Intended and Unintended Effects of the War on Poverty: What Research Tells Us and Implications for Policy Marianne Bitler, UC Davis & NBER Funding acknowledged/disclaimer

• FUNDING ACKNOWLEDGMENT: Research reported in this talk was supported by the Eunice Kennedy Shriver National Institute Of Child Health & Human Develop- ment of the National Institutes of Health under award number P01HD065704 and by the National Science Foundation under award SMA1327768. • DISCLAIMER: The findings, conclusions, views, and opinions are solely those of the authors and do not necessarily represent the views of the US Department of the Treasury, the National Institutes of Health, the National Science Foundation, or the United States gov- ernment. War on Poverty

• In his 1964 State of the Union address, President Johnson declared a War on Poverty. • Congress passed the Economic Opportunity act, creating the Office of Economic Opportunity to administer local funds (8/64). – Community Action Program (set up Comm. Action Agencies-local non-profits to promote self-sufficiency and run grants, Head Starts, etc. led by community members) – Project (school readiness for low-income kids) – (training for job readiness) – Others (Section 8 housing, Legal Services, Community Health Centers, Family Planning Grants, VISTA, Upward Bound…) War on Poverty

• Food Stamp Act of 1964 (8/64) (allowed counties to join what had been a pilot program ) • Elementary and Secondary Education Act (4/65) (Title 1) • Social Security Act of 1965 (7/65) (created Medicaid and ) • School Breakfast Program 1970s

• Earned Income Tax Credit (1975) (for families, small) • Supplemental Security Income (1974) (means tested cash benefits for disabled and aged) • WIC program (1974) (food vouchers for low income pregnant women and children under 5) Spending

• : Real 2014 $45 Billion 65, real 2014 $140 Billion 1972 (Haveman et al., JPAM) • Poverty: 1965 15.6%, 1972 11.9% • Participation in food stamps: 1965 500,000 participants, 1974 15,000,000 participants Summary of talk

• This talk is organized around programs aimed at the non-elderly and children. • It is also organized around the type of benefits: Cash, in-kind, and investments in human capital. • Focus on long run impacts as well. (Emerging economics literature) Types of programs

Timing Cash In-Kind Human Capital Original War on AFDC/TANF Food Stamps Head Start Poverty or earlier (SNAP) Title I School Meals Higher Education Housing Assistance Student Aid Medicaid Job Corps

Later program SSI WIC Early Head Start EITC CHIP CCDF The social safety net for nonelderly families: Eligibility 1. Cash welfare (AFDC/TANF) [means tested, categorical] 2. Food Stamps [means tested, nearly universal] 3. The EITC [means tested, requires employment, categorical] 4. SSI [means tested, categorical] 5. Medicaid [means tested, categorical until ACA] 6. WIC [means tested, categorical] The safety net for nonelderly families: How big in 2010? 1. In 2010, 35.2 million families with kids, 79 million families 2. Programs (not all targeted just to children 1. Medicaid non disabled children: 27 million children, $82 billion, $2363 per child per year 2. TANF cash: 1.9 million families, $11 billion, $402/month per family on the program 3. Food Stamps: 18.6 million families, $65 billion, $285/month per family on the program 4. The EITC: 26.2 million tax units, $59 billion, $187/month per tax unit 5. SSI (non-aged): 6.7 million persons, $46 billion, $518/month per recipient 6. WIC: 10 million persons, $7 billion, $5 billion food, $41.43/month per recipient 7. Head Start: 904,000 persons, $7 billion, $8000/year per recipient, if annualized, $667 per month Assessment

• I will review the causal literature about the largest of these programs. • I focus on intended effects such as poverty reduction and self-sufficiency. • I also consider unintended effects on employment, earnings, income, & poverty. • I also look at longer-run effects on family formation, investments in children, etc. Ongoing work

• I will summarize some ongoing work of mine aimed at looking at long run effects of the Food Stamp program on earnings and the food environment Stated intended effects of programs

