Benefits Will Jump Start Economic Recovery

January 29, 2009

The Coalition on Human Needs has done us all a great service. It has issued a summary of the provisions in the House economic recovery package that will benefit low-income people and others at immediate risk of hardship. Anyone who’s tried to read the legislation–or even the Appropriations Committee’s summary–knows how useful this is.

CHN also identifies shortcomings in the package, including the short shrift given to affordable housing. No funding for additional housing vouchers, despite the rising tide of homelessness. No funding to support the construction of new affordable housing, despite the job creation potential. To me, these are glaring gaps.

However, CHN’s most important message is that the provisions targeted to low-income people and laid-off workers will do more than alleviate hardship. Combined with proposed increases for K-12 education programs, they will save or create nearly two million jobs.

This is because they will quickly put money into the hands of people who will spend it to meet their needs. Mark Zandi, chief economist for Moody’s has translated this obvious truth into dollars and cents. He says, for example, that a $1.00 increase in food stamps will generate an estimated $1.73 in near-term economic growth.

The Economic Policy Institute has crunched the numbers another way. Its analysis for CHN shows that the food stamp provisions in the House package will save or create about 185,000 jobs. Think grocery store clerks, drivers for distribution companies, workers in food processing plants, etc.

Experts, including Zandi and the Congressional Budget Office, say that tax cuts are a less effective economic stimulus. CBO is particularly unenthusiastic about reductions in the corporate tax rate. As it says, businesses will not spend more money on labor or produce more just because they have more after-tax income. They need increased consumer demand. And that’s what the proposed food stamps increase and other measures targeted to low-income people will deliver.

Nevertheless, Congressional Republicans want less spending and more tax relief in the economic recovery package. And on the House side, they clearly won’t budge. Not a single Republican voted in favor of the package the House passed yesterday.

Now, there’s a reasonable argument to be made for paring down the spending part to focus it more on jump starting the economy and perhaps also for expanding the tax part. But substituting tax relief for the major measures CHN endorses should be a non-starter. Fortunately, it looks as if it will be.


Can We Afford NOT to Spend on Public Benefits?

December 26, 2008

Hard economic times force hard choices–for policymakers, as well as the rest of us. Falling stock prices, rising unemployment rates, cutbacks in both consumer and business spending all translate into less tax revenues for governments to spend.

So policymakers look for ways to cut spending. And public benefits programs are a prime target. Just look at the recent cutbacks and those on the table now.  Even policymakers who generally favor public benefits often view them as somewhat like charitable giving–a good thing to do when you can afford it but not an essential priority.

A recent report by the Partnership for America’s Economic Success puts public benefits programs in a different perspective. It focuses on food stamps and child nutrition programs, but its analysis could apply to other programs too.

The report looks at the impacts of food insecurity on children’s physical, mental and emotional development. It finds that lack of sufficient, nutritious food increases risks of a host of problems that translate into economic costs for our society as a whole.

For example, food insecure children are more likely to need special educational services. These cost almost twice as much as regular educational services. Adults who start out as food insecure children tend to earn less. So they spend less and pay less in taxes.

Early food insecurity is linked to a wide range of chronic health problems. These increase direct costs to publicly-funded health and income supports programs. They also cost our society indirectly as long-term losses in economic productivity.

When we compare all these costs to the costs of ensuring that mothers and children have enough nutritious food, we can see that food benefits programs are not just a compassionate thing to do for low-income people. They’re an investment that will return dividends in both the short and the long term.

Poor Women and Children Hit By DC Budget Cuts

December 6, 2008

Last month, the D.C. City Council approved a mix of budget cuts and spending freezes to cope with a projected shortfall in the Fiscal Year 2009 budget. Programs serving low-income and other vulnerable residents bore the brunt of the budget balancing act.

The Council reduced funding for two major programs intended to address the District’s affordable housing crisis. It also eliminated a small increase it had approved for the Temporary Assistance for Needy Families (TANF) program.

TANF is supposed to provide poor families with support that will enable them to become self-sufficient. They get a monthly cash benefit for a limited period of time, usually no more than five years. During this time, the adult recipient must work at a low-paying job or prepare for or seek work. A very high percentage of adult recipients are single women with children.

Anyone who has ever looked for or trained for a job knows that you have to be able to focus on those activities. You can’t if you’re scrambling to stave off hunger and homelessness.

Yet, up until very recently, the District’s maximum TANF benefit for a family of three was $428 per month. That’s less than 10% of what U.S. government data and other reliable sources indicate the family needs to live in D.C.

The City Council had voted to increase TANF benefits so that the family of three would receive $437 per month. According to a new DC Fiscal Policy Institute report, that was barely enough to compensate for lost purchasing power due to inflation. Now the Council has wiped the increase out. So TANF families will be even worse off than they were last year.

The Council voted in haste and without considering alternatives. As they say, haste makes waste. In this case, the waste will be in human lives, economic recovery and progress toward a more just, inclusive community.