The invisible safety net: Protecting poor children and families in the US

Janet Currie 04 January 2009

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In 1996, the Clinton administration fulfilled a pledge to “end welfare as we know it.” The main cash welfare programme for poor women and children in the US was replaced with the Temporary Assistance for Needy Families programme, which limited women to a lifetime total of five years of support, toughened work requirements, and strengthened sanctions. Under the Temporary Assistance for Needy Families programme, the poor are no longer “entitled” to state and federal cash assistance, and the federal government ended its commitment to match state spending on welfare.

The Temporary Assistance for Needy Families programme brought warnings of catastrophe. The Urban Institute, a Washington policy think tank, predicted that welfare reform would push 1.1 million children into poverty.1 Two high-ranking Clinton appointees at the Department of Health and Human Services resigned in protest.2 Senator Daniel Patrick Moynihan argued in the Senate that [this] “is not ‘welfare reform,’ it is ‘welfare repeal’. It is the first step in dismantling the social contract that has been in place in the US since at least the 1930s.”3

Yet the anticipated disaster never materialised. One reason is that cash welfare had been a decreasing part of the welfare system for many years. In 1996, many families receiving welfare also received “in-kind” assistance—food assistance, housing assistance, free medical care, and subsidised child care. These programmes providing specific goods often targeted needy children directly. Discussions of “welfare” often ignore these non-cash programmes, even though they account for the bulk of spending on low-income families. Other safety net programmes, most notably the Earned Income Tax Credit, provide cash. The Earned Income Tax Credit underwent a dramatic expansion during the 1990s and now provides more cash to low-income families than the Temporary Assistance for Needy Families programme.

The Invisible Safety Net

These programmes form a largely invisible but tremendously important social safety net, providing basic necessities to poor families. In his book about welfare reform, American Dream, Jason DeParle described cash welfare as one leg of a three legged stool that welfare mothers relied on for support. Since cash welfare was only one leg, it could be replaced by work or by contributions from friends or relatives.4

In The Invisible Safety Net, I argue that there is a fourth leg to the stool – support from the Earned Income Tax Credit and non-cash programmes. Less than 10% of aid to poor families is in the form of cash welfare payments. The bulk is provided by other safety net programmes including the Earned Income Tax Credit, Medicaid, food and nutrition programmes, housing assistance, and subsidised child care. This book assesses the importance and effectiveness of individual programmes in supporting low-income families with children and discusses how to improve their performance.

The evidence suggests that in-kind programmes are more effective than cash at improving the welfare of poor children in specific domains. A programme like Medicaid, which provides health insurance to poor children, is more effective in promoting the use of health care than a cash programme. And while I assess the programmes individually, I argue that they act together, providing a broad-reaching and comprehensive net that especially protects young children in low-income families.

Critiques of in-kind welfare programmes

Critics of in-kind programmes have three main arguments. First, critics dispute both their efficacy and how they are administered. A careful investigation of the evidence shows that many in-kind programmes are remarkably effective in improving the lives of poor children. Critics have alleged widespread fraud in virtually every safety net programme. These allegations have been investigated and proven largely without foundation. Yet each time Congress discusses funding these programmes, allegations of fraud and abuse resurface. We can expect this to happen once again as the new administration sets out to examine programmes serving the disadvantaged.

The ballooning federal budget deficit poses a second threat to safety net programmes. Once the initial stimulus packages are past and we are left to service the resulting debt, we may increasingly hear that there is simply no money left for anti-poverty programs. In America, safety net programs for children are particularly vulnerable because Congress must periodically reauthorise spending on them.

A third line of attack argues that, like the Temporary Assistance for Needy Families programme, control of the remaining safety net programs should be transferred to the states. The programs discussed in this book are all currently subject to federal guidelines even if they are administered at the state or local level. Many of the programs are “entitlements,” which means that anyone who applies and meets the eligibility criteria must be given benefits. An alternative vision of the safety net—the block grant approach—would take the money set aside for federal programs and give each state a grant. States would then design their own programmes and spend their block grants as they chose.

