America's Poor and the Great Recession

Chapter 4. America’s Partial Safety Net

58 · america’s poor and the great recession 4 America’s Partial Safety Net Over the last 75 years, the United States has built a safety net to offer protection for low-income129 individuals and families as well as other individuals who become unemployed. The phrase “low-income ” refers generally to people who are poor or near-poor, usually with incomes less than some multiple of the official poverty line (e.g., 185% or 300%). Comprised of governmental assistance programs and tax provisions, the net is a complex combination of state and federal policies. Many of the various public programs have their roots in—or were expanded due to—President Lyndon Johnson ’s “War on Poverty.” In his 1964 State of the Union Address, Johnson said, “This administration today, here and now, declares unconditional war on poverty in America. I urge this Congress and all Americans to join with me in that effort . . . we shall not rest until that war is won. The richest nation on earth can afford to win it. We cannot afford to lose it.” Yet, Johnson’s vision was not fully realized, and thus we term the safety net to be “partial” because it does not eradicate poverty in this country. As we shall see, parts of it are less responsive than others to economic downturns. Before turning to the individual programs and their performance during the recession, several issues should be addressed. Although the phrase “safety net” appears to be simple, it represents a wide range of different programs and services that operate at america’s partial safety net · 59 multiple levels of government and in both the private and public sectors. Unfortunately, there is no single data source in the United States that regularly supplies basic data on America’s safety net: how many low-income people are assisted by year, the degree of assistance , the consequences of the assistance, who paid for the assistance , and the overall cost of the safety net (and its components). Second, in Western European nations, the safety net is often organized in conjunction with social insurance systems that benefit the elderly or other non-working adults. In the United States, however, social insurance programs (such as Medicare and Social Security) are often seen as different from anti-poverty programs because a worker, who may be defined as middle class, pays taxes on a regular basis with a perception that those tax revenues are accumulated in national trust funds. The assumption is that those funds will ultimately be used to provide benefits to the worker when he or she becomes old enough (or otherwise eligible) for social insurance benefits (e.g., Medicare and Social Security). Although such perceptions may be oversimplified, they cause people in the United States—and their politicians —to treat Medicare and Social Security differently than the safety-net programs aimed at meeting the needs of people who are temporarily or chronically poor. The beneficiaries of the safety net may draw resources temporarily (e.g., due to an unanticipated spell of unemployment or reduced hours of work) or they may do so permanently (e.g., due to a disability that precludes work or chronic inability to find work). In the design of the safety net, a key question is how to ensure that able-bodied recipients have appropriate incentives to find work and function without assistance from the safety net. Thus, some antipoverty programs have work requirements and/or provisions designed to encourage recipients to work. The forms of assistance offered through the safety net vary. Cash assistance provides the recipient families the largest degree of flexibility, but there is no assurance that the heads of household will expend the cash on the most essential household needs. Inkind assistance may only be used for specified purposes as illustrated by food assistance programs, subsidized health care, and vouchers for housing payments. 60 · america’s poor and the great recession All but two of the public programs considered in this chapter are means-tested. That is, in order to be eligible, individuals/families must meet certain financial requirements, namely having very low income and assets. The cash or in-kind benefits provided by these programs are intended to buffer vulnerable individuals and families from experiencing hardship (or further hardship) because of their very low income. By contrast, receipt...