Restoring a True Safety Net
October 14, 2012
The Obama years have seen unprecedented growth in spending on what used to be known as the federal “anti-poverty” or “welfare” programs: means-tested initiatives to provide food, health insurance, housing benefits, and income support to the poor. These programs certainly grew during the Bush administration, with spending increasing by a total of about $100 billion over that eight-year period ($12.5 billion per year in 2010 dollars). But that spending increased another $150 billion in just the first two years of the Obama administration.
The scale of these increases is staggering. In three years, from 2008 through 2010, total annual spending on welfare programs (in 2010 dollars) increased from $475 billion to $666 billion — a 40% increase after accounting for inflation. At a combined annual cost of two-thirds of a trillion dollars, these programs are now on the same scale as the defense budget ($693 billion), Social Security ($700 billion), and Medicare ($551 billion).
Some of these spending increases were justified by the deep recession that began in December 2007. Indeed, the American Recovery and Reinvestment Act (ARRA), or the stimulus program, specifically targeted poverty programs for greatly expanded funding. And, as in the recessions of the early 1980s and early ’90s, the poverty rate climbed during the 2008 recession — to 15% from an average of about 12.5% during the mid-2000s. But this rise in poverty does not explain most of the recent increases in spending on anti-poverty programs.
Rather, it is the dramatic expansion of eligibility for these programs — spreading their benefits well into the middle class — that has driven the explosion of spending. Today, more than half of the benefits allocated through programs we think of as “anti-poverty” efforts actually go to people above the poverty line as defined by the U.S. Census Bureau. As a result, our poverty programs — once justified and defended as a safety net for Americans truly in need — exist, increasingly, to make life more comfortable for the middle class.
Clearly, if the United States is to control its growing budget deficit, the next Congress and president will have to seriously examine anti-poverty spending and bring these programs back into line with their original purpose. The good news is that, because of the ways in which federal anti-poverty benefits are currently distributed, policymakers can pursue fairly straightforward remedies. The fact that much of today’s spending on anti-poverty programs goes to people who are not in fact poor means that resetting eligibility requirements can yield significant savings — and thereby help restrain the growth of federal deficits and debts.
By carefully reviewing the data about safety-net programs — data that are not well known even among policymakers in Washington and that are, in some cases, analyzed here for the first time — we can understand the trends in welfare spending that have brought us to this point, and can find ways to significantly reduce federal spending without harming Americans who are actually in need.
In the world of government programs, “poverty” is not a simple label. There is only one official definition of poverty, set by the U.S. Census Bureau and updated each year to reflect inflation. The most recent definition, for instance, set the poverty threshold for 2011 at $11,702 in annual income for a single person under 65 years of age, and at $22,811 for a family of four that includes two children. Most of our assessments use 2010 data, since these are the most recent available authoritative figures, and the 2010 definitions were slightly lower: $11,344 for a single person and $22,113 for a family of four.
The problem comes in applying poverty definitions, because Congress allows federal agencies wide latitude in determining eligibility thresholds. Federal “poverty guidelines” allow agencies to move the threshold up to 130% or 200% of the official poverty level. For reference, using a poverty threshold of 200% for a family of four in 2011 would have given poverty benefits to families earning more than $45,000 annually. Throughout this analysis, when we refer to the “poverty level,” “poverty line,” or simply “poverty,” we mean the official federal definition of poverty as established by the U.S. Census Bureau, using annual income.
It is worth noting that average incomes and living costs differ significantly among the states. According to the Census Bureau, in 2010, the median income in Mississippi was $45,484; in Maryland, it was $83,137. Because of these differences, the federal government gives some leeway to the states to determine eligibility for anti-poverty programs, though there is only one federal definition of poverty, which is designed to reflect an absolute subsistence standard rather than one relative to incomes.
FEDERAL FOOD AID
With these facts in mind, it makes sense to begin our investigation with federal food programs — which, among the various anti-poverty programs that have grown in recent years, have seen the largest spending increase (as a percentage). Between 1992 and 2007, spending on food programs did not vary by more than a few billion dollars, after adjusting for inflation. But according to the Congressional Budget Office, spending on food programs rose from $57 billion in 2007 to $95 billion in 2010 (again, adjusted for inflation), an utterly unprecedented increase of 66%.
The two best-known federal food programs are the Supplemental Nutrition Assistance Program, or SNAP (formerly known as food stamps), and the school lunch and breakfast program. These are also the two largest food programs, accounting for approximately $68 billion and $14 billion, respectively, of the total federal funds spent on food assistance in 2010. The only other significant food program is the Women, Infants, and Children (WIC) program, which adds another $6.7 billion to the total. If we exclude administrative and other program costs and look only at direct spending on food benefits, we find approximately $65 billion in spending for SNAP, $13.5 billion for school meals, and $4.5 billion for the food-packages component of the WIC program.
Between 2000 and 2010, the number of persons receiving food stamps more than doubled, increasing from 17 million to slightly more than 40 million. Real spending more than tripled during this period, rising from $22 billion to $68 billion. This huge increase represents a major break from the historical pattern: Between the early 1990s and 2005, adjusted for inflation, the relationship between SNAP expenditures and food-stamp enrollment was quite stable. This suggests that the average per-person benefit was relatively constant during this period, with only a modest period of growth during the early 1990s. Starting in 2009, however, the relationship changed dramatically, with spending on benefits climbing much more rapidly than the number of beneficiaries.
The relationship between enrollment and average benefit is illustrated in the figure below, in which monthly benefits are expressed in 2010 dollars. Note that the average monthly benefit per person was approximately $90 during the 1980s, and rose only to a little over $100 per month during the recession of the early ’90s before falling back to $90 in the early 2000s. The benefit then rose again to $100 in 2003 and remained fairly level through 2008. In 2009, however, the average monthly benefit spiked to $127, and the next year it increased again to $134 per person…