Direct Cash Support And One-Stop Shop

Rapid advances in technology have made our lives remarkably convenient. Today, sitting in our homes, we can order anything from groceries to electronics to books to cars. We can request cleaning services, plan travel, speak with medical professionals about our health care a and “visit” the Egyptian pyramids and other wonders around the world in virtual reality. We can read news from all over the world and connect electronically with family and friends living far away from us. Yet, today, when someone loses their job or faces a sudden or persistent loss in income that leads to economic insecurity, much-needed help isn’t one-click away. It is still difficult to figure out how to navigate government safety net programs that individuals should have access to, so that immediate and ample support can provide temporary relief. That system needs to be fixed. How can we do it?

The government spends roughly $1 trillion on benefits and services for low-income households, as per the Congressional Research Service (CRS). These range from programs primarily designed to help families with children to retirement and health programs to food stamps and cash welfare. The CRS report shows that expenditure on these programs has grown over time. Yet ease of access in some cases has improved, and in others, has worsened. Why is it so hard to bring about change for the most vulnerable in the economy?

In 2019, nearly 31.5 million people (out of a total of nearly 65 million ) were lifted out of poverty due to a mix of tax credit programs and non-tax measures and in 2020 and 2021, more than 45 million were helped out of poverty due to pandemic relief programs. In the latest report from the US Census Bureau for 2021, the programs that most significantly reduced poverty, aside from Social Security, were tax credit programs like the expanded Child Tax Credit, the Child and Dependent Care Credit and the EITC. Non-tax programs such as SNAP lifted fewer than 3 million and TANF (cash welfare), fewer than 1 million. Each program functions differently and is aimed at solving a particular need. SNAP offers in-kind benefits that can be used to purchase certain types of foods at grocery stores. Medicaid offers health insurance to those below a certain income level. Social Security provides retirement income, while the tax credit programs both help to reduce tax liabilities while at the same time, providing some (refundable) cash to low-income households whose tax liabilities are low or zero.

Participation rates vary a lot across programs. While SNAP has a participation rate of 82%, the EITC is at 78%, Medicaid/CHIP at 91% (for children) and TANF at about 27%. This suggests that many people who are eligible for programs are still not taking them up. In addition, my analysis presented below, shows that very few people receive support from multiple programs at the same time, which makes the idea of a “safety net” questionable.

My recent analysis with data using the 2019 Survey of Income and Program Participation shows that only 31 percent of households at or below 130% of the federal poverty receive multiple social safety net benefits.^{Moreover, 46 percent of households in this group receive no benefits at all. The other 23 percent of households in this group receive a single benefit (often Medicaid or SNAP).}

There is relatively little existing research on participation in multiple benefits programs. A 2014 analysis from the Urban Institute found that 57 percent of households at or below 200% of the FPL receive multiple benefits. [The discrepancy between my analysis and the Urban Institute’s may be due in part to under-reporting of benefits in the SIPP and changes in participation rates over time.] The Urban Institute research finds that families receiving the multiple benefits tend to have lower incomes, lower levels of employment, and lower levels of education. We find similar results with the SIPP data.

Why is this the case? Why don’t more people access multiple benefit programs? There are several possibilities. (1) Measurement issues: Academic research shows that people often underreport benefit receipt in household surveys, so the lower numbers observed in household surveys may be a result of this. Currently, there isn’t one administrative dataset that can be used to construct multiple benefit usage (2) Stigma: Stigma refers to entrenched negative (and racist) stereotypes about how people who receive social safety net benefits are lazy or fail to contribute to society. Research consistently links these negative stereotypes to lower uptake rates. For example, a recent study from Elizabeth Linos found that using de-stigmatizing language in outreach materials for a rental assistance program increased program interest by 36%. (3) Time Tax: Annie Lowery has documented how government programs that support the poor are more burdensome and time-consuming than programs that support the wealthy or middle class. (4) Compliance Costs: State and local governments – who administer most social safety net programs – make it very hard for eligible populations to benefit from programs, given cliffs, strict eligibility requirements, burdensome documentation requirements, and more. For example, as of 2019, 33 states lack online applications for at least two key social safety net programs, and 19 states do not allow people to claim SNAP and Medicaid benefits at the same time, despite similar eligibility criteria across programs. Preliminary analysis using SIPP data shows that states that have online applications have fewer people responding that they did not receive any benefits. Finally, (5) Politically, there is a rift between those who consider easy access a problem since it may reduce incentives to work, while others advocate for Universal Basic Income as a replacement for the current patchwork of safety net programs.

Proposal: One Stop Shop and Direct Cash Support

So what can we do? If the issue is simply one of improving access to multiple benefit programs, the idea of a one-stop shop makes sense, where individuals provide one-time information on income and assets, and are immediately informed about their eligibility for multiple programs and the total help they can receive. These online platforms can be set up across states and would require alignment across different government departments that administer different programs.

But if the issue is to balance providing immediate help with the concern around reduced incentives to work, then we need to rethink the current system. Suppose someone loses their job or is facing a sudden loss of income brought on by health or other reasons. We could think of a system that provides immediate, unconditional cash support to households for say, 2 months. The support could be a fixed fraction of what the person was earning before (with a cap) or a fixed dollar amount. However, eligibility is universal, unlike the current system of unemployment insurance that leaves out large fractions of the population and is conditional on meeting job search and other requirements. The direct cash support could provide the buffer individuals need to weather the current hit to incomes and any benefits, and allows them the time to invest in job search, training, while feeling supported. After 2 months, the direct cash support can stop but individuals now apply for the multiple benefit programs through meeting income and asset requirements necessary for different programs. Even here, a one-stop shop approach to qualifying for different programs is critical. In other words, the initial direct cash support and the later one-stop shop can operate as a blended system that works as a true safety net in the immediate short run, while also retaining incentives to work and train in the long run since support does not continue indefinitely into the future.

The details of such a system will need to be fleshed out more clearly. For instance, how would the direct cash support interact with the UI system? How do we get different government agencies to align on the need for a one-stop shop? How many of the existing complexities of the US safety net should we carry over to the new system? Any fixes to the current system will require deep debate, thought, time, and patience. But if COVID-19 taught us anything, it is that we need to be much better prepared to handle not only the next big crisis, but also the crises that play out in people’s lives every day. We owe it to ourselves to work towards a better and more robust US social safety net.