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POLICY INSIGHT
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Greenstein on the Safety Net

| By CBPP
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CBPP

Testifying at today’s House Ways and Means Committee hearing, CBPP President Robert Greenstein explained that the safety net does more to reduce poverty than many people realize.  He also showed that low-income programs outside of health care aren’t contributing to the nation’s long-term fiscal problems and discussed efforts to better coordinate safety net programs.  Here’s an excerpt:

My testimony today makes the following three points.

  1. Safety net programs that assist people with low or moderate incomes can and should be improved.  But they are far more effective than is often understood.

    Data that measure poverty in the way that most analysts across the political spectrum favor —by counting assistance like SNAP (food stamps), the Earned Income Tax Credit (EITC), and rental subsidies rather than ignoring them as though they didn’t exist or had no impact on the resources a low-income family has to live on — show that the safety net cuts poverty roughly in half.  The data also show that, as a result of safety net programs, poverty barely increased in the Great Recession despite the worst economic downturn in decades.  Further, the data show that poverty is substantially lower today than it was a half century ago, largely as a result of safety net programs.

    In addition, recent advances in poverty research have enabled researchers to track children over several decades as they grow into adulthood.  These studies have found striking evidence that providing income-related benefits like SNAP, the EITC, and other income assistance to poor families with children results in increased test scores and educational attainment for poor children — and subsequently in increased employment and earnings in adulthood.  In other words, various programs that help poor families with children meet basic necessities also improve children’s longer-term outcomes.

  2. The cost of the universe of means-tested programs has grown over the past decade.  But this growth has been due overwhelmingly to two factors:  the Great Recession and the ensuing sluggish recovery; and a substantial growth in the cost of health care programs.  The latter reflects the rise in costs throughout the U.S. health care system (including private-sector health care), the aging of the population (since older people have far higher average health care costs than younger people), and the expansion of Medicaid and premium tax credits to cover more of the uninsured.

    Some policymakers, pundits, and others assume that means-tested programs in general are expanding rapidly and exploding in cost.  Budget data from the Congressional Budget Office (CBO) show that this is not the case; a very different picture emerges once one looks at means-tested programs outside health care.  Total federal spending for programs outside health care that are focused on people with low or modest incomes (hereafter referred to as “low-income programs”) peaked at 2.9 percent of gross domestic product (GDP) in 2010 but has declined as a share of GDP since then and continues to do so.  It stood at 2.3 percent of GDP in 2015.  And, of particular note, it is projected to decline to 1.9 percent of GDP in 2020 and 1.7 percent of GDP in 2025 — levels that are significantly below the average for the past 40 years.  From 1975 to 2014, federal spending on low-income programs outside health averaged 2.1 percent of GDP, which was higher than spending on these programs is expected to be in all years after 2017.

    Similarly, if we look at spending on low-income programs as a share of the budget, federal expenditures for low-income programs outside health care averaged 11.2 percent of federal non-interest spending over the four decades from 1975-2014, and climbed to 13 percent of spending in 2010.  But these costs are slated to fall to 10.4 percent of the budget in 2020 and 9.0 percent in 2025 — well below their average share over the past 40 years, and in fact, the lowest share since 1970.

  3. Coordination across various low-income programs should be strengthened.  Various states have made important improvements in this area in recent years (including through the Work Support Strategies demonstration, which uses innovative ways to better integrate procedures across programs such as SNAP, Medicaid, and child care assistance), but more can be done.

    There is a difference, however, between better coordinating and integrating various procedures and other program elements across these programs and effectively ending key programs and merging their funding into large block grants.  The former approach (strengthening coordination) can boost program effectiveness and efficiency.  The latter approach, by contrast, is likely to result in a marked reduction in program effectiveness in reducing poverty and in increases in poverty and hardship, as I explain below. . . .

Click here for the full testimony.