Posts Tagged ‘Taking Stock of the Safety Net Series’

Taking Stock of the Safety Net, Part 6: It Works, But It Doesn’t Do Enough

December 21, 2011 at 5:35 pm

As we’ve shown in our blog series over the past week, millions more Americans would face poverty and severe hardship without programs like TANF, housing assistance, SNAP (food stamps), and unemployment insurance — as well as other programs that this series didn’t focus on, such as Social Security and the Earned Income Tax Credit.

Still, the tax code and government transfer programs do less than they could or should to reduce poverty.

U.S. Poverty Rate Is High After Taxes and Transfers Compared to Similarly Wealthy Countries

Other similarly wealthy countries have far lower rates of poverty after factoring in the impact of safety net programs even though, on average, they have similar rates of poverty before counting these programs (see chart).  That’s true largely because nearly all of these other countries do more: their programs are more generous, easier to access, and broader in scope than those in the U.S.

Let’s remember:  people need these programs because they either receive inadequate wages or cannot work.  For many working Americans, a job alone is inadequate to lift a family out of poverty.  Economic Policy Institute data show that in 2007 (the most recent year available), over 25 percent of all workers received wages that were inadequate to keep a family of four out of poverty.

These programs also help support many people who cannot work, including children, the elderly, and people with significant disabilities, as well as able-bodied adults who cannot secure adequate employment because jobs are scarce.

The safety net also helps push back against growing inequality, though not as effectively as it once did.

And research shows that keeping young children out of poverty helps them succeed in school and earn more as adults.

As policymakers consider proposals to address medium- and long-term deficits, they should keep these facts in mind and avoid cuts that would worsen the nation’s already high rates of poverty and inequality.  To further reduce poverty and inequality, we’ll eventually need to spend more in a fiscally responsible way.  We’ll also need to make our tax system more progressive — and do so in a way that raises more revenues to meet the nation’s pressing needs and promotes more broadly shared prosperity.

Taking Stock of the Safety Net, Part 5: Helping Families Stay Afloat During Unemployment Spells

December 20, 2011 at 5:15 pm

Unemployment Insurance (UI) replaces up to half of the income that workers lose when they become unemployed through no fault of their own.  That lessens the financial strain on their families while these workers look for new jobs.  In a weak economy like the current one, UI also helps sustain consumer demand, keeping a downturn from being worse and providing a boost for a recovery.

As in previous recessions, policymakers responded to the deep recession that began in December 2007 by giving additional weeks of federally funded UI benefits to workers who run out of regular, state-funded UI benefits before they can find a job.

The number of people receiving UI benefits in a given week quadrupled from about 3 million at the start of the recession to a peak of 12 million in early 2010, according to Labor Department data.  Although that number has since dropped below 7 million, jobs remain hard to find and the long-term unemployment rate is unprecedentedly high (see chart).  Two-fifths of the unemployed have been looking for work for more than 26 weeks, the most weeks that state UI programs typically provide.

Long-Term Unemployment Rate Is Unprecendented

UI has done its job well thus far, such as by keeping 4.6 million people out of poverty in 2010 — 3.2 million of them as a result of the federal emergency UI benefits.  But the prolonged economic slump has placed considerable strain on the UI system:

  • Federal benefits in danger.  Congress has never let emergency federal UI expire when the unemployment rate has been as high as it is now, yet the fate of federal UI benefits in 2012 remains in legislative limbo.  If Congress doesn’t act before the end of this year, almost 2 million workers face a loss of benefits in January.
  • State benefit reductions.  Arkansas, Missouri, and South Carolina reduced the maximum number of weeks of UI benefits in 2011, and three more states — Florida, Illinois, and Michigan — will reduce benefits in January 2012.
  • “Reform” proposals that weaken the system. UI has always been a social insurance program that helps workers who have lost their job through no fault of their own.  Proposals like those in the recent House UI bill, which would require drug tests for UI recipients, deny benefits to all workers who lack a high school diploma or GED certificate and are not enrolled in classes to get one, and allow states to use UI funds for purposes other than paying benefits, would alter the very nature of the program and make it harder to qualify for benefits.  They also would make the system more costly to administer.
  • Unaddressed solvency issues. A number of states’ UI trust funds were inadequately prepared for the recession because states had kept the employer tax that pays for UI benefits artificially low.   Most states have borrowed from the federal government in the past few years to help pay benefits, and that debt is creating significant pressure in state legislatures to cut UI benefits.

