Solving the food stamp benefits cliffs

by David Bass | Oct 26, 2023

Solving the food stamp benefits cliffs

Many Americans rely on SNAP benefits to afford food, but these same individuals and families face a trap that keeps them mired in dependency. It’s called the SNAP benefits cliff. A new report from the Georgia Center for Opportunity analyzes some possible solutions for addressing the benefits cliffs still present in safety-net programs like SNAP.

What are benefits cliffs?

A benefits cliff is when an individual, family, or household loses more in net income and benefits from governmental assistance programs than it gains from additional earnings. This net loss is a perverse incentive that undermines the natural desire to earn more income.

At an individual level—or in the case of SNAP, at a household level—the impact has to do with the ability of the individual or household to overcome the cliff. If the household can increase its earnings (and other income) sufficiently relative to the loss in benefits and taxes, the cliff will have no impact on that specific individual or household.

Who is hurt the most by benefits cliffs?

Our computational analysis shows that it is mathematically possible for some one-member households, where the individual is disabled or elderly, to overcome a benefits cliff with a pay raise of less than 5%. However, almost all other households will require percentage income increases in the double digits or worse.

Larger families, especially those without elderly or disabled members of the household, fare much worse. For example, a family of four (where a single mom is raising three kids, for example) would require a pay raise of between 37% and 121%, assuming the family doesn’t have housing costs. For larger households with disabled or elderly members, that pay raise ranged from 30% to 109%.

Access the Report:

SOLVING THE FOOD ASSISTANCE (SNAP) BENEFITS CLIFFS

Our comprehensive report on the SNAP Benefits Cliffs outlines the pitfalls in the current structure of the program and steps that can be made at a federal, state, and agency level.

Learn More About This Report

Running the numbers: the impact of benefits cliffs

A family of four would begin experiencing SNAP benefits cliffs when their household income exceeds $36,084. This family would lose around $462.42 in SNAP benefits each month. To overcome those lost benefits, that same family would need to earn $58,280 a year, a 61.5 percent increase in income.

What is the marriage penalty?

Another example of benefits cliffs’ detrimental impacts lies in the marriage penalty. For instance, a couple choosing to marry would leave them worse off financially by getting married than by staying single. Instead, many couples decide to remain unmarried to avoid the financial burden of the marriage penalty.

SNAP benefits cliffs are at a 20-year high

During the COVID-19 pandemic, the SNAP maximum allotments were raised significantly—between 45% and 51%. The Thrifty Food Plan was recalculated by the USDA, which impacted these increases. However, SNAP’s current benefits cliffs are at a 20-year high and may be the highest they’ve ever been.

The situation is getting worse

Setting aside COVID-19 and the emergency allotment program, SNAP benefits cliffs are getting worse and, based on twenty years of data, have never been higher. This was not always the trend. The benefits cliffs cycled up to a high in 2009, slowly came down, and then leveled off for a few years. However, since the pandemic, they have all shot up to record highs.

Policy goals for improvement

We recommend approaching change from a policy perspective, and engaging Congress and the states to solve the problems with SNAP’s benefits cliffs.

As a public policy goal, it would make sense to design a safety-net assistance program in such a manner that it minimizes potential cliffs for most cases. We believe that it should be relatively easy for individuals and households to overcome benefits cliffs by earning additional income.

Our recommendations include:

Limiting how long future emergency allotment programs last
Requiring the USDA to recalculate the Thrifty Food Plan
Permanently eliminating benefits cliffs that a typical pay raise can’t mitigate
Implementing strategies to prevent marriage penalties
Amending U.S. code to test potential solutions via demonstration projects
Opening the floor for the Secretary of Agriculture to work with states to solve benefits cliffs
Allowing states to conduct §2026 demonstration projects

Benefits Cliffs in the Aggregate: Consequences for Welfare and Business Cycles

by Kimberly Sawatka | Oct 3, 2023

Georgia news, in the news, current events, Georgia happenings, GA happenings

Benefits Cliffs in the Aggregate: Consequences for Welfare and Business Cycles

Benefits cliffs – sudden decreases in public benefits that may occur with a small increase in earnings – may inhibit upward mobility. I study the effect of a multitude of cliffs across the universe of benefit programs in nine southern US states on intensive-margin labor supply and the implications for aggregate fluctuations. Using the American Community Survey and proprietary data from the Georgia Center for Opportunity covering nine southern US states, I leverage geographic and household-structure variation to find that, in aggregate, individuals in households approaching benefits cliffs reduce their working hours by about 40 hours annually. I then build a dynamic stochastic general equilibrium model that matches this result, where a key assumption of inframarginal households allows me to accurately capture the benefits cliffs of the US tax and transfer system. I find the aggregate implications of benefits cliffs on output are small, but welfare gains from their elimination are large and concentrated. In a counterfactual model that smooths over benefit cliffs, output increases about 1.6% more on impact in response to an aggregate productivity shock compared to the baseline model with benefits cliffs, but the welfare gain to formally-constrained households doubles.