• Cash aid: Provide a floor for consumption • Food programs: Avoid hunger, malnutrition • Health programs: Improve health • Human capital: Increase attainment, raise wages • Intergenerational goals Other key features of last several decades in the US • Transition from out-of-work assistance to in-work assistance in the US post welfare reforms of the late 1990s – Cash welfare entitlement (AFDC) changed to block grant (TANF), time limits, other tightening – EITC expanded • Other factors that are relevant – Business cycle – Wage and income inequality – Changing social norms Effects of programs: Unintended

• Standard economic model of a cash transfer program with utility maximizing recipient and means testing • Benefit reductions with increased earnings lead to work disincentives, asset tests lead to savings reductions • Iron triangle: More work incentives (lower tax rate) means more people on the program unless generosity is reduced • Categorical benefits in theory can cause changes in categories (single mother programs lead to more single motherhood) • Intergenerational effects • Take-up, stigma In-kind programs

• In-kind means you do not get cash. Economists think cash is more efficient (you pick) • Basic models predict biggest effects for those who would spend less on the good than the value of the in-kind benefit. Those who would spend at least that much should only increase use a little. • Behavioral science, dynamics predict otherwise. • Give in-kind to constrain people to consume the good (food stamps, medical benefits) Why can’t we just compare recipients to non-recipients or look at trends? • People who use these programs look systematically different than those who don’t (education, age, disability, single parenthood) • Might worry they are different on other dimensions we can’t see • If so, the comparison might overstate the effects of the program Why can’t we just compare recipients to non-recipients or look at trends? • Trends can be driven by other variables Causal estimates

• Experiments are the gold standard, randomize who gets an offer of a program, ensure their characteristics can’t be correlated with the offer • Quasi-experimental variation-arbitrary timing or imposition of policies, next best Variation for obtaining causal impacts

Federal St/Local Exog. RCT Rollout Policy Policy Formula Other AFDC/TANF X X X X SSI X X X EITC X X X Food Stamps/SNAP X X X Child Nutrition X X X X WIC X X Medicaid X X X X Housing X X CCDF X Head Start/Early HS X X X Title I X Higher Ed Student Aid X X Training X AFDC/TANF

• AFDC was an entitlement, changed to block grant TANF program in 1996 • State variation in benefits/eligibility • High tax on earnings • No time limit until kids age out • Came with Medicaid, Food Stamps, other benefits • Concerns about rising welfare caseloads lead to waivers, culminated in PRWORA AFDC vs. TANF

• Lifetime time limit with TANF • More work emphasis • More state flexibility to spend $ on non-cash assistance aimed at higher income folks (some states have basically dissolved their AFDC programs), block grant not entitlement • More state flexibility with sticks (sanctions) and carrots (reduced tax rate on earnings) TANF No Longer Acts as a Stabilizer TANF Reaches Fewer Poor Families A small share of the TANF block grant is used for cash assistance • Only 25% of the TANF block grant is cash assistance • Less assistance is going to the poorest families Effects of welfare reform

• More work, less welfare use in immediate wake of PWRORA (booming economy, EITC expanded), some evidence from experiments states had to do to get waivers • Little evidence state choices about earnings reductions affected income • Little evidence of any impacts on family structure • Children do better if income goes up, not otherwise Long Run Effects of the Food Stamp Program • Rollout: Food Stamps, series of papers by Hoynes, Schanzenbach, and Almond – Food Stamps began in 1961, pilot – Food Stamp act 1964, , was voluntary at the county level – Mandatory by 1975 – County rollout design, compare changes before and after my county gets Food Stamps, counterfactual is what other counties not getting it experience Rollout is a good quasi-experiment

• Exogeneity: Is adoption plausibly random? – Variation across time and place in where roll out occurred (Maps, time series) – Existing papers look at time to adoption as a function of other welfare programs/county characteristics pre adoption, no relationship – Event study graphs Figure 2: Food Stamp Program Start Date, By County (1961-1975)

Note: Authors’ tabulations of food stamp administrative data (U.S. Department of Agriculture, various years). The shading corresponds to the county FSP start date, where darker shading indicated later county implementation.

