President Biden’s decision to increase Supplemental Nutrition Assistance Program (SNAP) benefits or “food stamps” by more than 20 percent this fall reflects a continued effort by his administration and Congressional Democrats to increase government payments to low-income people who do not work. This latest move, when combined with expansions to the Child Tax Credit earlier this year, means that some non-working households are set to receive tens of thousands of dollars from the government each year without any expectation that they work or find a job.

The federal government sends cash to non-working low-income
households (especially those with children) so they can cover basic expenses,
as well as in-kind assistance to cover food, housing, and health insurance. On
top of this, the American Rescue Plan expanded the Child Tax Credit (CTC) to
provide additional cash payments to families (including those without work) in 2021,
totaling $3,600 per child under age six and $3,000 for older children, with the
intention of making the expansion permanent as part of their FY 2022 budget
reconciliation package. Public agencies cannot consider this new benefit as income
when calculating eligibility for other benefits.

Because some federal programs adjust benefit levels for different cost-of-living factors at the state or regional level, low-income households can receive different amounts depending on where they live. As shown in this chart, non-working single parents with two children living in Oklahoma City could receive almost $30,000 in cash or cash-like benefits — $37,929 when we add the value of Medicaid. Non-working residents of Washington, DC could get thousands more. The impact of these amounts on employment behavior are difficult to quantify, but it is reasonable to expect that government assistance in these amounts reduces work.

Work disincentives have been a long-standing problem in US safety net programs. However, current efforts by President Biden and the Democrats will only make matters worse. Under previous policies (before changes to SNAP and the CTC), a single mother with two children in Oklahoma City could increase her income by nearly $20,000 per year by working full-time at $10 per hour, which would be more than her earnings alone ($17,500) because of the EITC and CTC. If the Democrats fully implement their new policies, the same mother stands to gain only $15,562, less than her earnings because she loses SNAP benefits as her income increases. The new policies raise the effective marginal tax rate on earnings for low-income families and make employment less attractive, something AEI economists Alex Brill and Kyle Pomerleau acknowledged earlier this year.

Policymakers from both sides of the aisle have long been skeptical of increasing the generosity of government benefits in ways that discourage work. Taxing the population in order to redistribute income to the poor is a relatively simple endeavor, but such massive redistribution alone does not serve the poor very well in the end. Even President Lyndon Johnson’s Council of Economic Advisors, architects of the War on Poverty, warned in 1964:

The majority of the Nation could simply tax themselves enough to provide the necessary income supplements to their less fortunate citizens. The burden — one-fifth of the annual defense budget, less than 2 percent of GNP — would certainly not be intolerable. But this “solution” would leave untouched most of the roots of poverty. Americans want to earn the American standard of living by their own efforts and contributions.

The US has shown far greater generosity in supporting low-income children since Johnson declared the War on Poverty, increasing federal expenditures 17-fold since 1960. But it has done less well helping people earn their own way out of poverty. Congress had been making progress on this front since the 1990s, reforming some benefit programs to reduce work disincentives, while increasing work-based assistance. The 1996 welfare reform law established time limits and work requirements for work-capable parents who were receiving cash assistance, and lawmakers have repeatedly increased the earned income tax credit (EITC), targeting assistance to working families. The result has been increased employment among single mothers and declines in child poverty.

Policymakers on both sides of the aisle should carefully consider how President Biden’s proposed SNAP and CTC expansions will affect employment, within the context of the benefits we already provide to low-income families. Because there is a reasonable chance that employment among low-income families will decline, jeopardizing their long-term prospects.

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