How does American Social Insurance protect workers and families?

How does American Social Insurance protect workers and families?

Table of Content

American Social Insurance protect workers and families

American Social Insurance protect workers and families? Social Security protects workers and families. This paper examines the U.S. social insurance system, which includes programs funded by dedicated taxes and others that provide income support, help meeting basic needs, or economic opportunity services.

The paper examines the social insurance system as a whole and its component parts, providing an overview of major federal programs in education, workforce development, health, income support, nutrition, and housing.

The paper discusses how the social insurance system is organized, who is eligible, how benefits and services are delivered, and how the system affects poverty and inequality.

We focus on the system before the COVID-19 pandemic but also examine how programs respond to economic downturns.   The paper also reprises an array of proposals to strengthen the system in various ways that the Hamilton Project has commissioned in recent years.

It comes as policymakers shift their focus from using the social insurance system to provide relief from the pandemic and recession to considering what changes should be made to the system on an ongoing basis.


The U.S. social insurance system, implemented by federal, state, and local agencies, protects against what FDR called the vicissitudes of life: disability, loss of earnings in old age, being laid off, and other setbacks.

Social insurance helps people meet their basic needs and gain the skills and services they need to enter and succeed in the workforce.

It includes Social Security, UI, and early childhood education. Nearly everyone in the U.S. has benefited from social insurance.

Everyone indirectly benefits from it, either because they know the system will be there for them in a crisis or because it boosts the economy.

This paper explores how the social insurance system is organized, who is eligible, how benefits and services are delivered, and how the system reduces poverty and inequality.

We define the system broadly to include benefits, services, and income- and other-targeted programs. The paper examines the system as a whole and its component parts, including education and workforce development, health, income support, nutrition, and shelter.

We also consider how programs operate during economic downturns and normal times; we focus on the social insurance system before the COVID-19 pandemic.

This exercise reveals improvements and reforms. The paper reviews Hamilton Project policy proposals to improve the social insurance system, including how to better target supports, make programs more efficient, and reach the most vulnerable families and individuals during economic downturns and normal times.

Recent Hamilton reports have proposed changes to UI, Social Security, health insurance, paid leave, SNAP, the Earned Income Tax Credit, housing, childcare, education, and workforce development, and TANF (TANF).

This paper comes at an important juncture as policymakers shift from using the social insurance system to provide widespread relief during the COVID-19 pandemic and related recession to designing and instituting (as well as reauthorizing) reforms that will strengthen the system so it can make the economy more resilient and better protect from life’s vicissitudes.

 An Overview of the Social Insurance System

This chapter defines and explains social insurance. We describe how the federal, state, and local governments provide social insurance benefits and who receives them.

Social insurance programs reduce poverty and income inequality in the U.S. We highlight the system’s major programs in a box.

What Is Social Insurance?

A narrower and a broader definition of social insurance are often used. Social insurance is made up of government programs that workers and/or their employers pay taxes for while they are working.

Benefits are given to workers who reach retirement age, become disabled, lose their jobs, or have another event that makes them eligible. Social Security, Medicare, and UI are included.

Social insurance includes programs that are paid for by dedicated taxes and other programs (like tax credits) that provide income support, help people get or pay for necessities like food, housing, and health care, or offer services or benefits that improve economic opportunities, like education, job training, and child care.

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The broader definition includes both universal and targeted programs. The difference between the two is whether a program is open to all eligible families or individuals, no matter how much money they make, or whether it has restrictions based on how much money they make, usually a cap on how much money they can make.

No program is universal in terms of age, income, immigration status, etc.

Our broader definition includes entitlements, annual appropriations, and non-entitlement programs that are paid for outside of the appropriations process. We don’t consider employer-provided health care or retirement plans as social insurance.

Many federal programs are run in whole or in part by states (or, in some cases, by local governments). Some programs are paid for by both the federal and state governments, and eligibility requirements and/or benefit levels are set by both. Several programs’ benefit coverage (and coverage gaps) vary across the country.

The Great Depression spawned Social Security and UI. From the mid-1960s to the mid-1970s, Medicare, Medicaid, the Supplemental Security Income program, the Supplemental Nutrition Assistance Program (SNAP; formerly food stamps), and

The Earned Income Tax Credit (EITC) was created, along with Head Start and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). The Children’s Health Insurance Program (CHIP) and the Child

Tax Credit (CTC) was set up in 1997. The Patient Protection and Affordable Care Act (ACA), which was passed in 2010 and mostly went into effect in 2014, set up subsidies to make private health insurance more affordable.

Several of these programs act as automatic stabilizers, expanding to serve more people in recessions and contracting when the economy recovers. They help smooth out changes in people’s spending power over business cycles, moderate recessions, and speed economic recovery (Lee and Sheiner 2019). This applies to UI, SNAP, and Medicaid.

