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.

 


Where Will the House Budget Committee Go From Its War on the War on Poverty?

March 6, 2014

House Republican Budget Committee staff have been very busy. They’ve produced a 240-page report that summarizes — and provides snippets of research on — 92 programs creatively attributed to the War on Poverty.

“Creatively” because some of the programs have little or no bearing on efforts to reduce poverty, e.g., homeownership assistance, the fresh fruit and vegetable promotion program for elementary school children.

By and large, the research snippets are more balanced than one might expect — a triumph of low expectations, I suppose.

Ron Garver at The Fiscal Times cites four researchers who claim the report misrepresents or manipulates their findings. We get other examples of cherry-picking and misrepresentation in the Center on Budget and Policy Priorities’ commentary on the report.

There’s notable bias in presentation too — for example, the bolded conclusion that “Head Start does not improve student outcomes,” though the research cited shows it sometimes does, as Jonathan Cohn at New Republic notes.

And a HUGE exception to balance for Medicaid, as one might expect from a Committee that’s likely to again propose block-granting the program and slowly starving it. “Zombie Medicaid arguments,” proclaims the Incidental Economist‘s headline.

As this indicates, policy wonks of a progressive persuasion have already weighed in on the report — mostly, though not exclusively trying to set the record straight on what the research actually tells us.

I want instead to focus on a couple of the major messages, explicit and otherwise.

The report stretches to sweep in as many programs as possible in part because one of its messages is that there are far too many of them. Congress created them “to solve different problems — and at different times,” it says. As a result, “there is little coordination among them.”

Overall, this seems to me a reasonable assessment. Where it might take us is another matter.

The House SKILLS Act, for example, blows away 18 35 job training programs and rolls the surviving 17 into one big block grant. It also freezes funding for seven years — virtually ensuring that some of the formerly-targeted populations lose out to the more readily employable.

The larger problem, the report says, is that many programs are “a poverty trap” because they’re means-tested, i.e., provide benefits only to people below a certain income level.

They’re thus a disincentive to work — or at least to doing your best to get ahead because if you do, you face a “high marginal tax rate.” In other words, what you lose in benefits partially offsets what you gain in earnings.

No one, so far as I know, disputes the fact of marginal tax rates. They’re an inherent feature of programs that limit eligibility to people below a certain income level.

How big they are depends on who’s estimating and for what programs. Whether they actually “discourage … [people] from making more money,” as the report says, is less certain.

The Congressional Budget Office is inclined to think they do, though only for some people already in the workforce. Economist-blogger Jared Bernstein says that leading research has found the impact to be negligible.

Again, the question is where does this take us? Not, I trust, to the elimination of all means-tested programs. But like as not, to more expansive work requirements — and to time limits, since these would override any long-term disincentive.

Welfare “reform” is thus again pronounced a rip-roaring success — one of the instances of research misuse cited in the Garver article and by CBPP.

The report is surely a set-up for further spending cuts. Casting a wide net enables the Budget Committee to come up with a total anti-poverty bill of $799 billion in 2012 — and “trillions” over the last 50 years.

Ironically, as Cohn observes, the defects the report finds in a number of anti-poverty programs imply the need to spend more money.

But Budget Committee Chairman Paul Ryan seems to have something more grandiose in mind than fixing fixable problems, even when that might yield some savings — and something more grandiose than slashing here, slashing there.

In his view, federal anti-poverty programs need to be “entirely reimagined,” according to an indirect quote in the Washington Post.

We get a whiff of where he might be tending in a key test the report imposes whenever remotely feasible: Does the program encourage or discourage labor force participation?

Thus, for example, all the “evidence” cited to evaluate Supplemental Security Income relates to employment. Recall that adult SSI recipients under 65 are, by definition, blind or unable “to do any substantial gainful activity.”

SNAP (the food stamp program) is also viewed through the lens of labor force participation, as well as poverty reduction, based on the cash value of the benefit. “Evidence” for its effects on reducing hunger is apparently irrelevant.

But maybe there’s no real reimagining behind the words. As The New York Times editorial board observes, the report provides a “high-minded excuse” for Congressional Republicans “to eviscerate” major safety-net programs, as they’re already hell bent on doing.

Some also seem to cherish the notion that the reforms Ryan says it’s a precursor to will persuade us that they truly care about “people who’ve fallen through the cracks.”

Not, I think, if the report foreshadows what we’ll soon see in the House budget plan.


Congressman Paul Ryan Previews His Anti-Poverty Agenda

January 21, 2014

Congressman Paul Ryan wants to rebrand himself as a big thinker on poverty issues — and show a skeptical American public that the Republican party truly cares about low-income people.

He’s promised a comprehensive anti-poverty agenda to replace the efforts launched with President Johnson’s War on Poverty, to which he gives “a failing grade.”