    Moreover, without reform, most state UI trust funds likely will face the next recession either still in debt from the current downturn or so weak that they will quickly be back in debt.  A bill introduced in the Senate earlier this year, building on a proposal by President Obama, would give states a framework to restore the health of their trust funds.  Unfortunately, Congress hasn’t acted on it — or any other proposal to improve UI financing for the future.

Taking Stock of the Safety Net, Part 4: Helping Families Afford an Adequate Diet

December 19, 2011 at 3:51 pm

As other posts in this series have shown, 2011 was another tough year for low- and moderate -income families.  One indicator is that over 2 million new people joined the Supplemental Nutrition Assistance Program — SNAP, formerly known as food stamps — between January and September (the latest month available).

SNAP now helps 46 million low-income Americans afford a nutritionally adequate diet, and it has been one of our most effective weapons against rising hardship and unemployment in the recession.  Indeed, the 46 million low-income Americans who now receive SNAP benefits include 19 million people who have come on the rolls since the recession started.  SNAP lifted 5 million people, including 2 million children, out of poverty in 2010, under the Census Bureau’s new Supplemental Poverty Measure, which counts the value of families’ SNAP benefits as income.

Every SNAP dollar that a low-income family receives to buy food increases the resources the family has available for food or other necessities, such as shelter.  (Low-income people generally need to spend, rather than save, nearly all of their income to meet daily needs like food and shelter.)  That, in turn, helps the broader economy because the added spending helps maintain jobs and boost other families’ incomes.  Economists estimate that a $1 increase in SNAP benefits when the economy is weak generates $1.72 to $1.79 in economic activity.

SNAP is due for renewal as a part of next year’s Farm Bill.  While the program is one of the safety net’s strongest, it can get even stronger.  In assessing the program, policymakers should (among other things):

  • Do no harm. A number of policymakers, most notably House Budget Committee Chairman Paul Ryan, claim that SNAP is growing out of control and must be cut.  This claim is false.  As we have explained, SNAP has done exactly what it is supposed to do:  respond to growing need during a severe economic downturn.  Congressional Budget Office figures show that, as the economy recovers, SNAP spending will fall nearly to pre-recession levels as a share of the economy.
  • Examine whether benefit levels are adequate. SNAP benefits are based on the Agriculture Department’s (USDA) estimate of the cost of a bare-bones monthly grocery bill, the “Thrifty Food Plan.”  Observers have long held that the plan underestimates poor families’ actual food costs and, as a result, that SNAP benefits are too low.  USDA is examining how the temporary boost in SNAP benefits enacted in 2009 has affected program participants; this research should help to inform a debate about how best to improve benefit levels permanently.
  • Reevaluate SNAP’s harsh treatment of childless adults. SNAP requires most unemployed childless adults to participate in at least 20 hours per week in a limited set of work activities or else lose SNAP benefits after just three months.  States, however, are not required to provide these individuals with a qualifying work slot.  As a result, the work requirement is a de facto time-limit on food assistance for unemployed people.

    Congress wisely suspended this requirement during the recession, and states have the flexibility to waive it for areas of high unemployment.  Soon, however, this harsh rule will return in large parts of the country.  Congress should reevaluate it and ensure that poor unemployed workers who are willing to work can obtain needed food assistance.