For clarity, we divide social insurance into five categories. Box 1 provides highlights; Chapter 2 reviews the programs and Hamilton Project reform proposals in depth.

  1. Education and Workforce Development.Includes early childhood education, child care, student loan, and workforce development programs.
  2. Health. Health programs include Medicare, Medicaid, CHIP, and Affordable Care Act programs.
  3. Income Support.These programs support retirement income, family income, and low-income individuals through transfers, refundable credits, and tax reductions. Social Security, UI, CTC, EITC, and TANF are included (TANF).
  4. Nutrition. These programs include SNAP, WIC, and the school lunch (NSLP) and breakfast (SBP) programs.
  5. Shelter. Housing choice vouchers help low-income renters afford housing. Other programs reduce the burden of ownership for middle- to upper-income homeowners.

This paper doesn’t cover all social insurance programs. We don’t discuss many small-dollar shelter and workforce development programs, such as block grants and development funds.

TANF and SNAP include workforce and education training components that we don’t cover. LIHWAP provides water and wastewater assistance to some low-income households. Smaller programs are part of social insurance and can be important for beneficiaries, but this report focuses on larger programs for manageability.

How Is Social Insurance Provided by the Government?

How the government delivers social insurance depends on which level of government funds a program, delivers benefits, and sets eligibility and payment rules.

Another key dimension is whether a program is delivered on an entitlement basis, meaning all eligible individuals or households who apply must receive the benefit, or whether it provides benefits only to as many people as its annual funding allows, with other applicants being put on waiting lists or turned away despite meeting eligibility criteria.

Whether a program is an entitlement also affects whether it expands automatically during recessions. Policymakers expand the social insurance system during economic downturns, but certain programs expand and contract automatically as need increases or decreases.

Automatic stabilizers in these programs expand during recessions to help people whose incomes have fallen, boosting household purchasing power.

Some key programs have features that resemble insurance. Unemployment insurance helps employed people, and SNAP helps financially secure people.

In both cases, people know these programs exist to help them maintain spending during bad times. In some ways, it’s like a homeowner having fire or other disaster insurance.

The Roles of Different Levels of Government

Taxpayers fund and administer social insurance. The federal government funds and administers Social Security and Medicare. That’s also true of EITC and CTC, which provide income support and are part of social insurance.

Many federal programs are administered by states (or, in the case of low-income rental assistance programs, administered primarily by local housing agencies and, in some cases, by state agencies).

In some joint federal-state programs, the federal government pays all benefits and some administrative costs. SNAP and low-income housing are examples. In Medicaid, states must pay both benefits and administrative costs.

Which government level sets eligibility rules varies. Social Security and Medicare are federally funded and administered, so the federal government sets national standards.

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In programs like SNAP, the federal government prescribes benefit amounts and most eligibility rules, but states can modify some, and most do. In Medicaid, the federal government has established mandatory coverage categories—categories of people state Medicaid programs must cover—and optional coverage categories, with states having the option of whether or not to cover the people in them, resulting in considerable variability in who is eligible for Medicaid across states.

The federal government prescribes mandatory and optional health services for state Medicaid programs.

Differences between Entitlements and Discretionary Programs

Several programs are open-ended entitlements, meaning all eligible applicants must be served. SSI, SNAP, UI, and tax credits are examples. EITC, CTC, CDCTC, and premium tax credits subsidize health insurance in ACA marketplaces.

Non-entitlement programs receive discretionary, annual funding through the federal appropriations process and/or a separate capped federal funding stream. CCDBG and low-income housing are examples.

Federal child-care assistance reached only one in six eligible children before the pandemic due to limited funding, and federal rental assistance reached only one in five eligible low-income households.

Responding to Recessions

Open-ended entitlements can respond automatically in recessions: as people lose jobs and incomes fall, more people become eligible and enroll. These programs automatically serve more people, which boosts the economy.

When the economy is doing well, these programs offer less fiscal support and fewer people need it, which helps stabilize an overheating economy. Programs funded by discretionary federal spending or a separate capped-funding stream (like TANF) lack this feature.

Although entitlement programs like UI, SNAP, and Medicaid see their enrollments grow in recessions without congressional action because more people meet their eligibility criteria, it takes congressional action to broaden the eligibility criteria, boost the benefit levels, or (in programs like Medicaid where the federal government and states split the costs) increase the federal share of costs.

Roughly half of fiscal policy’s economic stabilization since 1980 has been due to policymakers’ actions, not automatic stabilizers (Sheiner and Ng 2019). In recent recessions, federal policymakers expanded UI beyond the automatic expansion; in the current recession, they broadened eligibility and increased benefit levels and duration.

In recent recessions, federal policymakers raised the federal share of Medicaid costs, increased SNAP benefits, and boosted state administrative costs. Temporary changes to UI, Medicaid, and SNAP are common.

In recessions, federal policymakers can boost funding for non-entitlement programs. In 2020 and 2021, policymakers increased funding for low-income housing, child care, and WIC.

