The Safety Net Caught a Lot of People in the Downturn

June 24th, 2013 at 6:41 pm

As I note over at the NYT’s Economix blog:

Let’s get this straight: the poor and their advocates were not the ones who tanked the economy.  Nor should they be on the defensive when the safety net expands to offset some of the damage.  The right question at such times is thus not why the SNAP rolls are so high.  It’s whether SNAP, unemployment insurance, T.A.N.F. et al are expanding adequately to meet the needs of the poor.

A few additional deets:

–For figure 2, I used a National Academy of the Science (NAS) recommended alternative measure, as noted.    But one could also use the Census Bureau’s very cool table maker to make the following figure, comparing the share of poor persons under market income and post-tax, post-transfer income (i.e., you can if you’re my colleague AS–h/t).  It a somewhat different exercise, because the NAS measure uses a different poverty threshold than the official one and assigns a value to publicly provided health coverage.

But the results are qualitatively the same.  Market income poverty goes up about four percentage points; post-tax/transfer poverty goes up about one point.  As I stress in the piece, the safety net helped to offset some of the income losses of the great recession.

pov_AS

Source: Census Bureau

–This post from a while back provides some interesting details around this theme.  The data only went through 2009, but they broke out how lower taxes and higher transfers more than offset the real income losses for the poorest fifth of households and offset 5/6’s of the losses for the middle fifth (that’s mostly UI benefits, btw).

–A key point of this piece I wrote for the American Prospect is that one of the problems we face now is that although the safety net was effective, a) it’s under attack, and b) once it fades, too many households face structural, as opposed to cyclical, barriers to getting ahead.

Progressives did well, at least during President Barack Obama’s first two years, at expanding the safety net during a serious economic emergency, using taxes and income transfers. But they have not done well in addressing the long-term trend of an erosion of “primary” income, namely wages and salaries. This leads to a paradox: A lot of people get help in a deep recession, but their incomes and life prospects stagnate during relatively good times. Looking forward, both the safety net and measures that might improve the primary income distribution will be under increasing attack from pressures to cut the budget deficit. In fact, there are plenty of strategies that could help reconnect families and children to restored economic growth, but policy is pushing in the opposite direction.

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6 comments in reply to "The Safety Net Caught a Lot of People in the Downturn"

  1. M Warner says:

    Is it just me, or are the labels flipped on the graph lines (Market Inc -> red; Post tax, trans -> blue)?


  2. purple says:

    Has any OECD country been able to substantially increase wages since the opening of China and this round of globalization ? I don’t think so, which should give a lot of people pause.

    There have been many different tactics, and all have failed.


  3. RationalAdult says:

    “Let’s get this straight: the poor and their advocates were not the ones who tanked the economy. Nor should they be on the defensive when the safety net expands to offset some of the damage. The right question at such times is thus not why the SNAP rolls are so high. It’s whether SNAP, unemployment insurance, T.A.N.F. et al are expanding adequately to meet the needs of the poor.”

    Anyone who blames the poor is either naive, foolish, or evil.

    //so it goes


  4. Kevin Rica says:

    Jared,

    Can you show us a table showing us the same thing for working households in poverty as a percentage of all working households (households having at least one full-time workers for most of the year)?

    Is there data for that?


  5. Pasquino says:

    There’s a market effect where low earners with less of a financial cushion jettison investments at the low point of the markets and, if they ever get back in, do so when stocks have recovered. I call it the bounce effect, recalling an investment banker interviewed during an earlier recession who said there were people who didn’t belong in the markets and the downturn was a good way of removing them.

    Might as well say there are poor people who just shouldn’t vote or participate in other ways. But Wall Street actively lures these folks in, chiefly by lobbying to replace defined retirement benefits with investment packages like 401Ks, which (and nobody seems to mention this) effectively hold retirees’ financial interests hostage in political terms, getting retirees who were working people all their lives, union members, to think and vote like shareholders once they retire. It’s hard to believe these powerful forms of leverage aren’t known and used aggressively by the moneyed classes.


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