  • SNAP Error Rates Declining

  • Examine ways to further reduce errors and fraud. SNAP error rates have fallen steadily in recent years and are now at all-time lows.  Only 3 percent of all SNAP benefits represent overpayments, meaning they either went to ineligible households or went to eligible households but in excessive amounts (see graph).  USDA has also cut “trafficking” — the sale of SNAP benefits for cash, which violates federal law — by three-quarters over the past 15 years.  Still, policymakers should look for ways to make further improvements, such as new investments in technology and business practices that can reduce waste without compromising eligible people’s access to benefits. 

Taking Stock of the Safety Net, Part 3: Helping Families Afford Decent Housing

December 16, 2011 at 3:39 pm

No one wants to spend the holidays without a safe place to call home.  Yet a growing number of families with children are homeless; a recent report estimated that one in 45 children in the United States was homeless during 2010.

Also, 7.1 million households — with 16.6 million people — paid more than half of their incomes for rent or lived in severely substandard housing in 2009, a jump of more than 20 percent since 2007.  (The Department of Housing and Urban Development [HUD] considers housing unaffordable if it consumes more than 30 percent of a household’s income.)

These problems would be much worse without federal rental assistance, which enables nearly 5 million low-income households to rent modest housing at an affordable cost, typically 30 percent of household income.  (Click here for state-by-state information.)  More than half of these households are headed by people who are elderly or have disabilities; roughly one-third are families with children.

While their primary purpose is to help families obtain decent-quality, affordable housing and thereby avert homelessness, federal rental assistance programs also lifted about 3 million families out of poverty in 2010.  And recent research shows that families that had the opportunity to use a housing voucher to move to a less-poor neighborhood are less likely to suffer from extreme obesity and diabetes — a benefit with potentially important savings in health costs, as well as improved quality of life.

Unfortunately, only one in four households that qualify for housing assistance receives it, due to limited funding.  And the number of families receiving federally funded rental assistance has remained static over the past decade, despite growing need (see graph).

HUD Rental Assistance Has Remained Flat Despite Increase in Need

Worse, major programs that have proven effective at helping families find stable housing will serve fewer families next year, again because of limited funding.

  • The $1.5 billion for homelessness prevention that Congress provided in the 2009 Recovery Act likely averted an even sharper increase in family homelessness in 2010, yet most local housing agencies will exhaust these funds well before the end of next year.
  • HUD’s final fiscal year 2012 budget cuts total program funding by $3.7 billion (9 percent) below the 2011 level.  Public housing and programs that promote the production of affordable housing will face the largest cuts.  But even the programs that fared relatively well in the budget — such as the Housing Choice Voucher program, which helps more than 2 million low-income families — will likely serve fewer families next year due to inadequate funding.

Also, the increasingly severe caps on most “discretionary” spending due to take effect starting in 2013 under the Budget Control Act will make it difficult to prevent further severe cuts in housing assistance.

Taking Stock of the Safety Net, Part 2: Meeting Families’ Basic Needs Through TANF

December 15, 2011 at 2:17 pm

About 3.5 million children and 1.1 million parents receive cash assistance each month from the Temporary Assistance for Needy Families (TANF) program to help cover their basic needs.

Families turn to TANF at times of major economic or personal distress, usually when they have lost a job or are facing a crisis such as fleeing an abusive situation or caring for a sick child.  Many also face serious personal and family challenges, such as mental or physical health problems.  In spite of the barriers they face, nearly all adult recipients must look for work and participate in approved work activities for 20 to 30 hours per week in order to receive benefits.  Most recipients receive assistance for two years or less.

Congress created TANF as part of the 1996 welfare reform law to serve two different functions:  (1) help parents find and maintain employment and (2) provide a safety net for families when they cannot work.  Unfortunately, flaws in TANF’s design have limited its success on both fronts, and the economic downturn has exposed its serious weaknesses.  In fact, TANF has grown weaker at the very time that the need for it has increased.