In 2020, policymakers can establish temporary new programs or program components to help mortgage holders and renters remain in their homes, focusing on those who lack the financial resources to pay their monthly housing expenses.

Such changes provide further relief to affected households during an economic slump and further economic stimulus because the benefits of these temporary program expansions to low-income households and those who recently lost their jobs tend to be spent quickly rather than saved.

Program Size and Growth

In FY 2019, the federal government spent $2.7 trillion (about 13% of GDP) on social insurance. Figure 1 shows that income support (including Social Security) and health coverage programs are the largest. Social Security spending accounted for 23 percent of the federal budget in 2019. (4.9 percent of GDP).

Medicare, Medicaid, CHIP, and subsidies for Affordable Care Act marketplace coverage accounted for $1.1 trillion, or 26% of the federal budget (5.3% of GDP), with Medicare responsible for nearly three-fifths of this amount. Other social insurance programs that help the needy cost $518 billion in 2019, or 12% of the federal budget. 1

Changes in the inflation-adjusted costs of social insurance programs stem from three main factors: demographic changes (i.e., population aging), increases in health-care costs, and policymaker decisions to expand or cut programs.

Population aging and health-care costs drive Social Security and Medicare costs. In 2019, the Center on Budget and Policy Priorities (CBPP) projected, based on Congressional Budget Office (CBO) forecasts, that virtually all of the increase in total federal program spending over the coming decade (spending exclusive of interest payments) would be due to Medicare and Social Security costs (CBO 2019; Kogan and Bryant 2019).

2 CBPP predicts that federal spending outside Medicare, Social Security, and interest payments will decline as a share of GDP over the next decade. Mandatory spending on lower-income households, such as entitlements, would remain largely unchanged as a share of GDP over the next decade (Kogan and Huang 2019).

Fig 1

The COVID-19 pandemic, recession, and policymakers’ responses have increased uncertainty about long-term program costs. Policymakers’ recent and proposed changes to the social insurance system could change this outlook.

How Do Workers and Families Receive Social Insurance?

Social insurance can be delivered

  • Cash, including tax refund checks; vouchers to purchase certain goods or services.
  • such as food in a grocery store or a child-care slot.
  • health insurance; or a specific good.
  • such as a box of food or a rental unit in a public housing project.

Some programs provide benefits (like those just mentioned), while others offer education, job training, or assistance for the disabled or elderly.

This is a diverse landscape. Given the variety of human needs, programs, and delivery mechanisms, a mix of cash, vouchers, and direct goods and services may be appropriate. How to improve the current mix of program designs and what reforms would strengthen the system are debated.

Cash Benefits

Several social insurance programs offer unrestricted cash benefits. This includes Social Security, SSI, and TANF. So do IRS checks sent to tax filers who qualify for EITC and CTC.

Some analysts believe cash provides the most value to recipients, but the evolution of social programs over the last half century suggests the public and policymakers are often reluctant to provide cash benefits and more amenable to vouchers and in-kind benefits (Liscow and Pershing 2020; Greenstein 1991).


Commercial marketplaces use vouchers. SNAP provides debit cards with vouchers for food purchases. Beneficiaries choose home-cooked foods to buy.

SNAP marked a departure from food commodity programs that came before it, under which beneficiaries had to travel to food depository points to receive boxes of specific foods, which often reflected surplus foods rather than a balanced diet.

Households receiving rental vouchers (primarily through the federal Housing Choice Voucher program) can use the vouchers to offset a portion of the rent for a unit they choose, if the landlord accepts vouchers.

Some health coverage programs use vouchers. People who buy health insurance in the Affordable Care Act’s marketplaces with a premium tax credit are essentially using a voucher to buy ACA-compliant coverage.

Consumers can choose which foods to buy, apartments to rent, or health insurance plan to buy with vouchers. Vouchers require a competitive, well-functioning marketplace that meets program standards.

Almost all grocery stores and supermarkets accept SNAP. Acceptance of rental vouchers is widespread but not universal; in some places, it’s low.

For the Affordable Care Act’s premium tax credits to work, a functioning marketplace with enough competing insurance plans in each area is required. Various ACA provisions are designed to provide this.

Program Areas with Combination Approaches

Child care has many programs and approaches. The CDCTC subsidizes families’ child-care costs with a once-a-year tax benefit.

The CCDF provides funds to states, which can use them to subsidize child care for low-income working families, improve child care quality, or establish child-care resource and referral agencies that connect parents and child-care providers in local communities.

Unlike the CDCTC, the CCDF can be used to set quality standards for child care.

Benefit Frequency

Benefits from social insurance programs vary in frequency. Social Security, SNAP, Medicaid, ACA premium tax credits, rental assistance, and others provide monthly benefits or services. UI is weekly.

