September 29, 2019
Especially during economic downturns, Americans who never expected to need help turn to social safety net programs like food stamps and unemployment insurance.
The Great Recession was the worst economic downturn in the U.S. since the Great Depression. Between 2007 and 2009, the unemployment rate doubled to ten percent. Nine million people lost their homes during and after the collapse of the housing market. By 2011, the poverty rate increased from 12.5 to 15 percent. To stay financially afloat, many Americans turned to federal programs we refer to as the social safety net, such as SNAP (previously called food stamps), unemployment insurance, and Medicaid.
To meet increased demand for these benefits, the federal government expanded eligibility and added temporary funding for them through the Emergency Unemployment Compensation program of 2008 and the American Recovery and Reinvestment Act of 2009 (ARRA). While many advocates and politicians cheered the expansion of social safety net programs during the Great Recession, others viewed it as runaway government spending.
Now, analysts are warning that another recession could be on the horizon. Another economic downturn could bring another fight over social safety net programs.
What is the social safety net?
The social safety net refers to a number of federal programs — roughly 80 — that provide financial help to low- and middle-income, retired, and disabled Americans. Our social safety net began with President Franklin Roosevelt’s New Deal-era Social Security Act of 1935 and has expanded significantly since then. According to the U.S. Census Bureau, the safety net kept 44.9 million Americans out of poverty in 2017.
Different programs provide cash, food assistance, housing subsidies, health insurance, and more to people in need. For some safety net programs, like Medicaid, the federal government sets ground rules and provides some funding, which states supplement with their own rules and funding. For others, like the Social Security retirement program, the federal government is the sole funder and administrator. Each program has its own eligibility requirements, and many also have work requirements.
What happens during a recession?
Some programs quickly see an uptick in usage when the economy begins to sour. Research shows that the last recession drove Americans to a few major safety net programs in particular:
- The Supplemental Nutrition Assistance Program (SNAP) provides food assistance to people with incomes up to 130 percent of the federal poverty line. ARRA increased the maximum benefit by 13.6 percent and temporarily suspended a three-month time limit for able-bodied adults without children. During and after the recession, participation in SNAP grew significantly, reaching more than 46 million Americans in 2012. Today, half of SNAP recipients are children.
- The Earned Income Tax Credit (EITC) provides financial support to low- and moderate-income working people, with families receiving larger credits than adults without children. ARRA increased the amount of the credit for families with three or more children and provided an additional credit of up to $400 per worker per year. Recession-era spending on the EITC increased by 21 percent.
- Unemployment Insurance (UI) provides partial replacement of earnings to people who lose their jobs through no fault of their own. During the recession, the Emergency Unemployment Compensation program extended the number of weeks a person could receive UI benefits, from 26 in most states to 99. Roughly 6.4 million additional people began receiving unemployment insurance benefits in 2009.
- Medicaid is a public insurance program for low-income people. ARRA included $87 billion in temporary Medicaid funding and $25 billion in temporary subsidies for COBRA, which allows people to continue using their employer-sponsored health benefits when they are no longer employed. The recession drove higher enrollment in Medicaid, with an additional 3.7 million people signing up in 2009. Today, the program covers one in five Americans.
These programs are all means-tested, another way of saying they are designed to provide benefits only to people with low income or assets. Our safety net also includes social insurance programs like Medicare and Social Security. While not directly aimed at helping those most in need, these are large-scale programs that have a major impact on poverty.
Is Another Recession Coming?
Experts say that nine major countries are on the verge of a recession. Seventy-four percent of economists who responded to a survey by the National Association for Business Economics said they expect a recession by the end of 2021.
If the U.S. hits another economic downturn, we may see a spike in the number of people seeking financial assistance, just as we did during the Great Recession. The politics this time, however, could be different. New leadership in Washington has long pushed safety net reforms like adding work requirements for recipients of food stamps, Medicaid, and housing subsidies, and there may be little appetite for expanding federal aid programs for individuals in the event of another downturn.
Another Recession, Another Federal Stimulus? This podcast from Planet Money asks whether Congress would pass another stimulus package if a recession hits the economy. There are some differences this time, they say: higher U.S. debt and more partisan gridlock — via NPR
Time for Reform: One think tank offers a primer on the social safety net and where it may be headed — via American Enterprise Institute
Food for Thought: SNAP reaches millions of people who need food assistance, and research shows that it improves long-term health and well-being, particularly for children — via Center on Budget and Policy Priorities
Low and Middle-Income Americans: An increasing share of spending on the social safety net goes to middle-income families — via Brookings
Recession or Slowdown? What’s the difference and how would it affect Americans’ ability to provide for themselves and their families? — via New York Times
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This article originally appeared in the September 29, 2019 issue of Wide Angle, our regular newsletter designed, we hope, to inform rather than inflame. Each edition brings you original articles by Common Ground Solutions, a quiz, and a round-up of news items — from across the political spectrum — that we think are worth reading. We make a special effort to cover good work being done to bridge political divides, and to offer constructive information on ways our readers can engage in the political process and make a difference on issues that matter to them.
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