirements, which can force states to design their TANF programs in ways that compromise the goal of connecting recipients to work.

In fact, one of the biggest limitations of the work participation rate — the key measure by which the federal government judges states’ TANF programs — is that states don’t need to move TANF recipients into actual paid work to meet the rate.  TANF is likely the only federal or state employment program in which getting participants into paid employment is not a key measure of success.

Many states say that, with more flexibility, they could operate more effective work programs.  As we explain in a new paper, policymakers have several options to give states more flexibility while strengthening the work provisions and making them more effective.

1. Give states the option to be accountable for employment outcomes (i.e., jobs) instead of the work rate. Policymakers could empower the federal Department of Health and Human Services (HHS) to authorize a limited number of demonstration projects that would give states that option.  Such a demonstration project would give states the flexibility to design work requirements that better reflect the needs of their TANF caseload and take account of local labor market needs.
2. Simplify the work requirements and reduce paperwork burdens. States spend lots of time tracking what activities can count toward the work rate and how many weeks or months individuals have already participated — as well as verifying every hour of participation.  They could better spend the time focused on improving employment outcomes.  Simplification efforts could include streamlining countable activities by easing complex limits on when certain activities can count, and allowing participation in more education activities to count.
3. Focus states’ incentives on improving actual employment placements. Currently, a state gets no more recognition for preparing and placing a recipient in employment than for excluding a family from its caseload and giving it no employment help.  States should get credit for successful employment outcomes, not for failing to serve needy families and children.  Possible steps include:  eliminating or limiting the credit that states get for simply reducing their caseloads; providing an employment credit in lieu of the caseload reduction credit; or allowing a state to count people who have left TANF for employment toward the work rate for a period of time.
4. Redesign the work measures to support engagement of all recipients in activities that will prepare them for work. Policymakers could:  allow a wider range of activities, including those addressing serious barriers to employment, to count (separate from the job search/job readiness category, which has severe restrictions); lift certain limits on when particular activities, like vocational education or job search, can count; and allow partial credit for recipients who are engaged in activities for less than the required 20 or 30 hours per week.
5. Require greater investments in work activities. Policymakers should require states to spend a specified share of their TANF resources on activities designed to prepare recipients for work.  In addition, states that do not meet applicable performance measures should be required to invest additional funds in work-related activities.  The current penalty structure withdraws federal funds from state TANF programs, further shrinking state resources to meet families’ employment needs.  Rather than pay a fiscal penalty, a state that fails to meet performance measures should be required to increase the share of its state and federal TANF spending that goes to work-related activities for families receiving assistance.

With both parties seeking more deficit reduction, the safety net remains a potential target for cuts.  The Washington Post’s Glenn Kessler in recent days analyzed a report from Senator Jeff Sessions comparing safety net benefits to middle-class incomes.  We issued our own analysis of the Sessions report today.  Here’s the opening:

Senator Jeff Sessions (R-AL) recently posted to the Senate Budget Committee website a document that implies that programs targeted to low-income people provide lavish benefits that raise the typical poor household’s standard-of-living above that of the typical middle-income household.  The Sessions release, however, is deeply flawed; it substantially overstates the assistance that poor households receive.  Means-tested programs do not raise poor households anywhere close to a typical middle-income household’s standard of living.

The Sessions document derives its numbers by adding up the cost of a large number of programs that are targeted on low- and moderate-income households — or on schools and communities with large numbers of low- and moderate-income students or residents — and dividing the total cost of these programs (all of which it labels “welfare”) by the number of households below the official poverty line.  It claims this shows that we spend the equivalent of $168 per poor household per day — or more than $60,000 per poor household annually.  It then compares this per-household amount to median household income.

This comparison rests, however, on a series of serious manipulations of the data that violate basic analytic standards and are used to produce a potentially inflammatory result.  To produce its claims, the document Senator Sessions posted does the following:

• Counts payments to hospitals, doctors, nursing homes, and other medical providers — including payments for care for sick elderly people at the end of their lives and for people with serious disabilities who are institutionalized — as though these payments are akin to cash income that is going to poor families to live on. . . .

• Counts, as spending on poor people, benefits and services that go to families and individuals who are above the poverty line. . . .

• Counts the value of health coverage for low-income households but not for middle-income households. . . . .

Census data paint a very different picture.  The Census Bureau’s Supplemental Poverty Measure (SPM) — which counts non-cash and tax-based benefits as income, including the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps), refundable tax credits, housing subsidies and the like, but not medical care — shows that:

• In 2011, the typical person in a family whose income was below the poverty line before means-tested benefits are counted remained 12 percent below the poverty line after the means-tested benefits are counted.  Moreover, the Supplemental Poverty Measure shows that even with these benefits, the typical poor person’s standard of living is 57 percent below that of the typical middle-income American.
• The SPM also shows that means-tested benefits lifted 20 million people out of poverty in 2011, but that the typical individual lifted out of poverty had income only 16 percent above the poverty line, far below the income level of the typical middle-class person.

Click here for the full report.