EITC and CTC are given annually after tax returns are filed in the winter and spring. Beginning in July 2021 and ending in December 2021, the IRS will issue CTC benefits monthly. Tax credit eligibility and benefit levels remain based on income.

In programs like SNAP and Medicaid, eligibility is based on monthly income. Using monthly income rather than annual income allows people who were recently laid off to qualify more quickly.

Whom Does Social Insurance Benefit?


Program goals, target population, and administration determine eligibility. People with work histories, current workers, children, families with children, people with disabilities, seniors, low-income people, pregnant or nursing women, or a combination of these groups may be targeted.

Social Security, Medicare, and UI require long work histories. These universal programs have no income eligibility limit but require a certain number of paid quarters or years. EITC is one program that requires earned income. Other programs require child-care costs.

Some social insurance programs require demographic eligibility. To qualify for Social Security, you must be 62 or older, seriously disabled, a spouse or dependent child of a covered worker, or a surviving spouse or dependent child of a covered worker.

Children under 19 qualify for CHIP. Pregnant, nursing, or postpartum women or children under 5 qualify for WIC. Many programs’ eligibility requirements qualify people for other benefits.

Most states automatically qualify SSI recipients for SNAP and Medicaid. TANF recipients are automatically SNAP-eligible.

Social insurance has income limits. Medicaid has different income limits for children and adults under 65. In the past, programs were often categorized as universal (no upper income limit) or targeted to the poor, but that’s no longer true.

Social insurance programs increasingly cover low-income and higher-income households. In 2021, the Affordable Care Act’s premium tax credits can reach 400% of the poverty line, or $106,000 for a family of four (and during the pandemic and economic downturn to levels higher than that).

Married filers with two children and incomes up to $480,000 can claim the CTC.

SSI and Medicaid for people 65 and older or with disabilities have the strictest asset tests. This reflects the fact that some retirees have low income but large savings. Most states test assets for TANF cash assistance.

Medicaid does not have an asset test for children or non-elderly adults (except those with disabilities), and most states have opted to ease or eliminate asset tests in SNAP. Asset tests aren’t used for rental assistance.

Programs have other eligibility requirements. UI recipients must work. TANF, SNAP, and housing assistance have time limits unless participants work. States can get SNAP waivers for high-unemployment areas and provide individual exemptions. Several other programs let states exclude ex-felons and drug users.

Eligibility among Immigrants

Most social insurance programs are available to US citizens and legal permanent residents, but not undocumented immigrants. Program eligibility varies for legally present immigrants.

Legally present immigrants who entered the U.S. late in life often don’t qualify for Social Security and Medicare because they don’t have enough years of earnings.

Several major programs, including Medicaid and SNAP, prohibit legal immigrants from receiving benefits during their first five years in the U.S., with some exceptions.

Children, refugees, asylees, and people receiving federal disability benefits are exempt from the SNAP five-year bar, but most other recently arrived legal immigrants are.

Refugees and asylees are exempt from Medicaid and CHIP’s five-year bar, and states may exempt children (35 do) and pregnant women (25 states do).

Participation and Take Up

Social insurance program participation rates vary. “Take-up rates” are the percentage of eligible people or households who enroll in programs. From 1989 to 2012, 77% of those eligible for UI collected it, but some states had average take-up rates below 50%. (Auray, Fuller, and Lkhagvasuren 2019).

Take-up rates can vary across programs and program parts. The IRS estimates that 82% to 86% of child-eligible families receive the EITC. In contrast, only 65% of childless workers claimed the EITC in 2016, likely because the “childless EITC” provides small benefits compared to those for families with children (IRS 2020).

Higher social insurance benefit levels are associated with higher participation. Families with children have a much higher SNAP participation rate than older adults, who receive smaller benefits.

WIC’s overall participation rate was just over 50% in 2017 (USDA 2020): eligible infants were far more likely (79%) to participate than eligible 4-year-olds (25%).

SNAP shows that participation rates are higher for households eligible for more benefits and that take-up rates can improve over time. In 1980, 52.5% of SNAP-eligible households enrolled. 87.5% of eligible households received SNAP in 2017.

In 2012, the last year for which data is available, 87% of eligible households received SNAP, but these households accounted for 96% of the total benefits eligible households would have received if everyone eligible participated (USDA 2019). Higher SNAP benefit recipients have higher participation rates.

Policymakers, practitioners, and others who seek to boost program take-up rates are increasingly relying on advances in information technology (IT). Specifically, they are using an individual’s or household’s participation in certain programs to enroll them automatically (or nearly automatically) in other programs for which they qualify.

In Medicaid and SNAP, practices include electronically screening people enrolled in one program to facilitate their enrollment in the other, and using SNAP or Medicaid enrollment to automatically enroll children in free school meals.

States are also relying on IT to reduce the number of times households must visit social service offices to apply for or renew benefits; this increases take-up and retention (and to reduce churn, where households slip off the programs despite remaining eligible for them and must reapply to reenroll).


