A Safety Net That Works Improving Federal Programs for Low-Income Americans

A SAFETY NET THAT WORKS IMPROVING FEDERAL PROGRAMS FOR LOW-INCOME AMERICANS Douglas J. Besharov • Richard V. Burkhauser Douglas M. Call • James C. Capretta • Kevin C. Corinth Maura Corrigan • Mary C. Daly • Robert Doar Ron Haskins • Bruce D. Meyer • Edgar O. Olsen Angela Rachidi • Katharine B. Stevens • Russell Sykes Edited by Robert Doar AMERICAN ENTERPRISE INSTITUTE A SAFETY NET THAT WORKS IMPROVING FEDERAL PROGRAMS FOR LOW-INCOME AMERICANS Douglas J. Besharov • Richard V. Burkhauser Douglas M. Call • James C. Capretta • Kevin C. Corinth Maura Corrigan • Mary C. Daly • Robert Doar Ron Haskins • Bruce D. Meyer • Edgar O. Olsen Angela Rachidi • Katharine B. Stevens • Russell Sykes Edited by Robert Doar AMERICAN ENTERPRISE INSTITUTE ISBN-13: 978-0-8447-5004-0 (hardback) ISBN-0-8447-5004-2 (hardback) ISBN-13: 978-0-8447-5005-7 (paperback) ISBN-10: 0-8447-5005-0 (paperback) ISBN-13: 978-0-8447-5009-5 (ebook) ISBN-10: 0-8447-5009-3 (ebook) © 2017 by the American Enterprise Institute. All rights reserved. No part of this publication may be used or reproduced in any man- ner whatsoever without permission in writing from the American Enterprise Institute except in the case of brief quotations embodied in news articles, critical articles, or reviews. The views expressed in the publications of the American Enterprise Institute are those of the authors and do not necessarily reflect the views of the staff, advisory panels, officers, or trustees of AEI. American Enterprise Institute 1789 Massachusetts Avenue, NW Washington, DC 20036 www.aei.org Contents Preface v The Earned Income Tax Credit 1 Bruce D. Meyer Viewing the Food Stamp Program Through a 44-Year Lens 19 Russell Sykes Medicaid 47 James C. Capretta Empowering Child Support Enforcement to Reduce Poverty 63 Robert Doar Reducing Poverty by Reforming Housing Policy 87 Edgar O. Olsen Child Welfare: In Search of Lasting Reform 107 Maura Corrigan Temporary Assistance for Needy Families 129 Ron Haskins The Supplemental Security Income Disabled Children Program: Improving Employment Outcomes in Adulthood 147 Richard V. Burkhauser and Mary C. Daly iii iv A SAFETY NET THAT WORKS Child Care Assistance in the United States 160 Angela Rachidi WIC’s Expanding Eligibility, Rather Than Enhanced Services 179 Douglas J. Besharov and Douglas M. Call Improving Our Federal Response to Homelessness 206 Kevin C. Corinth Federal Early Childhood Care and Education Programs: Advancing Opportunity Through Early Learning 221 Katharine B. Stevens About the Authors 245 Acknowledgments 253 Preface mericans are frustrated that too little progress is being made in A reducing poverty and expanding opportunity. In a recent AEI/ Los Angeles Times survey, 70 percent of Americans said they believe the conditions for the poor had either stayed the same or gotten worse over the past 10 or 15 years, and 60 percent believe that most poor people will probably remain in poverty. Clearly the promise of upward mobility has not felt like a reality for many families stuck at the bottom of the economic ladder. In fact, one study from Pew Charitable Trusts found that 43 percent of Americans born in the bottom fifth of the income distribution remain there as adults, and more than 20 percent of children lived in poverty in 2014. To be sure, the official poverty rate is a flawed metric because it does not consider a significant amount ofgovernment-provided assistance that raises many families’ incomes above the poverty line. Better measures of poverty show that we have made progress in reducing material hardship, and experts from the left and right agree that the poor today are better off materially than in the past. But they are better off largely because of government assistance, not because they are working or earning more on their own—and therein lies the current dissatisfaction. Poverty fighters across the political spectrum have consistently said that helping low-income Americans achieve sufficient earnings should be the goal of our antipoverty efforts. The AEI/Los Angeles Times survey found that more than half of Americans living in poverty said that the main purpose of welfare programs should be helping poor people get back on their feet again, not simply providing for their material needs. Thankfully, most mainstream leaders understand the key principles of a better approach. Able-bodied adults need to work because steady employment almost always leads a family out of poverty, v vi A SAFETY NET THAT WORKS provides opportunities for upward mobility, and is a source of dig- nity and purpose. Children are best off when they are raised by two committed parents, which is most likely to happen in marriage. And society must maintain a safety net that reduces material hardship, ensures that children can be raised in healthy