Aid Programs Helped U.S. Survive the Great Recession

Newswise — The country’s welfare programs scored high marks during the Great Recession, according to a new report by Robert A. Moffitt, the Krieger-Eisenhower Professor of Economics at The Johns Hopkins University.

The report, published this month in The Annals of the American Academy of Political and Social Science, shows the country’s “social safety net” expanded to catch many Americans during the economic downturn, which lasted roughly from 2008 through 2009.

In “The Great Recession and the Social Safety Net,” Moffitt found aggregate safety net spending rose $500 billion from 2007 to 2010. Meanwhile, caseloads rose too, from 276 million to 310 million.

Carrying the bulk of this load, he said, 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 Unemployment Insurance, 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 said. “The programs did their job and made a difference – there’s no question about it.”

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 said, but those people were each getting slightly more assistance.

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

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 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 U.S. 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,” Moffett said.

“My findings — which I did not expect — showed that neither of these is correct. The U.S. 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.”

Moffitt will present his findings Jan. 30 at the Brookings Institution, 1775 Massachusetts Ave, NW, Washington, DC. The event begins at 9 a.m. in the Falk Auditorium.

For more information about “The Great Recession and the Social Safety Net” or to speak with Robert Moffitt, please contact Jill Rosen at 443-997-9906 (office), 443-547-8805 (cell) or [email protected].