Eligibility and take-up rates affect social insurance enrollment. Recessions can affect program enrollment. In 2007, the annual weekly continuing claims average was 2.5 million, but in 2009, at the height of the Great Recession, it was 5.8 million.

Figure 2 sorts the largest social insurance programs by recipients in 2018, near the last economic cycle’s peak.

Many of these programs are accessed by the same individuals or families, so program counts from administrative websites should not be added to estimate total social insurance participation.

Medicaid and CHIP recipients were highest in 2018, followed by Social Security (OASDI). UI recipiency was low in 2018 (it was the lowest of the major programs that year), but it soared in 2020 when unemployment surged and Congress temporarily increased UI benefits.

How Does Social Insurance Affect Poverty and Income Inequality?

Income affects many social insurance programs. Most of these programs require low income, often a multiple of the poverty line. The programs’ income limits range from 100% to 300 or 400% of the poverty line.

HHS updates poverty-line thresholds each year to account for inflation. In some programs, the federal government sets the income limit, while states do so within federal guidelines.

Other social insurance programs, such as Social Security, Medicare, and UI, have no income limits but require a specified earnings history.

Poverty and Social Insurance

Analysts use the Supplemental Poverty Measure (SPM) rather than the Official Poverty Measure (OPM) to determine the effects of social insurance programs on poverty.

Both are calculated by the US Census Bureau (Census). The OPM is used to determine program eligibility, but only the SPM counts benefits from programs like SNAP, rental vouchers, and refundable tax credits as income.

In measuring the antipoverty impact of social insurance programs over time, analysts use the anchored SPM, which adjusts poverty-line thresholds only for inflation. The anchored SPM compares poverty over time.

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In figure 3, historical data from the SPM, using estimates from Columbia University’s Center on Poverty and Social Policy, show that expansions in various social insurance programs have reduced poverty.

In the 1960s, when many social insurance programs were in their infancy, they had a small impact on poverty. In 2019, social insurance programs reduced the poverty rate under the anchored SPM from 22% to 11%.

Moreover, these data (and other data in this paper on the antipoverty effects of social insurance programs) understate those effects because they are based on Census data, which undercounts the number of people receiving various benefits (Meyer, Mok, and Sullivan 2009). 4

Fig 2

Examining what percentage of poor people social insurance lifts above the poverty line is another way to measure its anti-poverty effectiveness. The Center on Budget and Policy Priorities (using an SPM anchored to 2019 – that is, an SPM in which poverty-line thresholds for years before 2019 are adjusted for inflation) found that in the late 1960s, government benefits and taxes lifted out of poverty about 5% of those who would otherwise be poor, and by 2019, they lifted out 48% of those who would otherwise be poor.

Children and older adults are particularly impacted by social insurance programs (figure 4). Social Security is a large source of income for older adults, so it reduces their poverty the most (Some 74 percent of Social Security benefits go to retirees and their dependents; SSA 2021).

Before taxes and transfers, households with an oldest member age 65 or older have the highest poverty rates of any age group. After the effects of Social Security and other programs are taken into account, the poverty rate for older adults is dramatically lower, but it’s still higher than for children and working-age groups.

2019 SPM child poverty rate before benefits and taxes was 20%. Child poverty was 11% after benefits and taxes.

Figure 5 displays data produced for THP by Danilo Trisi and Matt Saenz of the CBPP showing that the EITC, CTC, and SNAP significantly reduce child poverty.

EITC and CTC reduced child poverty by 7 percent in 2017. SNAP reduced child poverty by more than 4%. SNAP reduced child poverty by more than 5% during the Great Recession. UI reduced child poverty by 2% that year.

Fig 3

Fig 4

Fig 5

After taxes and transfers, some children’s poverty rates remain high. In 2015, Black and Hispanic child poverty rates were twice as high as for non-Hispanic white children, according to the National Academy of Sciences. Single-parent children have twice the poverty rate of two-parent children, according to a report (NAS, 2019).

Poverty and Race

Black and Hispanic households have higher poverty rates than non-Hispanic white households due to discrimination and disparities in employment, education, and health care.

In 2017, government assistance programs cut white, black, and Hispanic poverty rates by more than half (CBPP 2013–17). Poor white families have average incomes closer to the poverty line than poor Black and Hispanic families.

A given amount of aid will lift a larger share of poor whites over the poverty threshold than poor non-whites. These figures also show that a larger share of poor Hispanics are ineligible for many social insurance programs due to immigration status.

Black and Hispanic poverty rates have declined over time, especially after government aid and taxes (Trisi and Saenz 2021).

An analysis of the anti-poverty impact of social insurance programs by race is incomplete if it only looks at reductions in poverty rates, or the share of people lifted above the poverty threshold.

