I really liked this piece.
Let’s start with the safety net since it’s a fixture of advanced economies and serves the critical function of catching (or not) the most economically vulnerable when the market fails. What follows is a brief overview of a many-faceted topic, but there’s solid evidence that key parts of the safety net performed well — probably better than you thought.
Before I get to the evidence, a word about context. First, as suggested above, there’s another recession lurking out there somewhere, so let’s learn what worked and what didn’t.
Second, and this is particularly important in today’s political economy, too many policy makers devalue the safety net. In Representative Paul Ryan’s terminology, it’s a “hammock.” For Ronald Reagan, it was a feckless weapon in the “failed” war on poverty (though to his credit, he extended a wage subsidy for low-wage workers that has become a highly effective anti-poverty tool). For many of today’s conservatives, the increased use of a safety-net program is proof that there’s something wrong with the user, not the underlying economy.
But while people do abuse safety nets — and not just poor people (think bank bailouts and special tax treatment of multinational corporations) — I want to see receipt of unemployment insurance, the rolls of the Supplemental Nutrition Assistance Program (food stamps), and so on go up in recessions. In fact, their failure to do so would be a sign that something’s very wrong, like an air bag that failed to deploy in a crash.
The figure below tracks three programs, two which responded quite elastically to the downturn, and one — Temporary Assistance for Needy Families, or T.A.N.F. — which did not. (I’ll get to why unemployment insurance has gone down while SNAP remained elevated in a moment.)
There are two reasons that T.A.N.F. was so unresponsive. First, welfare reform in the mid-1990s significantly increased its work requirements, which worked well then, as the policy change interacted with historically strong demand for low-wage labor. Since then, and especially in the great recession, the low-wage job market has been much less welcoming.
Second, T.A.N.F. was “block granted,” meaning states receive a fixed amount that is largely insensitive to recessions (my colleague Liz Schott has noted some minor wrinkles) and inflation. Since the block grant began, the real value of T.A.N.F. funds is down 30 percent. Now, consider this: it is a fixture of conservative policy on poverty to apply this same block grant strategy to food stamps and Medicaid. The numbers and the chart above show this to be a recipe for inelastic response to recession, or, more plainly, a great way to cut some big holes in the safety net.
The official rate for children goes up over the recession, from 18 percent to 22 percent, but once you include the full force of safety-net (and Recovery Act) measures that kicked in, it holds steady at about 15 percent. Though child poverty rates even under the alternative measure are still too high, this figure provides strong evidence of the effectiveness of the American safety net in the worst recession since the Depression.
So let’s get this straight: the poor and their advocates were not the ones who tanked the economy. Nor should they be on the defensive when the safety net expands to offset some of the damage.
I watched the safety net work during the Great Recession right here where I live. We had people coming into this office who have never relied on assistance before telling us they needed help. For a while there I felt like I was delivering public service announcements: “go to Job and Family Services on the square and apply for food stamps. Today.” I cannot imagine how bad it would have gotten without a safety net, because it was the worst I’ve ever seen with a safety net.
So great to have someone look at what actually happened to us, instead of pondering the abstract theoretical musings of Mr. Paul Ryan and his merry band of pundits.