environments, and rewards individuals who work. However, translating these principles into effective public policy and detailed legislation is a difficult task. My hope is that this volume will be a useful resource for those trying to do just that. In the pages that follow, we have brought together academics and practitioners with decades of experience studying and implementing the crucial federal programs that assist low-income Americans. Each essay will discuss a program’s history, what research and personal experience show about its effects, and one expert’s view of how to help it work better. Of course, not all of the problems facing low-income Americans will be solved by federal antipoverty programs. But political reality dictates that these major programs are not going to disappear anytime soon, meaning leaders who are serious about helping poor Ameri- cans should learn how they work and develop an agenda for improving them. Moreover, many of these assistance programs do reduce poverty and, with thoughtful reform, could be even more effective in helping struggling Americans move up. This volume intends to help policymakers understand how each program functions—its strengths, as well as its weaknesses. Policymakers have an important responsibility, along with the rest of civil society, to develop a safety net that works and better helps poor Americans increase their earnings. When President Johnson declared our nation’s “war on poverty,” he defined our task as striving to “replace despair with opportunity.” While none of the authors pre- sented here have all the answers, I hope these analyses and proposals can help us move toward finally living up to that mission. Robert Doar Morgridge Fellow in Poverty Studies American Enterprise Institute The Earned Income Tax Credit BRUCE D. MEYER University of Chicago; American Enterprise Institute; National Bureau of Economic Research ince its inception in 1975, the federal earned income tax Scredit (EITC) has grown dramatically and is now the larg- est antipoverty program for the non-aged in the United States. In 2014, 28.5 million tax units received EITC payments totaling $68.3 billion, according to IRS data. As a result, the EITC lifted an estimated 7.3 million individuals above the poverty line. In addi- tion to directly raising incomes, the EITC has sharply changed work incentives, currently increasing the after-tax wage by up to 45 percent for those with low earnings. The EITC is part of the tax system and does not require people to have a tax liability that the credit offsets. A person without a net tax liability receives it as a payment that, in 2016, could be as large as $6,269. The fundamental problem in designing tax and transfer programs for those with few resources is that such programs typically undermine work. The EITC’s goal has been to transfer income while encouraging work. This feature led to the political support for its ini- tial adoption and subsequent expansions.1 The program has become increasingly prominent during a time when policymakers have sought to reduce the dependence encouraged by welfare programs. In this paper, I first summarize how the EITC operates and describe the characteristics of recipients. I then discuss empirical work on the EITC’s effects on income distribution, labor supply, and other outcomes. Next, I discuss a few policy concerns about the EITC: possible negative effects on hours of work and marriage 1 2 A SAFETY NET THAT WORKS and problems of compliance with the tax system. Finally, I briefly discuss the likely effects of further expanding the credit in ways suggested by several proposals. How the EITC Works The EITC provides an earnings subsidy to families that satisfy three criteria. First, a family must have a wage earner, since only those who work are eligible. Second, a family must have low income. In 2016, a single-parent family with one child was eligible if its income was below $39,296, while a family with two children could earn up to $44,648, and a family with three children could earn up to $47,955. A two-parent family could earn $5,550 more than these amounts and still receive the credit. Third, while a small EITC (up to $506 in 2016) is available to the childless, to receive a significant EITC, a family has to have resident children. In 2016, the max- imum credit was $3,373 for a family with one child, $5,572 for a family with two children, and $6,269 for a family with three or more children (see Table 1). Because the EITC is refundable, a family can receive the credit even if it does not have an income tax liability. In the vast majority of cases, the credit is received as a lump sum as part of a tax refund early the following year. The tax filer must fill out a one-page form with information on the qualifying child or children that is submit- ted with the rest of the tax return.

Load more