Jun 25, 2012 at 7:30 pm
I’ve been pouring over information on safety net programs, getting ready for Congressional testimony on Wed (more on that later). But in perusing this CRS document on the history of federal safety net—basically, poverty-reduction programs—I stumbled on a lot of food stamps for thought (I’ll look for a better link, but this may be a $ product).
Let me be clear from the outset: I’m a firm believer that economies need safety nets. Or, backing up a step, I’m a firm believer that markets fail, and when they do so, the most economically vulnerable take the biggest whacks (actually, more of an “observer” than a believer here—this ain’t religion).
And while I know there are now audiences in America who will literally applaud when someone suggests letting uninsured, sick people fend for themselves (watch it here), and members of Congress who inveigh against safety-net programs as the real source of everything that ails us, the fact is that most Americans agree with me on this one, which is one reason why we’ve always built such protections into the system.
In my testimony—which I’ll post tomorrow—I go through the benefits of these programs not just in terms of poverty reduction, which is significant, but in terms of generational benefits—kids from poor families that receive some of these benefits have better education, employment, and earnings outcomes compared to similarly low-income kids who do not. But for now, I want to make two macro points.
First, for all the popular wisdom that programs to help low-income people are swallowing the economy, the truth is that like so much else that plagues our fiscal future, it’s all about health care spending. The figure shows that as a share of GDP, prior to the Great Recession, non-health care spending was cruising along at around 1.5% for decades. It was Medicaid/CHIP (Medicaid expansion for kids) that did most of the growing.
And looking forward—note the projection period—the growth in safety-net spending as a share of the economy is wholly a health care story.
The Congressional Budget Office (CBO) forecasts that under current law, federal outlays for need-tested programs would continue to increase, even in inflation-adjusted terms, in the upcoming decade. However, that increase is attributable to health care programs. For programs other than health care, total inflation-adjusted spending is projected to decrease over the period FY2011 through FY2022.
This is important, because it tells quite a different tale than an ever-increasing share of lazy-bones on the dole. Turns out here too we’re beset by the problem of health care spending that’s outpacing everything else. There ought to be a law…um…I mean, there ought to be a law that a non-politicized Supreme Court would uphold.
Second macro point: improving the functioning of the safety net to incentivize and reward work is a perfectly legitimate goal, but it doesn’t happen by cutting, slashing, and burning. It’s easy to shove people into the low-wage labor market without a lifeline, and that might reduce your welfare, food stamp, or Medicaid rolls. But it will sharply increase your poverty rolls.
Welfare reform in the 1990s is a good example. The very tight job market made a huge difference—evidence from the past few years shows that absent that, welfare reform functions poorly—but even with many more jobs available, it took a better safety net to help low-income families with kids actually get ahead.
In [the 1990s], total spending on non-health low-income assistance programs increased. However, aid was substantially restructured during the period. For low-income families with children, policies were shifted away from providing a safety net for families without earnings toward a policy to support work among low-income parents…
…aid to working poor families with children was increased during the 1990s. Earnings supplements for working parents through the EITC [a wage subidy for low-icnome workers] were substantially expanded through legislation in 1990, with a major increase in the credit amount enacted in 1993. A child tax credit of $500 per child was established by tax legislation in 1997. The 1996 welfare reform law also substantially expanded funding to help states pay for child care subsidies for working parents.
So, you want my recipe for helping the least advantaged among us? Well, I’m going to give it to you anyway. Full employment, health reform that finds efficiencies where waste prevails today, and enough work supports to make work pay even in the lowest wage jobs.
Sounds easy, right?
OK, back to my DC reality of fiscal cliffs, austerity, and nervousness re Thursday.
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