It’s also important to examine the reduction by race in the poverty gap — the amount by which all poor families fall below the poverty line. 5 In 2017, federal programs and taxes reduced the poverty gap for white households by 73%, for Black households by 69%, for Hispanic households by 60%, and for Asian households by 46%.

Income Inequality and Social Insurance

In addition to poverty, inequality is another important measure of the social insurance system’s impact. The social insurance system combined with the broader tax system reduces income inequality. Inequality remains high in the US, so policymakers should consider ways to improve social insurance.

Commonly, the reduction in inequality caused by a country’s policies is measured by the country’s Gini coefficient, which measures income inequality. A country with zero Gini coefficient would have no income inequality.

A country with one earner and no others would have a Gini coefficient of 1. Higher Gini coefficients indicate greater income inequality.

Figure 6a shows OECD Gini coefficients before and after taxes and transfers. This chart ranks countries by Gini coefficients before taxes and transfers. The U.S. has high income inequality before taxes and transfers (red).

Figure 6b ranks the countries based on their Gini coefficients after taxes and transfers.

Tax and transfer systems reduce income inequality in all other advanced OECD countries, as shown. The US has the most inequality before and after taxes and transfers.

This is due to high pretax and transfer income inequality in the U.S. relative to other advanced OECD countries and a smaller reduction in inequality from taxes and transfers (shown by the length of the arrows in the figures).

Fig 6a

Fig 6b

 High-level Descriptions of Social Insurance Programs

This chapter describes the major social insurance programs within five broad categories:

  1. Education and Workforce Development
  2. Health
  3. Income Support
  4. Nutrition
  5. Shelter

The following descriptions give an overview of the major programs. They’re not exhaustive and can’t be. We also discuss the effectiveness of these programs and Hamilton Project proposals to improve social insurance.

1. Education and Workforce Development Programs

Education and workforce development are broad. It includes early childhood education programs, which can also serve as child care for children under 3, student loan programs for college and graduate students, and workforce development programs for midcareer workers.

Early Childhood Care and Education (ECE)

ECE describes center-based and other nonparental child care. ECE includes preschool or pre-kindergarten programs that support children’s social and academic development and day care. Early Head Start, Head Start, CCDF, and Preschool Development Grant help eligible families access child care (PDG). 5,4 million children were in federal or state ECE programs in 2019.

In 2017, states and local governments spent $12 billion on ECE and the federal government spent $22 billion (Gould and Blair 2020). Figure 7 shows that 63% of 3- and 4-year-olds in preschool are in a public program, including Head Start.

Public programs can’t serve all eligible families. Therefore, many low-income families can’t afford preschool. (2018); (2019)

ECE programs have many benefits. Short- and long-term effects of ECE are typically based on the outcomes of specific programs, such as Perry Preschool, Abecedarian, and Head Start, or the rollout of state preschool programs (Cascio 2021).

A meta-analysis on ECE concludes that children who participate in ECE in their first five years have lower grade repeat rates and higher high school graduation rates (McCoy et al. 2017).

Head Start and Early Head Start

The largest federally funded ECE programs are Head Start and Early Head Start. Since these programs began, they’ve served 37 million birth-to-five-year-olds.

Head Start and Early Head Start aim to reduce poverty by meeting children’s emotional, social, health, nutritional, and psychological needs. The majority of Head Start seats go to low-income children.

Head Start and Early Head Start funded 927,000 seats in ECE with nearly $10 billion in 2018–19. Average annual program spending per child is $11,000. (National Head Start Association 2020).

In 2020, only 36% of eligible children aged 3 to 5 and 11% of eligible children under 3 had access to Head Start or Early Head Start (National Head Start Association 2021).

Fig 7

Head Start has short- and long-term benefits, according to evidence. Head Start improves kindergarten readiness and third-grade academic outcomes (Feller et al. 2016; Kline and Walters 2016).

Head Start works better with more grade school funding (Johnson and Jackson 2019). Head Start improves health and education, according to research (Deming 2009; Garces et al. 2002; Bauer and Schanzenbach 2016).

Head Start improves parenting (Bauer & Schanzenbach, 2016) and reduces intergenerational poverty (Barr and Gibbs 2017). ECE and care boost parents’ employment (Morrissey 2017; Davis et. al 2018).

Child and Dependent Care Tax Credit (CDCTC)

CDCTC subsidizes middle-income families’ child-care costs. High-income families qualify because there’s no income cap. Before the pandemic and recession, the credit offered little or no support for low- or moderate-income families because it was nonrefundable. The ARP expands and makes refundable the child care credit for low-income families in 2021.

Early Childhood Education Block Grants

ECE block grants fund high-quality child care in states (Vesley and Anderson 2009). These grants are the main source of child-care funding for low-income families. CCDF and PDG are ECE block grants.

These funds can be used to support child-care centers or provide vouchers to low-income families. These funds are not an entitlement, so programs have limited funding; only one in six eligible children benefit (National Women’s Law Center 2019).