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Opinion: New Missouri law will help residents escape safety-net cliffs

by Eric Cochling | Sep 26, 2023

Opinion: New Missouri law will help residents escape safety-net cliffs

Missouri lawmakers took an important step forward for working-class and impoverished residents this year by enacting Senate Bill 82. This new law will help more Missourians escape from an entrapping safety-net system and experience the dignity and opportunity of work.

On paper, our safety-net programs in Missouri are intended to help people avoid abject poverty and meet their basic needs. These programs should be temporary whenever possible and encourage work and independence, because ultimately what we want for people is stability and mobility. The sad reality, however, is that many of the programs include a hidden time bomb that threatens the very individuals they are intended to help.

For those receiving safety-net benefits — especially SNAP, child care assistance, and Medicaid — there can be a sudden, steep loss of government assistance as a worker’s income increases. This often results in a loss in benefits that far exceeds the additional pay from a raise a worker receives. These unintended consequences of the benefits cliff can be devastating, trapping individuals and families in a perpetual cycle of poverty. It is high time we address this issue and strive for a more sustainable and supportive system.

Read the full article here

How programs to help the poor can harm upward mobility – Sutherland Institute

by Georgia Center for Opportunity | Aug 15, 2023

How programs to help the poor can harm upward mobility – Sutherland Institute

Imagine you’re offered a raise that, if accepted, would actually make your family worse off.

This is the experience of some families in poverty when they hit something called the benefits cliff. This “cliff effect” is triggered when a family’s increase in earned income prompts a disproportionately larger decrease in the benefits they receive through federally funded public assistance programs.

This week’s guest is Kelsey Underwood, vice president of strategy and product for the Georgia Center for Opportunity. She joins the show to discuss how the benefits cliff can disincentivize work, negatively impacting families struggling to escape poverty. She also touches on GCO’s efforts in various states to clear obstacles to upward mobility for impoverished Americans. The discussion centers around the dignity of work that fosters upward mobility and identifies resources available to policymakers and business leaders to help address the issue.

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Are Work Requirements Good or Bad?

by Corey Burres | Jun 1, 2023

Are Work Requirements Good or Bad?

Key Points

The arguments around work requirements ignore the purpose of how our safety net services should work.
The public, in general, agree with the argument for work requirements because they see the system as a temporary solution.
We must reform the system so that we move people into opportunity and thriving.

As the federal government debates the debt ceiling and attempts to bring spending under control, one recurring topic is work requirements for adults on government benefits and safety net services. The argument is that implementing work requirements will encourage more people to leave welfare programs, which in turn would decrease spending on one of the biggest expenses in the federal budget.

However, the debate about work requirements should not, in my opinion, be connected to fiscal accountability. Instead, it should be linked to the central purpose of these services and the people needing them.

A look at work requirements

To understand these challenges we need to look at the differing opinions on work requirements. On one side you hear the argument that not requiring work for benefits like SNAP and Medicaid is a disincentive to work for those on benefits. In other words, people are staying on benefits longer than necessary because there is no benefit to getting off, and in many cases, it is more costly to get off.

On the other side, the argument requiring work is simply a way to save money which ultimately hurts the poor. The argument is people in need of food support and healthcare will not be able to work and thus will be forced off of services without work.

Both of these arguments ignore the full experience of those on safety net services. Therefore, I want to challenge us to set aside political talking points and have a real discussion on the issue. These arguments are fraught with finger-pointing and people assigning motivations to each other. The discussion around work requirements is important because it challenges us to ask, “What is the purpose of our welfare system?”

With The Alliance for Opportunity, we are crafting policies that will create a clear path to get off safety net services and into opportunity in Georgia.

Work requirements aren’t a bad idea

At the Georgia Center for Opportunity, we generally agree with the idea of work requirements, but not for the reasons political pundits throw around. We are not trying to “weed out bad actors” or trying to reduce government expenditures. Those outcomes may come to pass but they cannot and should not be the intent of such measures.

While there is a politicized debate currently raging, the idea of requiring work to continue to receive benefits is not new. FDR’s New Deal, the framework for our current safety net system, pushed for a system that helped those unable to work like children or disabled individuals. The expansion of such a system to cover the unemployed came later in the process and was designed to be a stopgap between employment.