45 Share of counties with Food Stamps by year

SNAP adoption (from Hoynes and Schanzenbach, 2009): Share of counties adopting by year 114 AMERICAN ECONOMIC JOURNAL: APPLIED ECONOMICS OCTOBER 2009

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1961: Pilot 1964 FSA: 1973 Amend: ) prog rams counties can mandatory FSP b y inititated start FSP 1975 80 percent

d e t h eig w ( 60 P S F

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a 40 p i c i t par

1968: PSID s b eg ins ie t 20 un o C

0 1960 1962 1964 1966 1968 1970 1972 1974

Figure 1. Cumulative Percent of Counties with Food Stamp Program, 1960–1975

Source: Authors’ tabulations of county FSP start dates. Counties are weighted by their 1960 population.

20

Food stamp program Commodity distribution program )

ons 16 i mill (

ation 12 7 p i c i part

8 average

4 Monthly

0 1969 1970 1971 1972 1973 1974 1975 1976

Year

Figure 2. Food Assistance Program Participation, 1968–1976

Source: Author created fgure based on a table from the book Feeding Hungry People: Rulemaking in the Food Stamp Program Berry 1984 . ( ) Effects of Rollout

• Existing papers show that roll out leads to less out of pocket food spending, more food at home (Hoynes & Schanzenbach, 2009) • Some work disincentive effect (similar to cash) (Hoynes and Schanzenbach, 2012) • Increases in birthweight, less LBW from natality data (Almond, Hoynes, and Schanzenbach, 2011) Long run effects on adult health

• This paper uses the PSID (a panel data set). You know where kids were when they were 0 to 5, and can see when they were first exposed to Food Stamps. • Hoynes, Schanzenbach, and Almond find large effects on reducing metabolic syndrome and increasing self-sufficiency for women. Table 2 Metabolic Syndrome Index for High Participation Sample Components of metabolic syndrome index

Metabolic syndrome Heart High blood Heart attack (index) disease Diabetes pressure Obesity FS share IU-5 -0.294*** -0.032 -0.13 -0.159* -0.053 -0.031 (0.107) (0.048) (0.086) (0.086) (0.027) (0.019)

Mean of dep var 0.01 0.05 0.19 0.33 0.03 0.01

Observations 8,246 8,431 8,430 9,217 8,430 8,432 R-squared 0.26 0.19 0.22 0.26 0.13 0.08

Table 3 Additional Health Outcomes for the High Participation Sample

Other health outcomes Health behaviors In good Height below Ever Drink 3+ day health Disabled 5th perc. smoked now FS share IU-5 0.110 -0.004 -0.060** -0.078 -0.002 (0.074) (0.039) (0.026) (0.131) (0.052)

Y-mean 0.59 0.12 0.02 0.52 0.15

Observations 25,738 25,731 9,398 8,430 8,413 R-squared 0.16 0.13 0.22 0.32 0.25

Notes to Tables 2 and 3: Each parameter is from a separate regression of the outcome variable on FSP exposure (share of months between conception and age 5 that FSP is in the county). The sample comes from the 1968-2009 PSID and includes heads and wives born between 1956-1981 who are between 18 and 53 (or 24-53 for economic outcomes). The high participation sample includes those born into families where the head had less than a high school education. Estimates are weighted using the PSID weights and clustered on county of birth. The models control for individual demographics, family background, and fixed effects for year of birth, year of interview, county, state specific linear cohort, and 1960 county characters interacted with linear cohort. Standard errors are in parentheses and ***, **, and * indicate that the estimates are significant at the 1%, 5% and 10% levels.