Early evidence shows the PDG supports increased enrollment or improvements in state preschool programs (Friedman-Krauss et al. 2020). A PDG report shows that enrollment in PDG-funded classrooms increased by 87% in four years.

In the fourth year of the grant, twice as many families and children had high-quality care as in the first (OESE 2019).

Under CCDF, states can design programs within federal guidelines. Different parental time-use and eligibility requirements across states create burdens for parents and administrators, limiting families’ access to consistent child care (Adams et al. 2014; Adams and Heller 2015; Jenkins and Ngyuen 2019; Johnson-Staub, Matthews, and Adams 2015).

Herbst and Tekin find evidence that subsidies harm child development because expanding access without ensuring quality leads to lower-quality center-based care (Herbst and Tekin 2008).

Postsecondary Education

Since the mid-1950s, the federal government has subsidized postsecondary education, lowering barriers for needy students. The FAFSA is used to apply for Federal Pell Grants, Direct Subsidized Loans, Federal Supplemental Educational Opportunity Grants (FSEOG), and Federal Work-Study (FWS). The FAFSA feeds a formula that calculates eligibility using the cost of attendance and expected family contribution.

In 2019–20, undergraduate and graduate students received $143 billion in federal grants, loans, and tax benefits (College Board 2020). State and local governments support in-state schools, while the feds help students.

Nearly 80% of state and local higher education funding went to such operations, while 11% went to student aid grants (Laderman and Weeden 2020).

Postsecondary degrees confer benefits beyond better labor market outcomes. In general, postsecondary degree holders earn more and have better nonfinancial outcomes, such as higher community engagement and healthier lives (Oreopoulos and Petronijevic 2013; US Department of Education [ED] 2016).

Postsecondary graduates can better weather economic downturns. After the Great Recession, they had better labor market results (Carnevale, Jayasundera, and Gulish 2016; Greenstone and Looney 2011).

Pell Grants and On-Campus Programs

In 2019-20, the Federal Pell Grant Program will award $28 billion to 6.7 million low-income college students (College Board 2020). The maximum Pell Grant award was $6,495 for the most recent award year (Federal Student Aid 2021). Grant aid has been falling as a share of cost of attendance for decades (figure 8).

In 2017, the maximum Pell Grant covered 29% of tuition, fees, room, and board at a public four-year college, compared to 79% in 1975. (Protopsaltis and Parrott, 2017). The annual cost left to students and their families is largely covered by student loans.

Three on-campus programs under the Higher Education Act (HEA) are unique among needs-based student aid programs because schools’ financial aid offices determine the mix and amount of aid awarded and must match federal funds.

FSEOG allows schools to award additional grants and loans to students with exceptional financial need. FWS provides part-time work opportunities either with the school or with participating organizations and businesses.

Pell Grant recipients have higher transfer and dropout rates than others (Mundel and Rice 2008). Pell Grants have mixed benefits beyond lowering tuition.

Marx and Turner find that students who miss the Pell deadline receive more aid overall (Marx and Turner 2015; Scott-Clayton and Park 2015). Pell recipients don’t have higher enrollment, completion, or persistence rates among low-income students (Baum and Scott-Clayton 2013; Bettinger 2004; Turner 2014).

Research on campus programs is limited. Current evidence is limited to single-institution or state data, with inconsistent findings (Scott-Clayton 2011; Scott-Clayton and Minaya 2014; Stinebrickner and Stinebrickner 2003).

Student Loans

Needs-based Direct Subsidized Loans are only available to undergraduates and have lower interest rates than market rates. No interest is assessed while the student is enrolled, during a six-month grace period after graduation or a change from full-time enrollment, and during authorized deferment periods.

Nonsubsidized loans have below-market rates, but interest is assessed immediately. Direct Subsidized and Direct Unsubsidized Loans from the federal government provided 86% of the $102 billion in student loans issued for 2019–20, including 80% of loans to undergraduates and 96% of higher-interest, higher-balance loans to graduate students (College Board 2020).

Students can choose from a variety of federal loan repayment plans, including income-driven repayment (IDR). IDR plans adjust monthly payments based on a borrower’s income and offer loan forgiveness after 20 or 25 years under certain terms.

Fig 8

The aid from student loans can do more than cover educational costs for most Americans. Yilla and Wessel (2019) find that many students also use loans for living expenses.

Most students graduate with less than $40,000 in debt, evidence shows (Council of Economic Advisers [CEA] 2016; Looney, Wessel, and Yilla 2020). Despite borrowing relatively small amounts, students of color are more likely to default than white students (Harrast 2004; Scott-Clayton 2018; Volkwein and Cabrera 1998; Volkwein and Szelest 1995; Woo 2002).

Student loan default causes loss of repayment tools, damaged credit, increased collection fees, garnished wages, and ineligibility for other aid programs (PEW 2020).