As the system expanded even further, it became apparent the support should include systems to get people back into work—this led to job training and education programs.

That is where we are today and ultimately how we should be looking at the safety net system for those able to work. The system must be designed to ask, “How can we help you get back on your feet and be self-sustainable?” Not because you are only valuable if you work, but because you are a valuable member of society. This view of membership is probably why work requirements are very popular among the US population. We value and understand the importance of work.

The research on the value of work is expansive. It leads to positive outcomes for families, improved personal mental health, and deeper community value. It is what we should want for people. It is what we should build our services to provide people, not a paycheck but an opportunity.

The arguments against work requirements

The issue becomes more complex when you recognize the valid arguments against work requirements. One of these is that work requirements don’t increase work rates—they simply cut people off of needed services.

The argument is that these requirements add another stress level to people just trying to survive. This creates yet another hurdle for those already struggling to navigate a complex process. The result is people find a different means to survive or they simply give up. Obviously, no one wants to add to people’s burdens.

Rather than arguing against work requirements, these challenges highlight the flaws in our current system. The system is poorly designed and does not lead to the outcomes we want for people.

Work requirements are a good policy in a bad system

Policymakers are notoriously inept when it comes to policy reforms. Half-measures have resulted in a system that is not focused on outcomes. If the system were structured to reduce complexity and alleviate stress for those seeking job support, then a work requirement could be the positive encouragement it should be.

This is one reason we are working with other state think tanks on a One Door Model that would transform our safety net services and create a clear, supportive, and accessible path to work.

These types of policies are critical to ensure that we are helping those in need. They are also critical to ensure that we deliver dignity and hope as an outcome.

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About The Author

Corey Burres

VP of Communication and Marketing

Corey Burres is the director the award-winning education documentary Flunked. He served as a consultant with many state think tanks around the country to help them utilize marketing and story telling to improve public policy. He is active in the foster care community and working to help build a better community around him.

Brockway: Utah’s ‘One Door’ Policy Shows The Way Forward On Safety-Net Reforms

by Kimberly Sawatka | May 31, 2023

Brockway: Utah’s ‘One Door’ Policy Shows The Way Forward On Safety-Net Reforms

Below is an opinion column by Buzz Brockway:

The April unemployment report shows that job opportunities remain at historic highs across the country. In fact, the report came in better than expected at a 3.4% unemployment rate, exceeding expectations for the resilience and strength of the labor market.

In this environment, no work-capable person should be without a job. But the sad reality is that the very safety net system created to help people who are struggling is the same one contributing to keeping them mired in generational poverty. I’m talking about America’s social-safety net system.

As it stands, our nation’s welfare system is a fragmented hodgepodge of programs. The dozens of programs that make up “the system” have different and, at times, competing goals, inconsistent rules, and overlapping groups of recipients.

The complicated nature of welfare is more than a nuisance. For recipients, it’s a detrimental barrier to advancing to a better life. The scenario in signing up for welfare benefits is confusing at best. Even if people do find the right office, they must resubmit the same information multiple times, and often eligibility is determined by conflicting rules. Would-be recipients may end up with multiple plans and multiple caseworkers.

Ultimately, every hour someone spends navigating the safety-net system is an hour they aren’t spending looking for ways to escape it.

Adding to the confusion, there is often a disconnect between safety-net programs and welfare-to-work initiatives. This keeps people stuck in poverty. The safety net is essential for catching those who are falling, but it isn’t a destination. Although this truth is often politicized and used to advance a certain agenda, the vast majority of Americans recognize that work is the best way to escape poverty. It should be our goal to remove every barrier to a life of thriving, and that includes obstacles to work.

The path into poverty is deeply individual, and so reforms are needed for a more holistic approach. Streamlining the safety-net process is mandatory to avoid conflicting rules and inconsistent treatment of people between programs. A big part of this is consolidating and combining programs that serve the same families. For individuals, this will eliminate the need to go to multiple agencies for help. It will also mean that welfare recipients will be connected straight to work programs, setting a foundation to free them from generational poverty.

Is there an example of success in this arena? Thankfully, the answer is a resounding yes. We should look to Utah as an example of a state in the nation that is leading the way.

Utah’s “one door” policy has integrated human services with workforce services and provides citizens with a single program to work through. Welfare becomes work support, and people have a clear path to get the help they need while receiving education, training, and other support to find employment. On the fiscal front, the state also integrates federal and state funds using a unique cost model that has proven highly effective.

Read the full article here