Posted in: Annual Report

A Tenuous Safety Net

By | September 17, 2010

When he accepted the Democratic Party’s presidential nomination in 1992, Bill Clinton promised “an America where we end welfare as we know it.”  Clinton fulfilled his pledge four years later when Congressional legislation replaced the former welfare entitlement system with the current program, Temporary Assistance for Needy Families (TANF).  During the late 1990s, the reformed welfare policy, combined with expansions for other work supports and a booming economy, enabled many low-income women to move off the rolls and into jobs.  Welfare caseloads dropped precipitously. In 1995, 4.8 million families received welfare benefits; by 2008, that number fell to 1.7 million.

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However, TANF is just a small part of the federal safety net.  While welfare rolls have indeed shrunk, total federal spending on what the Congressional Budget Office classifies as “income security” has increased from $98.3 billion in 1996 to $348.5 billion in 2009.  This figure encompasses a range of programs, from unemployment insurance and income tax credits to TANF and food stamps.  However, the growth in spending has not kept pace with the needs of a growing number of Americans who have turned to public benefits in the recent recession.  Furthermore, the safety net still fails to provide for the most vulnerable populations that need social support.

SAFETY NET ALPHABET SOUP

Although TANF is perhaps the most politically volatile program of assistance for the poor, it accounts for only $16.5 billion of the 2009 federal spending on the safety net, or roughly 5 percent.   The budget allocates significantly more money to a handful of other income security programs such as unemployment insurance, cash assistance, food stamps, and income tax credits. President Obama’s 2011 budget proposal reflects the growing scope and funding of other safety net programs relative to that of welfare. The $18.59 billion allocated for welfare next year pales in comparison to the budgets for other public benefits.

The Supplemental Nutrition Assistance Program (SNAP), more popularly known as food stamps, will cost $80.08 billion in 2011—a 16.6 percent increase from 2010. Supplemental Security Income (SSI), a program that provides stipends to the low-income elderly and disabled, will cost the government $53.22 billion, a 12.7 percent increase.  The Earned Income Tax Credit, with a budget of $49.54 billion, provides a refundable tax credit to 23.7 million low or middle-wage workers.  The biggest slice of the income security budget belongs to unemployment insurance (UI).  UI provides weekly payments to individuals who lose their jobs due to no fault of their own, an average of 36 percent of their weekly income.  From 2008 to 2009, the program’s number of recipients and funding level nearly doubled due to jobs lost in the recession.  $83.26 billion is budgeted for UI next year.

A Shrinking Ball in the Net

In light of decreasing caseloads and participation rates, welfare has played an increasingly smaller part in the safety net of low-income Americans.  The federal government distributes $16.5 billion in state TANF funding for fewer than two million families; in contrast, EITC costs over $49 billion to benefit 23.7 million recipients.  SNAP (food stamps) has seen a similar upsurge in participation, especially during the recent economic downturn. Kay Brown, Director of Education, Workforce, and Income Security Issues at the U.S. Government Accountability Office, told the HPR, “SNAP is an entitlement program that is designed to be responsive like that: to pump resources and invigorate the economy.”  By contrast, welfare did not attract more recipients during the recession, likely because of its strict eligibility requirements and low monetary benefit.  Elizabeth Lower-Basch, senior policy analyst at the Center for Law and Social Policy, explained to the HPR that people who left the welfare rolls after the 1996 reform were either at the top or the bottom of the income pool: those who started work and earned too much to qualify, and those who faced insurmountable barriers to employment.  She noted that, in contrast to food stamps, “By design, [TANF] doesn’t reach the poorest of the poor.”  Receiving TANF benefits is contingent upon meeting certain work requirements, a provision that precludes enrollment of the most disadvantaged.

This exclusion of eligibility is a theme of many safety net programs, leaving out childless adults and those who are unable to work—a disproportionate number of whom are men.  Welfare and Medicaid are primarily intended for poor single mothers with children; EITC targets working families with children.  As social policies such as TANF and EITC shift to provide income supports only to those who work, people with barriers to employment – such as disabilities, limited education, or criminal records – cannot receive any benefits.  Despite the growth in spending, the safety net still fails to provide support to the most vulnerable populations.

Holes in the Net

Social service organizations have witnessed the impact of the economic recession on low- and middle-income families.  John Drew, President/CEO of Action for Boston Community Development (ABCD), told the HPR that ABCD saw a 20 to 25 percent increase in utilization of all its anti-poverty programs, such as fuel assistance and job training.  The federal government awarded $19.7 billion to community groups such as ABCD in 2005; 11 percent of that money went to faith-based organizations.  Rosie’s Place, a privately funded non-profit that provides social services to low-income women and children in Boston, faced a similar surge of visitors last year.  Sue Marsh, the charity’s executive director, told the HPR that she noticed a broader demographic of people in need.  Women from higher income brackets, such as former homeowners who were victims of foreclosure, came for help in addition to Rosie’s Place usual clients.

Both publicly and privately funded agencies have reported difficulties in social service provision, citing insufficient federal and state spending for safety net programs.  Drew stressed the importance of federal funding for government-funded organizations such as his, noting that current levels of government support are not enough to guarantee security for ABCD’s clients, especially during a recession.  “There is a very tenuous safety net.  But when that net is pulled back, I’m very fearful,” he said.  Similarly, while Rosie’s Place does not rely on any governmental money, Marsh said that when more systems in the safety net fail, her organization faces more pressure.  Government spending on the safety net may have increased in response to the economic downturn, but agencies like ABCD and Rosie’s Place are still struggling to cope with demand for their services.

Although federal spending on social welfare has soared in recent years, the system is struggling to respond, as people who have lost their jobs in the economic downturn join the long-term unemployed in turning to the government for support.  Programs like unemployment insurance have ballooned in scope and cost as more people have lost their jobs, and they show little sign of shrinking until the job market recovers.  The growing strain on the welfare system illustrates the tension between the two opposing aims of the safety net: the social imperative of providing economic support to those who need it, versus the political and economic desire to incentivize recipients to work.  Current income security programs are focused too heavily on the latter objective, often requiring that people must be employed before they can receive cash assistance.  People who face insurmountable obstacles to employment – such as health problems or a lack of marketable skills – have long suffered from these eligibility restrictions.  The economic downturn has caused many working- and middle-class Americans to face the same dilemma, but it remains to be seen whether policymakers will respond to this challenge by enacting substantial reform.  The recession has revealed the strained strings of a patchwork safety net—a net that is struggling to support a record number of Americans in its greatest challenge since the Great Depression.

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