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Other papers

• Barr finds exposure to Food Stamps while young reduces the probability of incarceration • My own work with Tim Beatty and Cynthia Van der Werf shows that there was an effect of rollout on the food environment. We see an increase in employment in grocery and food stores. Bitler and Figinski (I)

• Look at long run effects of exposure to Food Stamps while 0-5 • Use tax records for a 1 percent sample of Social Security Numbers • Linked to place of birth from Social Security Card applications • Sample: Born in US 1955 to 1980 and could match to place of birth Bitler and Figinski (II)

• Outcomes at age 32. • Control for county, year of birth, gender, and white/non-white. • Also control for average spending in the county of birth through age 18 on – spending on public medical care – the EITC – unemployment insurance payments – SSI Bitler and Figinski (III)

Results for FS exposure women at age 32, cohorts 1955–1980

(1) (2) (3) (4) (5) (6) FS thru 5 654⇤⇤ 587⇤ 589⇤ 670⇤⇤ 614⇤ 641⇤⇤ (311) (302) (312) (300) (342) (311) Controls for: White Y Y Y Y Y Y YOB FE Y Y Y Y Y Y COB FE Y Y Y Y Y Y SOB trend N Y Y Y N N COB trend N N N N Y Y REIS birth N N Y N Y N REIS to 18 N N N Y N Y

34 Bitler and Figinski (IV)

• No effects for men • For women, also find a reduction in ever having had SSI and SSDI EITC

• The EITC is a refundable tax credit, quite large for families with children, small otherwise. • It offers a wage subsidy, then a flat amount, then is taxed away. • Take-up is high. • Bitler, Hoynes, and Kuka (2016) find that it is not very countercyclical for low-skill/single parents, when times are bad they do not get more EITC. Higher skill/married parents claim more when times are bad. EITC

• EITC expanded considerably in mid 1990s, with a much bigger increase in benefits for those with 2 or more versus 1 kid – Series of papers by Hoynes and Eissa, Simon and Miller, Patel, DD of 1 versus 2 kids post expansion on labor supply, infant health, income; Evans and Garthwaite on mother’s health: All find positive effects – Dahl and Lochner use own predicted EITC funding to look at effects on kids’ test scores: More predicted EITC leads to higher text scores Head Start

• Non-profits get matching grants from the Federal government to provide low income children with pre-school • Based on Perry Pre-School experiment • Started in 1965 • Lots of evidence of short run cognitive gains using family comparisons Head Start

• Head Start Rollout: poorest 300 counties got aid in applying – Ludwig and Miller QJE: Find some long run positive effects on mortality, other outcomes • Variation in rollout: Barr and Gibbs find large effects of your mother being exposed to HS Other evidence using the Head Start Impact Study (experiment) • Bitler, Hoynes, and Domina: Distributional approach – Positive effects at the bottom of the PPVT distribution, and some achievement measures – Little difference across groups once condition on where in distribution the control group is • Kline and Walters and Page, Feller and Miratrix use other approaches, find evidence the counterfactual may matter • Gelber and Isen: Positive effects on parenting Medicaid Rollout

• Goodman-Bacon looks at rollout, places with larger AFDC use pre-rollout see a bigger increase in coverage. He finds a significant decline in non-white child mortality. • Boudreaux et al. find long run positive effects of exposure on health in adulthood. Medicaid

• Big literature using late 1980s/early 1990s expansions – Simulated eligibility: Project eligibility using national data Currie/Gruber/Cutler/Shore-Sheppard/Yelowitz • Experiment in Oregon: Baicker, Finkelstein, others – More coverage, more health care use, better self-rated health, less depression, little on objective health, less bankruptcy • RD of Medicaid expansion – Those born on or after September 1983 (expansion happened when they were young kids) – Card and Shore-Sheppard coverage went up – Wherry, Miller, Kaestner, and Meyer 2015: Less hospitalizations – Miller and Meyer: Less mortality for teens – East, Miller, Page, and Wherry: Large positive effects of exposure in utero on the next generation’s birth weight Broader lessons for policy (I)

• Individuals respond to incentives – Effects on labor supply are somewhat mitigated by a shift to in-work welfare – Effects largely on labor supply, incentives for altering family structure and investment not large enough? Broader lessons for policy (II)

• Some positive long term effects, can think of these programs as investments • Tradeoffs for policy makers (Iron Triangle, more generosity vs. better work incentives) • Program complexity is challenging, can attenuate program impacts Broader lessons for policy (III)

• In some settings, need attention to quality as well as quantity • Coordination across levels of government important (e.g., Medicaid and ACA) • Continue agenda, counterfactual of 1980s to now not the counterfactual about which we are learning long-run effects