Social Safety Net Programs and Asset Building Strategies: Can They Peacefully Coexist?
Blog Post
April 6, 2010
Although by official estimates the state of the economy is improving, millions of Americans are still without jobs. While current unemployment figures are under 10% and some gains have been seen in a few economic sectors, the picture is not exactly rosy quite yet. If the number of individuals underemployed or working part-time but desiring full-time employment was considered, then the unemployment numbers would rise considerably.
<p><span>And among the millions of Americans without any employment whatsoever, many have been out of work for a substantial period of time and these numbers are increasing every day. The Bureau of Labor Statistics reports that <a href="http://www.bls.gov/news.release/pdf/empsit.pdf">6.5 million Americans</a> have been unemployed for 6 months or more. </span></p> <p><span>These American families face a grim future. The longer an individual remains unemployed, often the harder it can be to find a job. Many people may become depressed and discouraged by the lack of employment opportunities in their area and while some consider seeking higher education or specialized training as a way of making themselves more marketable, they still must find ways to feed their families while doing so.</span></p> <p><span>These are times when social safety net programs are supposed to prevent families from falling through the cracks and slipping into poverty. This is exactly what federal and state social service programs are designed to do—help prevent American families from reaching rock bottom when faced with economic, health or other negative life events beyond their control. </span></p> <p><span>And while the number of SNAP (food stamp) applicants has increased dramatically over the past 3 years—in proportion with unemployment numbers—TANF (Temporary Aid for Needy Families) applications has remained stagnant when compared to the number of eligible families. There are over 3 million TANF-eligible families not currently participating in the program. (Below is a graph that illustrates these participation trends.)</span></p> <p style="text-align: center; "> <img alt="" src="http://www.newamerica.net/sites/newamerica.net/files/policydocs/image002_0.gif"></p> <p><span>TANF, the post-1996 welfare reform version of cash assistance to families, is not fulfilling its mission as a family support program because of critical design flaws that incentivize states’ attempts to reduce TANF enrollment numbers regardless of family economic need. </span></p><p><span>Lauren Damme with New America’s Economic Growth Program describes TANF’s failure to effectively function as a social safety net in her <a href="http://www.newamerica.net/publications/policy/holes_in_the_safety_net">blog post</a> and analyzes several possible reasons behind low TANF participation rates. </span></p> <p><span>Relative to the asset building field is the fact that TANF rules, broadly federally defined but allowing states a great deal of flexibility, impose asset limits on families in many states. Participation in TANF is limited to families with little or no assets (monetary holdings such as “rainy day” emergency or retirement savings). While the asset limit for TANF eligibility in many states is $2,000-3,000, a <a href="http://www.economicmobility.org/assets/pdfs/EMP_Savings_Report.pdf">recent paper</a> commissioned by the Pew Economic Mobility Project, and authored by staff of New America's Asset Building program, suggests that a family of 4 needs over $5,000 to cover expenses for three months living at the federal poverty level (this paper also presents a thorough analysis of the problems pertaining to public assistance programs and assets limits as well as specific strategies for improvement).</span></p> <p><span>This is a contradiction both in policy and ideology. The goal of cash welfare assistance programs is to provide a temporary cushion of financial support while moving families towards self-sufficiency and off of public assistance. Having personal savings and other monetary assets are exactly the types of resources that will help families transition off assistance dependence. </span></p> <p><span>Only <a href="http://scorecard.cfed.org/downloads/pdfs/policy_briefs/LiftingAssetLimits.pdf">three states</a> have eliminated their asset tests for TANF applicants altogether. These states recognize that monetary savings and a future-focused attitude towards family finances are crucial components of long-term economic stability.</span></p> <p><span>The state of the economy and national unemployment rates play a large role in family economic well-being but having emergency savings and other assets to fall back on during difficult times allows families to weather periods of economic uncertainty without falling into poverty, or for many families even further into poverty. State and federal policies that promote the spending down of such assets or encourage a “spend it all now” mentality regarding family income and cash flow are counterproductive. Rather than promoting economic security, such policies prevent families from advancing up the socioeconomic ladder.</span></p> <p><span>Families may max out the time they can spend on the TANF rolls but this doesn’t mean they will be financially stable when they no longer receive assistance. Rather, they may very well be left worse off than when they initially began to receive TANF assistance. </span></p> <p><span>President Obama’s <a href="http://www.acf.hhs.gov/programs/olab/budget/2011/2011_all.pdf">2011 budget</a> proposes raising the asset-limits for some social safety net programs to $10,000. <a href="http://www.clasp.org/issues/in_focus?type=work_supports&id=0007">Including TANF</a> in those policy proposals would allow many more needy families to be eligible for cash assistance and could help promote greater economic security for the neediest of American families.</span></p> <p><span>Asset building strategies and programs that promote savings and thrift do not have to sit opposite participation in assistance programs. Both are beneficial and necessary components of a safety net to keep American families from falling into poverty during times of national and/or personal economic instability. By removing asset limits and other disincentives to saving from public assistance eligibility guidelines, savings and thrift could work alongside TANF and other safety net programs to better promote financial security and upward economic mobility.</span></p> <p> </p>