Of Poverty Traps and Benefits Cliffs

April 28, 2014

Congressman Paul Ryan, as we know, views safety net programs as a “poverty trap” because they’re means-tested.

“The federal government effectively discourages … [poor families] from making more money, his War on Poverty report says, because they’ll lose benefits if they do — and pay higher taxes as well.

Whether these prospects actually discourage work is debatable — and at the very least, contingent on many variables. The loss of benefits isn’t. Progressives and conservatives alike have commented on the so-called “cliff effect” — to different ends, as you might imagine.

I’ve been puzzling over policy solutions because cliffs or something very like seem inherent in means-tested programs. And to some extent, they are.

But that doesn’t mean we should just shrug our shoulders — or view the only solution as “universal programs” akin to Medicare, as Roger Senserrich at the Connecticut Association for Human Services apparently does.

A recent report by Children’s HealthWatch shows that we could make progress by looking carefully at the real-world causes and effects of cliffs.

The report focuses on SNAP (the food stamp program) and, as one might expect, effects on children’s health when families lose all or a portion of their benefits due to income increases.

The distinction here indicates that SNAP is already structured to create a downward slope, rather than what the word “cliff” brings to mind. Benefits nevertheless dwindle — and eventually disappear — as income rises.

Families can be hit with a double or triple whammy because other safety net and work support programs are also means-tested. A Witness to Hunger, for example, worked overtime for a month, “and they just cut me off food stamps, and they cut my kids’ medical insurance off.”

This may be one reason that income increases are often not enough to compensate for lost SNAP benefits, as results of a CHW survey show.

For example, young children in families who’d altogether lost their benefits were 78% more likely to be food insecure than those in families who’d consistently received them.

For those in families whose benefits had been reduced, the likelihood was 55% greater. And caregivers were 30% more likely not to seek health care for themselves or another family member because they felt they couldn’t afford it.

The CHW report is entitled Punishing Hard Work, though not only wage increases can send families over the cliff.

They can also lose SNAP benefits when a disabled child starts receiving Supplemental Security Income, for example, or when an absent parent starts paying child support. In either case, children should be better off, but may not be.

CHW advocates several federal policy solutions to moderate the cliff effect.

One reflects a recommendation the Food Research and Action Center has made for many years. Use the U.S. Department of Agriculture’s Low-Cost Food Plan instead of the Thrifty Food Plan as the basis for determining maximum SNAP benefits.

As FRAC has explained — and the Institute of Medicine confirmed — the TFP is unrealistic in various ways. And it understates the costs of foods in the market baskets used to set benefit levels, as CHW itself has shown. Even more so the costs of foods that would make up a healthful diet.

A shift to the Low-Cost Food Plan wouldn’t affect the maximum income threshold, but it would leave families with larger benefits during the tapering-off period.

Two other recommendations address permissible deductions in gross household income. Both would increase the likelihood of a net income below the poverty line — the eligibility cut-off for SNAP.

One would eliminate the cap on deductible housing and utility costs — just $478 a month for most families.

The other would expand the current medical expenses deduction, which is now available only to elderly family members and those who receive disability benefits. Yet families can incur out-of-pocket healthcare costs for other members, even if they’re covered by Medicaid.

These costs often increase with income, as families move to private health insurance plans, as CHW observes. So expanding the medical expense deduction would help preserve one benefit as another shrank.

This is one example of why policymakers should “look across programs to determine … unintended consequences related to increasing family income.”

CHW looks to the Affordable Care Act as a potential vehicle, since it gives states an opportunity to create linkages between healthcare subsidies and other federal benefits.

Well, we know what Congressman Ryan thinks of the ACA. Another “poverty trap,” he calls it.

But if he were really concerned about encouraging people to “begin … getting the dignity of work, rising [sic] their income,” etc., he’d be focusing on the kinds of solutions CHW advocates instead of trying to gut programs like SNAP.

 


Food Stamp Benefits Too Low for a Healthy Diet, New Study Confirms

February 2, 2012

In 2008, Children’s HealthWatch and partners reported on a unique study aimed at finding out whether food stamp benefits enable low-income families to buy what they need for a healthy diet. Now we’ve got a followup.

The answer now, as before is no. And though the followup was conducted only in Philadelphia, the findings are generally applicable to other urban areas, including the District of Columbia.

For both studies, Children’s HealthWatch developed a shopping list based on the U.S. Department of Agriculture’s Thrifty Food Plan — the current basis for setting the maximum value of food stamps.

Then a couple of trained graduate students went to stores of various sizes in four low-income neighborhoods. They collected prices for the items on the shopping list and noted items that weren’t available.

Not surprisingly, small stores didn’t stock anything close to the TFP market basket.* An average of 50% of the items were missing — mostly fresh fruits and vegetables and other “healthy, nutrient rich foods.” Even medium-sized stores stocked, on average, only two-thirds.

But, in a way, what was on the shelves (or not) didn’t matter because food stamp benefits wouldn’t have covered the costs of the TFP items.

A family of four with the maximum benefit would have been short an average of $196 per month. In other words, it would have had to come up with $2,352 per year to eat according to the TFP that met its nutritional needs.

Shortfalls were considerably higher for families who have to rely on nearby small stores — $251 per month or more than $3,300 a year for the family of four.

Recall that the current maximum food stamp benefit reflects the 13.6% boost Congress passed as part of the Recovery Act. Without it, the family of four would have been short an average of $276 per month or somewhat over $3,300 per year.

This is clearly more than a low-income family can afford. Even now, as one the Drexel University’s Witnesses to Hunger says, “The amount we get for three meals a day is not cutting it …. [W]e have to eat unhealthy food.”

The food stamp boost is due to end in November 2013 rather than, as originally expected, some five or so years later. Congress foreshortened its life to offset the costs of some other measures.

Congress could, of course, restore the funds it raided, thus giving the food stamp program enough to pay for the boost until the inflation-adjusted cost of the TFP yielded the same results.

Children’s HealthWatch recommends this. The Food Research and Action Center is campaigning for it as well.

Yet there’d still be a shortfall — at least for a great many families in urban areas. Children’s HealthWatch mentions families in rural communities as well.

The root cause here is the way food stamp benefits are calculated, i.e., costs of the items in the TFP, adjusted annually for nationwide price increases.

FRAC recommended some time ago that food stamp benefits be based on USDA’s Low-Cost Food Plan. This plan, it said, is “the lowest of the three government budgets for normal use” and “generally in line with what low and moderate-income families report they need to spend.”

Children’s HealthWatch says the food plan switch should be considered — specifically to more accurately reflect food costs in areas where they’re higher than nationwide averages.

The Low-Cost Food plan now costs, on average, about 23% more than the TFP. This is considerably less than all but the poorest households spend.

The latest food security survey for USDA found that households with incomes above 185% of the federal poverty line — then about $40,790 a year for a family of four — spent 30% more than the TFP created for their size and configuration.

That’s just 1% more than the average shortfall the Children’s HealthWatch researchers found.

The food stamp program is due for reauthorization this year, along with the rest of the complex and controversial Farm Bill. Highly doubtful that Congress will even try to enact a revised law until some time after the elections.

But it’s still good to get the fundamental benefits issues on the radar screen — and keep them there in as many ways as we can.

I, for one, would like to see mystery shoppers armed with TFP grocery lists prowling corner stores and supermarkets all over the country.

* Each of USDA’s food plans is actually 15 different market baskets specifying types and quantities of food for different age and gender groups, plus two each for families of two and four members. The ChildrensWatch shopping list was apparently based on one of the market baskets for a family with two adults and two children.