He’s been visiting projects in inner-city neighborhoods, accompanied by Robert Woodson, the conservative founder and president of the Center for Neighborhood Enterprise. He’s been talking with experts at like-minded think tanks.

The agenda is yet to come. But we got something of a preview last week when he spoke at the Brookings Institution’s Social Mobility Summit.

Ryan said he “could already hear howls of protest from certain corners.” So I’ll refrain, as best I can, and try to summarize what seem to be major planks of the framework for his agenda-in-process.

Poverty is not just deprivation, but “a form of isolation.” This is Ryan’s major take on poverty in America. He goes at it from various angles — all linked to adverse government impacts.

On the one hand, “taxes take people out of the workforce” because employers would hire more people if their taxes were lower and people would “work that extra hour.” These people, one notes, are in the workforce.

On the other hand, government programs are partly responsible for cutting poor people off from education, work and family. Here Ryan is borrowing from Brookings research that’s become a well-worn conservative recipe for avoiding poverty — finish high school, get a full-time job, marry, then (and only then) have children.

But while the recipe comes close to blaming poor people for irresponsible choices, Ryan blames the federal government. It’s “walling them up in a massive quarantine,” he says.

Government anti-poverty programs create a “poverty trap.” We have a “hodgepodge” of programs created to solve different problems at different times, Ryan observes.

And they create disincentives to earning more, he says, because they result in “high marginal tax rates” — economist-speak for what a household loses in benefits, as well as the higher taxes it pays when its income increases.

The result of income cut-offs for benefits is also sometimes referred to as the “cliff effect” — a problem that’s getting attention from experts across the political spectrum.

Some government programs mitigate the cliff effect. The Earned Income Tax Credit, for example, phases out rather than abruptly ending. Ryan likes this. The health insurance subsidies provided by the Affordable Care Act also phase out. Well, we know what Ryan thinks of the ACA.

Whether, as he says, the high marginal tax rates discourage work is a more complex issue than he acknowledges.

Economist Eugene Steuerle, whom he cites, told interested House subcommittees that studies have produced “mixed and ambiguous” results, but that he believes the extra income often outweighs the tax effect. Indeed, “some people may work more to generate the same net income.”

A better poverty plan would reflect two principles — simplicity and standards. Simplicity means “consolidation,” i.e., block-granting of some sort.

Ryan is intrigued by the UK’s new Universal Credit, which will replace six benefits for low-income working-age people with a single monthly cash payment and also smooth out the cliff. It’s going through “a rough patch,” he acknowledges, apparently referring to technical rollout problems.

It’s also already subject to what the Guardian calls “stealth cuts,” i.e., a three-year freeze on the amount recipients can earn before their credit starts phasing out. But it’s unfair, at this point, to say that’s why Ryan’s interested.

On the other hand, we’ve got his proposed block grants for SNAP and Medicaid, which make it hard to believe that his evolving plans “have nothing to do with a line on a spreadsheet,” as he claims.

Standards refer to work requirements, which Ryan apparently believes lead to work — “the shortest route back into society.” Also, I think, to time limits, since federal assistance should be an “onramp — a quick drive back into the hustle and bustle of life.” Note the isolation theme again.

The model Ryan likes — wouldn’t you know it? — is the Temporary Assistance for Needy Families program.

As Republicans often do, he cites results — not wholly attributable to TANF — from the late 1990s. Caseloads shrank as more welfare mothers entered the workforce. The child poverty rate declined.

But single-mother employment rates have since dropped. And single mothers who were working in 2011 earned, on average, a bit over $400 a week. The child poverty rate is higher than it was in 2000.

The most significant lasting outcome of welfare “reform” is the caseload cut — from 68% of poor families with children when it was enacted to 27% in 2010.

Only local communities can solve the problem. This isn’t a new message. I remarked on it when the House Budget Committee, which Ryan chairs, issued its latest annual plan.

Ryan made the implications clearer, however. Government, he said, has “crowded out civil society.” It’s told people that poverty isn’t their problem — and by implication, we’ve believed it.

This is a curious view of what goes on in communities today. We have scads of faith-based and other nonprofits that provide food, shelter, clothing, training, health care and more to people in need.

They depend in part on donations — in both time and money — from people who quite clearly believe that poverty is their problem. The organizations are also, in some cases, the way that government anti-poverty funds are translated into services.

And they’re the source of new solutions. The Housing First model for addressing chronic homelessness is an example — though not, one I think, that conforms to Ryan’s standards.

Ryan says that the only way to solve the problem of poverty is “face to face.” If this means that he will not only meet with, but learn from the people who’d be affected by his plan-in-the-making, then it may be a whole lot different from what he previewed last week.

