Repairing the Safety Net

Mitt Romney said last week that if the safety net “needs a repair, I’ll fix it.”  It does need some repair, as our recent blog series explained.  That is, the safety net works but still has some serious gaps.

The positive news is that the safety net, bolstered by temporary expansions enacted during the recession, has helped hold the line against poverty and hardship in the past few years.  Without safety-net programs, the poverty rate would have been 28.6 percent in 2010, nearly twice its actual 15.5 percent rate (using a measure of poverty that includes the impact of tax credits and safety-net programs like food stamps that provide non-cash benefits).

Moreover, under broader measures of poverty, the poverty rate rose only modestly between 2007 and 2010 despite the tremendous increase in unemployment.  This outcome reflects the strength of the safety net, as bolstered by temporary measures enacted in the Recovery Act that Census data show kept 7 million Americans out of poverty in 2010.

But the safety net also has significant holes.  For example:

  • Medicaid coverage for poor parents has large gaps. Most low-income children are eligible for either Medicaid or the Children’s Health Insurance Program.  But for adults, the story is very different.

    In the typical (or median) state, working parents are not eligible for Medicaid if their incomes exceed just 63 percent of the poverty line ($12,027 for a family of three), as a new Kaiser Foundation report shows.  Non-working parents, such as those who have been laid off, are ineligible for Medicaid if their incomes exceed 37 percent of the poverty line (or $7,063 for a family of three).  And, in most states, non-disabled adults under age 65 who are not raising minor children are not eligible for Medicaid at all.

    As a result, very large numbers of poor individuals — including many of the working poor — are uninsured.

    The Affordable Care Act will fill this coverage hole by expanding Medicaid to cover non-elderly adults with incomes up to 133 percent of the poverty line.  A number of presidential candidates and other political figures, including Governor Romney, have pledged to repeal the law, however, which would leave this hole in place unless a repeal measure is accompanied with strong alternative ways to expand coverage for these low-income individuals.

  • Temporary Assistance for Needy Families (TANF) has weakened at the very time that the need for it has increased. Congress created TANF in the 1996 welfare reform law both to help parents find and maintain employment and to provide a safety net for families when they cannot work.  Unfortunately, flaws in TANF’s design have significantly limited its success on both fronts.

    TANF policies that emphasize employment — combined with other policy changes, such as expansions of the Earned Income Tax Credit — moved more people into the labor market, particularly during the booming economy of the late 1990s.  But the current downturn has exposed serious shortcomings in TANF.

    TANF benefits have eroded over time and now are below 50 percent of the poverty line in all states — and below 30 percent of the poverty line in most states.  In addition, the share of needy families who receive any benefits has fallen sharply.  In 1996, TANF cash assistance reached 68 families with children for every 100 such families in poverty; in 2009, it helped just 27 families for every 100 in poverty.

    Largely because of these trends, Census data show that the safety net now does much less than it used to to lift children out of deep poverty — that is, to lift them above half of the poverty line.

    A big reason for TANF’s sharp decline is that it is a block grant, so federal funding stays flat even when need rises during recessions.   This is noteworthy because both the Ryan budget that the House adopted last year and proposals put forth by various presidential candidates (including Romney, Newt Gingrich, and Rick Santorum) would use TANF as a model for sweeping changes to programs such as Medicaid and SNAP and convert both programs to block grants.

  • Supplemental Security Income (SSI) provides vital cash assistance to the nation’s poorest elderly and disabled people but leaves many of them well below the poverty line. SSI provides monthly cash assistance to people who are disabled, blind, or elderly and have little or no income and few assets, but its benefit levels are very low.  SSI benefits bring a single elderly or disabled individual to $8,376 a year — 75 percent of the poverty line.  (It brings couples to 83 percent of the poverty line.)  As a result, many SSI recipients have difficulty meeting basic needs.
  • Federal rental assistance enables millions of low-income households to rent modest housing at an affordable cost, but the need far outstrips available funding. Only one in four low-income households that qualify for housing assistance receives it, due to limited funding.  The number of families receiving federally funded rental assistance has remained static in recent years in the face of growing need.

These shortcomings deserve policymakers’ attention.  We need a strong safety net both because not everyone can work (due to age, illness, and other factors) and because there often are not enough jobs for all who want them — such as now, when there are four job-seekers for every available job.

A well-functioning safety net also helps the economy by making recessions less severe than they otherwise would be.  It expands to cover more people when unemployment climbs and poverty increases, thereby cushioning the loss of purchasing power and keeping the economy from weakening further and preventing still more job loss.

Note: The Center on Budget and Policy Priorities is a non-partisan organization and takes no position on political candidates.

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More About Robert Greenstein

Robert Greenstein

Greenstein is the founder and President of the Center on Budget and Policy Priorities. You can follow him on Twitter @GreensteinCBPP.

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2 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. 1

    Why does the sole issuer of our currency, the Federal Government/Federal Reserve, need to raise revenue? The reasons are two manage aggregate demand not raise revenue. FACT: The Fed just credits bank accounts by fiat, like it has always done, since 1913, “Thin Air Money.” Taxes don’t pay for anything.

    What constrains the Fed from doing the same for the non-FIRE sector? Nothing, except the subversive, anti-populist attitudes of Republicans and bond holders.

    Boehner/Ryan and Obama/Reid have little effective knowledge of how America’s monetary and fiscal operations work.

    How can any responsible leader continue uttering the canard that America will go broke in the face of the following:

    Axioms=Indisputable Facts:

    #1 The U.S. as an autonomous fiat currency issuer cannot go broke in that currency.

    #2 The Federal Government is not dependent upon taxation or borrowing to spend.

    #3 The Federal Government must issue dollars/currency before it taxes or borrows.

    #4 The Federal Government does not depend upon foreign governments to finance its expenditures.

    #5 We cannot burden our grandchildren with todays debt. Our grandhildren will consume all they produce.

    #6 In all national accounting, imports are savings and exports are costs.

    #7 The Federal Government’s deficit is equal, to the penny, to the private sector’s net financial assets.

    We need to deficit spend until unemployment is reduced to 3-4%.

  2. Sara Dustin #

    Dear Bob,

    Thank you for this most clear, well researched,analyzed and composed analysis of the Presidents budget proposal. It is helpful to me as an advocate for poor parents in N.H., and typical of all of EPI’s work, which I use extensively as an economic writer.
    Sara Dustin

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