The issue of which level of government should be responsible for which functions has always been controversial in the US. Many people believe that anti-poverty programmes should be devolved to the states as a matter of “states’ rights.” But there are important economic reasons why such devolution could pose a severe threat to the safety net. One is that most states cannot run budget deficits. Under existing federal safety net programmes more people become eligible and entitled to assistance when times are bad so that federal payments rise automatically in bad times. Under a state block grant system, there would be no guarantee that federal payments to states would respond to economic conditions. If state revenues fall as need grows, there will be cutbacks in state-financed services. Some American states are already running out of money to pay for unemployment insurance and public health insurance programmes like Medicaid, illustrating the reality of this concern. Temporary cutbacks in programmes like Medicaid during bad times could permanently harm vulnerable children in a way that cannot be easily made up when budgets improve.

The value of the safety net

Public support for the safety net springs from a strong desire to help poor children. Yet until recently, few researchers asked whether welfare benefited children. Researchers focused on whether women on welfare earned less, married less, or had more children. No one specified exactly what specific benefits (if any) children were expected to gain from parental participation in cash welfare. In contrast, the safety net programmes discussed in my book have clear goals: Food programmes are to prevent hunger, medical programmes are to improve health, housing programmes are to provide shelter, and enriched early care and education is provided in an effort to promote school readiness.

The Invisible Safety Net describes the key components of the safety net and demonstrates that these individual programmes make a difference in the lives of low-income children. In-kind safety net programmes such as Medicaid, WIC, and Head Start have quietly served as a more effective answer to the problem of poverty than the cash programmes research usually highlights. In contrast, while welfare reform has been very successful at getting low-income women to work, there is little evidence that it has had much impact, positive or negative, on children.

Policy reforms

The important question for policy, however, is where we go from here. One option is to keep the structure of existing federal programmes as it is but to make incremental reforms to each programme. The discussion in this book acknowledges and catalogues many valid criticisms of existing safety net programme and addresses specific reforms with respect to each programme. Incremental knowledge-based change is not glamorous, but it is likely to be more productive than scrapping existing programmes in favour of new, unproven ones.

A promising alternative would involve the integration of existing programmes into a more effective safety net. Individual programmes all have different eligibility criteria and require different actions on the part of would-be users, greatly increasing the costs of participation to poor families. Coordinating eligibility requirements across programmes would cut administrative costs and help poor people access these programmes.

A more radical reform would involve using the tax system to administer the safety net, which is currently how the Earned Income Tax Credit works. This would allow the government to slowly phase out many different types of programme benefits as recipients’ incomes rose. At present, the fact that people stand to lose many benefits with slight increases in earnings is a disincentive to work and a barrier to economic advancement.

Most other books about poverty and welfare reflect public and scholarly preoccupations with cash welfare programmes and largely ignore the invisible safety net provided by in-kind programmes. Years of benign neglect by scholars and policy analysts pose their own threat to the safety net, as policy makers may not recognise the importance of key programmes. The research surveyed in my book shows that safety net programmes generally accomplish their goals and are a crucial part of the continuing fight against poverty among children. The new administration has an opportunity to put what we have learned to good use and move forward with reforming the safety net for the twenty-first century.

Footnotes

1. Zedlewski, Sheila, Sandra Clark, Eric Meier, Keith Watson. “Potential Effects of Congressional Welfare Reform Legislation on Family Incomes,” (Washington D.C.: Urban Institute) July 26, 1996.

2. Barbara Vobejda and Judith Havemann. “Two HHS Officials Quit Over Welfare Changes,” The Washington Post, Thursday, Sept.12, 1996, page A1.

3. Moynihan, Daniel Patrick. Speech delivered to the US Senate, Thursday August 1, 1996, reprinted as “When Principle is at Issue,” in the Washington Post, August 4, 1996, p. C07.

4. Jason DeParle, American Dream: Three Women, Ten Kids, and a Nation’s Drive to End Welfare (New York: Viking) 2004.

 

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Topics:  Welfare state and social Europe

Tags:  US, safety net, child poverty, welfare programmes

Henry Putnam Professor of Economics and Public Affairs and Director of the Center for Health and Well Being, Princeton University

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