Ryan Budget Would Make Safety Net Less Effective in Promoting and Supporting Work
Posted by: Sharon Parrott
Posted in: Children’s Health Insurance Program, Congressional Action, Deficits and Projections, Earned Income Tax Credit, Federal Budget, Federal Tax, Food Assistance, Food Stamps, Health Policy, Medicaid, Poverty and Income, Trends
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.