I’ll reserve further howls till we see it.


The Message Behind the Messages in Ryan’s Budget Plan

March 18, 2013

This year I vowed not to pick apart Congressman Paul Ryan’s budget plan — the refurbished, but barely changed Path the Prosperity.

A path it certainly is. And it’s worth attending to because it shows where right-wing Republicans want to take us — if not all at once (highly improbable), then step by step. Or should I say manufactured crisis by crisis?

Specifically, as Washington Post columnist Michael Gerson indicates, they view “civil society as an alternative to government.” This should set off alarm bells among nonprofit service providers and all of us who care about the work they do.

Like last year’s plan — and the plan the year before — it purports to strengthen the safety net by block granting Medicaid and SNAP (the food stamp program), thus giving states “flexibility” to manage increasing diminished federal funds.

Except that they’d have to time-limit SNAP participation, since that worked so well for former — and now desperately poor — families dumped out of the safety net by “welfare reform.”

Retirement would be secured by converting Medicare into a modified voucher program that would jack up the per person cost of traditional Medicare, thus building a fiscal case for killing it.

Meanwhile, seniors would have to pay increasingly more for their insurance because the premium support they’d get from the government wouldn’t keep pace with rising health care costs.

And the Affordable Care Act would be repealed, including the federal incentives for Medicaid expansion. So an estimated 40-50 million more low and moderate-income people too young for Medicare wouldn’t have any health insurance whatever.

Something (unspecified) would be done to cut Social Security spending. The plan cites misleadingly over-simple life expectancy increases. So we can infer that Ryan wants the eligibility age increased again.

Also “less generous benefits.” We know by now that this is code for pegging Social Security cost-of-living adjustments to the chained CPI, which rises more slowly than the price index used now.

But the plan itself merely directs the President and Congress to propose reform legislation — a profile in courage, as one advocate remarked.

But I said I wasn’t going to write about these things. And here I am off on a tear.

The combination of what Robert Greenstein at the Center on Budget and Policy Priorities calls “reverse Robin Hood policies” and the euphemisms used to describe them does that to me.

Well, the Path will die in the Senate, just like the previous plans. So the most we can say about it as a genuine budget blueprint is that it sets the stage of another partisan standoff.

What actually struck me about the plan was the introductory justification — not the lead-off hysteria about the imagined debt crisis, but the celebration of community.

The budget, Ryan says, “makes room for community — for the vast middle ground between government and the person.” People find happiness “through friendship, … in their families, their places of worship and youth groups.”

“While we belong to one country, we also belong to thousands of communities.” They encourage our personal growth. “So the duty of government is not to displace these communities, but to support them.”

Who could argue with that? Only someone, I suppose, who thought that the federal government was — or should be — the source of our personal happiness, sense of “belonging and self-fulfillment.”

The explicit message is that our communities — and our families — face many dangers, i.e., “rising health costs, a stagnant economy, massive debt, an uncertain world.”

The federal government can do something about these, but it shouldn’t play the leading role because its proper business is to “secure our individual rights and protect … [community] diversity.”

The unspoken message is that Ryan and his right-wing colleagues aim to divest the federal government of core responsibilities for the health, well-being and economic opportunities of the population as a whole.

The proposed Medicaid and SNAP block grants wouldn’t merely shift funding responsibilities to the states — by shrinking the federal cost shares over time.

They would ultimately shift feeding and tending to the medical needs of low-income people onto local communities because it’s wholly unrealistic to believe that states would — or even could — continue to absorb the costs of retaining these critical safety net programs intact.

Nor make up for deeper, as-yet-unspecified cuts to non-defense programs that depend on annual appropriations, e.g., education, transportation, public safety, housing assistance.

They’d be billions larger than those the current law requires because the Ryan budget would shift all further mandated cuts in defense to those other so-called discretionary programs.

States could also lose funds for school meals, other child nutrition programs and Temporary Assistance for Needy Families because another $800 billion would be taken from programs that don’t depend on annual appropriations — in addition to those, like SNAP and the major health care programs, that the plan specifically names.

We would, in other words, return to some long ago time when faith-based and other local community organizations cared for the poor in their communities as best they could, with no government help whatever.

Many communities today have strong networks of nonprofit organizations that both supplement and serve as channels for federal spending on both safety net programs and others that meet vital human and economic needs.

But not all communities have such organizations.

And I doubt you could find a nonprofit anywhere that would say that it — and others in its network — could meet the needs of all low-income community members if the federal government backed out of its anti-poverty commitments.

In short, the budget plan presents a clear contrast between the right-wing Republican vision for our society and the vision President Obama campaigned on — that “we are greater together” and that government is a way we come together to help give life to values we commonly share.

Well, most of us anyway.