‘Safety net’ programs worked in Great Recession

"There have been many complaints that the US safety net . . . is inadequate to serve those who in need. And there have been other voices saying that government is ineffectual and that much of the money is wasted," Robert A. Moffitt says. "My findings—which I did not expect—showed that neither of these is correct." (Credit: John Flinchbaugh/Flickr)

The country’s economic and social safety net expanded to catch many Americans during the economic downturn of 2008 and 2009, working as it was designed to do, a study finds.

“The programs did their job and made a difference,” says Johns Hopkins University economist Robert A. Moffitt. “There’s no question about it.”

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Aggregate safety net spending rose $500 billion from 2007 to 2010, Moffit found. Caseloads rose too, from 276 million to 310 million. Carrying the bulk of the load, he says, were the Earned Income Tax Credit, unemployment insurance, and the Supplemental Nutrition Assistance Program. Together, the three programs accounted for about a third of the spending increase.

Other programs that expanded to meet the demand included Medicaid, Medicare, and Social Security retirement and disability benefits.

“Our results show that there was a major response from the safety net to the Great Recession,” Moffitt says. The study appears in the Annals of the American Academy of Political and Social Science.

Spending on SNAP—food stamps—more than doubled, Moffitt found, vaulting from $30 billion in 2007 to $65 billion in 2010. The program was not only helping more people, Moffitt says, but also those people were each getting slightly more assistance.

The Earned Income Tax Credit, a federal income tax refund for low- to moderate-income working families, grew from $49 billion to $59 billion. Spending per person actually dropped, however, and the growth was entirely due to an increase in the number of recipients, Moffitt says.

Medicaid spending also rose during the recession, from $327 billion in 2007 to $401 billion in 2010, Moffitt found. Social insurance programs grew substantially as well, with unemployment insurance showing the steepest incline—from $34 billion to $142 billion during the recession.

Not everyone benefited equally from the welfare increases, Moffitt discovered. He reported that families just above and just below the poverty line received most of the aid, more than the lowest earners.

The additional money went to a wide range of demographic groups, and families with and without children, he found. Somewhat less of the increase went to the elderly and the disabled.

“There have been many complaints that the US safety net has been shredded and is inadequate to serve those who in need. And there have been other voices saying that government is ineffectual and that much of the money is wasted,” Moffitt says.

“My findings—which I did not expect—showed that neither of these is correct. The US safety net is very healthy and was extremely responsive to the Great Recession, helping families of all different types and at all different income levels.”

Source: Johns Hopkins University