Number of Families Receiving AFDC/TANF Benefits for Every 100 Families in Poverty

  • In 1996, TANF helped 68 families for every 100 families in poverty; in 2009, it helped just 27 families for every 100 families in poverty (see graph).
  • In 1995, TANF’s predecessor, Aid to Families with Dependent Children (AFDC), lifted 2.2 million children out of “deep poverty” — that is, it lifted their family’s income above 50 percent of the poverty line.  In 2005 (the last year for which these data are available), TANF lifted just 650,000 children out of deep poverty.   Half of the poverty line in 2011 is $9,265 for a family of three.
  • TANF benefit levels are so low that they do not, in any state, raise a family’s income above 50 percent of the poverty line.  In most states, TANF benefits are worth at least 20 percent less than when TANF was created, after adjusting for inflation.  In 2011, six states — the highest number ever in one year — cut their already low TANF benefits.

TANF is up for renewal in 2012.   Congress should use this opportunity to make improvements like:

  • Strengthening access to the program. A big reason why so many families who need TANF don’t receive it is that many states have made it unnecessarily difficult to apply for (and remain on) it because federal TANF rules essentially reward states for reducing their caseloads.  Families who need temporary cash assistance to meet their basic needs should not be left out in the cold.
  • Redefining how TANF measures state performance. States receiving TANF funds must have a certain percentage of their TANF caseload participating in work activities.  The easiest way for states to meet this requirement is to avoid serving families with the biggest employment barriers, even though they are the very families that most need the help.  Instead, the federal government should measure state programs according to how well they help people gain a foothold and advance in the work force.
  • Giving states funds to create subsidized employment programs. The TANF Emergency Fund, for example, enabled states to provide subsidized jobs in the private, public, and non-profit sectors for nearly 250,000 otherwise unemployed parents and youth, but it expired last September.  When unemployment is high and jobs are scarce, states need additional options to help maintain TANF’s focus on work.

Taking Stock of the Safety Net, Part 1: Overview

December 14, 2011 at 5:16 pm

We will issue a series of posts in the coming days that will look back at some of the major programs that helped struggling families during the year — their goals, impact, and issues facing policymakers in 2012.  Today, we’ll begin by setting the context.

For America’s low- and moderate-income families, 2011 was another very bad year, as the Great Recession of 2007-2009 continued to have a large and lingering impact.  Unemployment and long-term unemployment remained very high, as did the percentage Americans without health insurance.

Yet things aren’t nearly as bad as they could have been.  The safety net is helping to hold the line against poverty and hardship, as the latest available figures in several areas show.

  • Without government assistance programs, the poverty rate would have been nearly twice as high in 2010:  an estimated 28.6 percent, compared with the actual figure of 15.5 percent, based on a measure of poverty that includes the impact of programs like food stamps and housing assistance and tax credits (including the Earned Income Tax Credit).   If the safety net hadn’t existed, another 40 million people would have been poor.
  • Just one part of the safety net — six temporary federal initiatives enacted in 2009 and 2010 to bolster the economy by lifting consumers’ incomes and purchases — kept an estimated 7 million people out of poverty in 2010.
  • The number of young adults with private health coverage has risen by roughly 2.5 million since an Affordable Care Act provision took effect last year requiring insurance companies to allow young adults to stay on their parents’ insurance plans through age 26.
  • Up to 2 million more people are employed in the fourth quarter of 2011 because of the 2009 Recovery Act, according to the Congressional Budget Office.  The law’s impact on employment peaked in the third quarter of 2010, when as many as 3.6 million people owed their jobs to the Recovery Act; large parts of that Act have since expired.

These silver linings come with a big cloud, however.  The temporary initiatives either have expired or are set to expire, and the Budget Control Act enacted in August calls for roughly $2 trillion in spending reductions; some in Congress want to cut even deeper.

All major deficit-reduction agreements of the past 25 years have reflected the principle that deficit reduction should not increase poverty or inequality.  Upholding that bipartisan principle should be a top New Year’s resolution for policymakers in 2012.

The next post in this series will look at Temporary Assistance for Needy Families (TANF).