America's Poor and the Great Recession

Chapter 6. Policy Options for Strengthening the Safety Net

102 · america’s poor and the great recession 6 Policy Options for Strengthening the Safety Net The Great Recession was so deep and lengthy, and the recovery so slow, that the number of people in America who are poor has reached the highest level—almost 50 million—since the official poverty statistic was established in the 1960s. The cruel reality is that poverty continued to increase in America for many months after the Great Recession ended in June 2009. The monthly rate of job creation after June 2009 was uneven. While the unemployment rate in mid-2012 is down to about 8 percent from a peak of more than 10 percent, millions of Americans have been out of work for six months or more. If current average rates of job creation continue, it will take 88 months to attain the peak level of employment achieved in January 2008, prior to the onset of the Great Recession.248 The much longer recovery period compared to the recessions of the 1980s and 1990s is not surprising , since the Great Recession had its roots in financial crises, which are known to induce deep recessions with slow recoveries. As a result, the poverty rate may continue to increase before it begins a slow fall. One of the best indicators of trends in poverty is the monthly count of SNAP (Food Stamp) recipients, and it did not fall for two consecutive months until early 2012.249 Some estimates policy options for strengthening the safety net · 103 suggest that, depending on how anemic the recovery is, the count of SNAP recipients may not begin to decline on a full-year basis until 2014.250 The good news is that the U.S. safety net, coupled with some timely stimulus policies, cushioned the impact of the Great Recession , making it less harmful (especially for low-income Americans) than it otherwise would have been. To be sure, not all components of the safety net worked equally well. Federal food assistance, unemployment compensation, Supplemental Security Income, and Medicaid responded robustly to the swelling number of impoverished Americans, but TANF and federal housing programs were not responsive to the brutal force of the Great Recession. One of America’s best anti-poverty measures, the Earned Income Tax Credit, was hampered because many low-income people could not find work and thus could not benefit from the program, which is based on earnings. A slow recovery poses a big risk for low-income Americans because the rate of improvement in the supply of jobs—and the corresponding decline of poverty through increased earnings, occurs at a slower pace compared to the speed at which certain elected of- ficials wish to make cuts to the safety net. Concerns about the federal fiscal situation, coupled with the empty coffers of many state governments, ensure that the safety net will be at risk of cuts in each budgetary deliberation between now and 2020. Philanthropic donations aimed at low-income families declined at precisely the time that they may have been needed the most: in 2008–2009, during the depths of the recession. However, philanthropy began its recovery (2010–2011) in time to offset some of the recent cuts in the governmental safety net. During the 2013–2020 period, many more families are likely to be looking for private support , since their unemployment compensation may expire and the push for austerity may constrain the amount of support available from government. In this chapter, we offer a number of options for policy makers to consider that could assist low-income families. We begin with nearterm options to protect vulnerable people during the slow recovery from the Great Recession. Our recommendations include: (1) indexing the federal minimum wage for inflation and (2) finding efficiencies in the safety net. In the latter category we discuss reforms to 104 · america’s poor and the great recession Medicaid, improving targeting of federal transfer programs, and modifications to non-poverty policies and programs so that low-income individuals receive more benefits. Before presenting our suggestions , we first review what might be considered typical conservative and liberal approaches to these reforms before presenting a policy that might be palatable to both parties. We then look ahead and propose policy options applicable to future downturns in the business cycle. Our recommendations here include reforms to TANF and the unemployment compensation systems, subsidized...