It has been said that haste makes waste. Apparently, this saying also applies to legislation.

Back in March with the pandemic looming, Congress quickly passed major legislation to address the pain of the pandemic. It was well known at the time that the quickness by which the pandemic legislation became law would lead to mistakes and inefficiencies. Here is just one of them.

The Food Stamp Cliff

My last blog highlighted the new food stamps rule created by Congress to address the pandemic. I hinted at how it made welfare cliffs worse.

Welfare cliffs, also known as benefits cliffs, show up whenever a loss in benefits exceeds an increase in earnings. These cliffs are disincentives for earning more money and can show up in tax and welfare programs individually or in combination. 

When it comes to the food stamp program, our research shows that normally these cliffs are fickle. Whether a cliff occurs for a family depends on several factors. In some cases, such as when there is an elderly or disabled member of the household, there are no welfare cliffs. However, if the household has no member who is disabled or elderly and especially receives the maximum deductions and allowances, there can be significant cliffs.

Now with the pandemic food stamp program, all households have cliffs—and they are steeper than ever before.

The table below shows the cliffs for households up to six6 persons when no member of the household is disabled or elderly. The benefit amounts stay the same no matter what income a household receives. Therefore, any household over the gross income limit—even just one dollar over the limit—would lose the entire benefit no matter what level of income it had prior to its income exceeding the limit.

 

Households with an elderly or a disabled member also have cliffs of the same magnitude. However, the gross income level when they hit the cliffs varies depending on the net income calculations, but in every case, these levels would be greater than the gross income limits listed in the table. 

From March 2020 to August 2020, these cliffs were immaterial because the Georgia Division of Family and Children Services (DFCS) received permission from the Federal government to extend eligibility certification for six months. In practice, this meant that those households no longer qualifying for benefits were allowed to stay in the program. 

However, DFCS began processing renewals again in September, and now households gaining in earnings can find themselves faced with the cliffs at the magnitudes displayed in the table.

What was Congress thinking? 

The food stamp changes were part of the Families First Coronavirus Response Act (P.L. 116-127), which had overwhelming bipartisan support. With the legislation, Congress intended to ensure the physical and financial security of families.

One concern was access to food. Congress wanted to make more food available through the food stamp program. Fair enough. 

However, changing the rule so that every household participating in the program gets the maximum allowable benefit was crude and blunt. It guaranteed steep welfare cliffs across the board. A single-parent household with one child earning $1,868  a month would lose $374 in monthly benefits if the parent received just one dollar more in income. 

The action also favored wealthier participants. A four-person household with $2,839 in monthly income gets $680, which is exactly the same amount received by a four-person household with no income despite being more vulnerable. 

 

Congress did not have to be so crude and blunt in its approach. Just as easily, Congress could have simply increased the maximum allotment. This action would have spread out the extra funding across all incomes more evenly among the participants. 

Congress could have also been more daring by simultaneously increasing the gross income limit, making any potential cliffs less severe.

The dilemma 

Perhaps Congress chose not to consider these two easy alternatives because key members believed it would be too difficult to roll back the enhanced benefits once the pandemic is finally over. 

There is probably some truth to this fear. However, we do not escape the political difficulty. My next blog will focus on the coming food stamp crisis. 

If you have experience with the food stamp cliff, we would like to hear from you. Be sure to let us know in the comments below. 

 

DISINCENTIVES FOR WORK AND MARRIAGE IN GEORGIA’S WELFARE SYSTEM

Based on the most recent 2015 data, this report provides an in-depth look at the welfare cliffs across the state of Georgia. A computer model was created to demonstrate how welfare programs, alone or in combination with other programs, create multiple welfare cliffs for recipients that punish work. In addition to covering a dozen programs – more than any previous model – the tool used to produce the following report allows users to see how the welfare cliff affects individuals and families with very specific characteristics, including the age and sex of the parent, number of children, age of children, income, and other variables. Welfare reform conversations often lack a complete understanding of just how means-tested programs actually inflict harm on some of the neediest within our state’s communities.