Does the Social Safety Net Work?

The Inclusive Economy Blog

Last month, the Census Bureau released updated annual estimates of Poverty, Income, and Health Insurance Coverage. Nationally, many of the trends from recent years continued unabated: there was no change in median annual income or the official poverty rate. The stagnation in the income and poverty numbers remains troubling, but there is a silver lining: the social safety net is helping to ensure the well-being of American families.

These data are invaluable for tracking how Americans are faring in this economy, but the official poverty numbers still don’t give a complete picture of low-income families’ complex financial lives. Since the spike in the poverty rate in the wake of the recession, our nation’s social benefit programs have done incredible work, largely keeping household poverty at bay and families afloat. Nowhere is this role more evident, nor articulated more clearly, than in the Census Bureau’s Supplemental Poverty Measure (SPM) estimates of household poverty.

The SPM is the Census Bureau’s more comprehensive view of both household poverty and the effect of public benefit programs on poverty alleviation. This measure has historically remained higher than the official poverty rate, particularly among the elderly and this year’s SPM estimates are no different. However, the share of children in poverty drops nearly five percentage points, from 21.5% according to the official poverty measure down to 16.7% in the SPM—a total of over 3.5 million fewer children living in poverty:

What accounts for these dramatic differences? These declines in childhood poverty can be traced back to the national Earned Income and refundable Child Tax Credits, without which the childhood poverty rate would have been 23.8%, and the Supplemental Nutrition Assistance Program (SNAP), which lowered the childhood poverty rate by nearly three percentage points, from an estimated 19.5%. Both of these programs had significant effects on the overall poverty rate, as well, though the effect of both pales in comparison to that of the Social Security program, which keeps a full 26 million Americans above the SPM’s poverty threshold, and, without which, poverty in the United States would balloon to nearly a quarter of the population:

The Census Bureau’s estimates of Health Insurance Coverage provides further evidence of the real impact of the nation’s social safety net. The 2014 estimates represent the first full year of data after the implementation of the Affordable Care Act (ACA) and its accompanying expansion of Medicaid benefits to the adult population living in households earning up to 138% of the federal poverty level.
The effects were big. Both the CPS health insurance survey (national only) and the American Community Survey (national and state) estimates show a three percentage point decline in the national uninsured rate, which is directly attributable to the implementation of the ACA. In other words, the share of uninsured Americans fell more after one year under the ACA than it had over the entire previous decade. As expected, the groups that experienced the largest declines in percentage uninsured were those with the highest historic rates: working age adults and communities of color, all of whom experienced declines greater than four percentage points:

What Can We Do?

The data are clear: U.S. safety net programs provide critical support to low-income children, families and individuals. While these programs have continued to keep millions of Americans out of poverty and away from disaster, they have collectively failed to bring down the poverty rate, which has hovered around 15 percent for far too long. Similarly, dogged improvements in the economy at large—such as steady job growth and low interest rates spurring private sector investment—have done little to tangibly improve the financial security of the majority of American households. The stubborn persistence of these historically high levels of poverty belie the superficiality of these improvements to our economy.

This is where states have an opportunity—and a responsibility—to pick up the slack where the private sector and federal government have fallen short and implement broad-based social reforms that provide all citizens the foundation necessary to thrive. Only half of the states and the District of Columbia offer a statewide EITC, to complement the federal tax credit. As demonstrated in Table 2, the EITC has served as one of the nation’s key weapons in the fight against childhood poverty; expanding this benefit at the state level will provide the youngest Americans the early support they need to develop and flourish throughout their formative years.

Additionally, while the ACA will continue to drive down the national uninsured rate by increasing access to affordable health care, 20 states have chosen not to expand Medicaid, leaving thousands of the poorest Americans without affordable health insurance coverage. Correcting this will not only result in fewer Americans in poverty, but will also create a healthier and more productive workforce.
States should also eliminate asset limits for public benefit programs, removing a major impediment facing many families and allowing a greater number of families at the margins to take advantage of our nation’s many foundational resources. Many states have already taken each these steps, but only when every state acts will the US truly have an opportunity economy, one in which all citizens can take part.

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