The American social safety net was designed to lift people out of poverty and set them on the path to success. However, after more than 80 years of varying iterations, recipients of government assistance cycle in and out of poverty rather than becoming self-sufficient, in large part because current policies force them to do so.
Strict limits on assets and benefits cliffs take an all-or-nothing approach to helping lift people out of poverty. In fact, data show that these two policies hold people in poverty rather than allowing them to become self-sufficient.
At least some of these programs are outdated, are inadvertently furthering the cycle of poverty, and are increasing the likelihood that individuals will remain on assistance. Longer on- and off-ramps are needed to ensure fiscal responsibility of tax dollars, and reforms are needed to spur recipients to achieve lifelong sufficiency.
Benefits cliffs occur when recipients of government assistance abruptly lose all or most of their benefits and the sudden ineligibility results in a net loss to the family budget. That is, the increase in income is not substantial enough to cover the amount of the total budget loss as a result of losing benefits. Asset limits are limits on the amount of “assets,” like money in checking and savings accounts, some property, and stocks or bonds. In some states, a family’s second vehicle may be counted against their family asset valuation even if the household includes two adults who both need transportation to work.
Benefits programs are generally designed to fulfill short-term needs with the assumption that recipients will become self-sufficient. Yet, while financial experts recommend American families retain at least three months’ worth of income for emergencies, doing so would make most, if not all, beneficiaries ineligible for benefits. In 2022 numbers, a family of four living at the federal poverty level would need $6,937.50 in savings to follow best practices, which is almost 3.5 times more than they can have and without losing thousands of dollars in critical benefits that they are using short-term to survive and rise out of poverty. As a benchmark, the average Kentucky family of four incurs $4,834 per month in costs to survive; individuals subject to asset limits can keep less than two weeks’ worth of survival costs in the bank to stay eligible.
What benefits are we talking about? Likely we are talking about benefits that someone you know needs and uses, as one in four Americans participate in at least one major state or federal benefit program. These can include Medicaid, Supplemental Nutrition Assistance Program (SNAP – formerly known as food stamps), Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), Section 8 Housing Assistance, and Social Security Disability. All these programs test assets prior to enrollment to determine eligibility. This means one in four Americans are disincentivized from collecting enough savings to survive a moderate family emergency.
The pandemic placed a magnifying glass on these policy shortfalls, the stories from which should become catalysts for change. Without having the savings necessary to prepare for unexpected events, the pandemic left one in three people struggling to pay their bills. Without significant savings to fall back on, individuals across the U.S. were left with little money to live on while they waited anywhere from a few weeks to a few months to receive unemployment and stimulus payments.
This is especially important for benefits recipients, because they are more likely to be unbanked or underbanked – stimulus recipients without a bank account on file with the federal government often had to wait much longer to receive a mailed paper check or prepaid debit card, a complication for anyone who was forced to move because they were unable to afford rent or mortgage payments.
What about fraud? The data does not support oft-repeated claims of widespread fraud. The USDA’s most recent report shows that less than 1% of SNAP recipient claims are fraudulent. Additional research found that most fraud cases in the Medicaid program are committed by healthcare providers, not the recipients of healthcare.
Family Scholar House is a nonprofit organization dedicated to ending the cycle of poverty and transforming communities by empowering youth and families to succeed in education and achieve life-long self-sufficiency. As single parents, many pre-residents and current participants alike rely on the support of government assistance programs as they commonly face socioeconomic barriers that make financial self-sufficiency more difficult. However, Family Scholar House works diligently to fill in the gaps of support whatever they may be.
Finger pointing is not going to help us get through this. We want and need every citizen to become self-sufficient. Policies targeted toward fraud are pushing well-intended and extremely hard working people back into poverty over and over again.
Let’s work together to ensure that our policies, our practices, and our voices are all focused on longer on-ramps to self sufficiency so that our friends, neighbors, brothers and sisters and parents and fellow citizens have what they need to be contributing citizens with the dignity and respect they deserve.
– Cathe Dykstra is the CEO and Chief Possibility Officer for Family Scholar House.