Tax Incentives

The federal government lowers the cost of higher education through 12 tax benefits, including excluding scholarships from taxable income and deducting student loan interest.

These tax incentives cost the federal government $27 billion in annual revenue. The two largest tax credit programs, the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), extend credits to low- to moderate-income families for qualifying education expenses of up to $2,500 and $2,000 respectively (Congressional Research Service [CRS] 2021).

AOTC and LLC have little impact on enrollment, college choice, debt, or tuition paid (Hoxby and Bulman 2015, 2016). Complexity of claiming credits and delayed delivery reduce their impact, studies show (Dynarski and Scott-Clayton 2018; GAO 2012).

Fig 9

Workforce Development

The US workforce development system supports the training and retraining of experienced workers, jobseekers, and new entrants who lack a four-year postsecondary credential.

Workforce development includes certificate programs at community colleges, vocational courses offered by training providers, apprenticeship programs, and career services like job search assistance and career counseling.

The federal government invests in training programs and reemployment services for displaced and disadvantaged workers due to employer and private underinvestment.

President Obama signed the Workforce Innovation and Opportunity Act (WIOA) in 2014, reauthorizing the Workforce Investment Act (WIA). WIOA programs offer adults over 18 broad access to their range of services, while giving priority to low-income and skills-deficient job-seekers. Other programs target disadvantaged youth, veterans, and others.

Federal support for employment and training spans 43 programs, nine agencies, and various worker populations (GAO 2019). Figures 9 and 10 show WIOA-funded training and reemployment programs.

Most programs have low participation, except for employment services. The system is uncoordinated and underfunded.

Recent evidence on workforce development programs is mixed (Bauer, Breitwieser, and Shambaugh 2018; Greenberg, Michalopolous, and Robins 2003).

Workforce development programs that target specific populations and sectors improve labor market outcomes, including wages (Elliot and Roder 2017; Hendra et al. 2016).

THP Proposals: Education and Workforce Development

One THP proposal would increase access to affordable, high-quality ECE by expanding Head Start and Early Head Start and creating a new program to stimulate competition among eligible child-care providers and raise ECE worker compensation.

All families would have multiple child-care provider options, and the total family payment for child care would be capped to prevent families from falling deeper into poverty. (Read Elizabeth Davis and Aaron Sojourner’s THP proposal [2021] for more.)

Fig 10

Creating jobs in disadvantaged areas with subsidies. David Neumark’s THP proposal would create a community job subsidy program, providing federal funding to partnerships of local employers, nonprofits, and community groups to identify local needs and administer jobs.

These jobs would be 100% federally subsidized for the first 18 months and 50% subsidized for the second 18 months for low-income workers. These job subsidies would target areas with 40% or more below-poverty residents.

Creating a well-prepared workforce requires learning centers to be flexible and adaptable to new technologies. Another THP proposal would support online educational credits for qualified adults at accredited and registered learning organizations.

Employer groups, professional associations, and unions should provide feedback on program offerings. Providers would be prohibited from charging tuition and fees above reimbursement, encouraging programs to use technology to reduce costs.

In addition, federal agencies and a network of competitively selected universities and their partners would launch a national initiative to advance adult learning. (Read Richard Arum and Mitchell Stevens’ THP proposal [2020] for more.)

Reforms could increase HEA funding to allow postsecondary institutions to expand occupational training for a stronger, more coherent workforce training system.

To do this, another THP proposal would tax employers who replace workers with automation, encouraging them to retrain them instead. A permanent version of the Trade Adjustment Assistance Community College and Career Training (TAACCCT) grant program could fund partnerships between community colleges, workforce training institutions, and states to improve student and displaced worker outcomes.

Harry Holzer’s THP proposal [2021] has more details.

Bauer, Breitwieser, and Shambaugh 2018 summarized prior THP proposals on ECE to workforce development.

2. Health Programs

Most Americans are covered by public or employer-sponsored insurance, but millions are uninsured. The federal government spent $291 billion on employer-based insurance in FY 2020 by excluding premiums from taxable income. Because this tax exclusion increases with higher marginal tax rates and rising premiums, higher-income people receive larger subsidies (CBO 2020a).

Medicare, Medicaid, CHIP, and premium tax credits lower the cost of insurance purchased through Affordable Care Act marketplaces. The VA system provides health insurance and care for active-duty military and veterans.

Figure 11 shows insurance program spending as a percent of GDP. Medicare and Medicaid spending as a percent of GDP has been higher since the 1960s. Medicare and Medicaid spending rose from less than 1% of GDP in 1966 to 3% and 2% of GDP in 2018. Other federal health insurance programs haven’t grown.

Active-duty military and veteran health insurance was 0.2% for nearly four decades before rising to 0.4%. The ACA and CHIP spent 0.3% of GDP in 2018.

As the COVID-19 pandemic showed, job-based health coverage can be unstable (Collins et al. 2020). Between 2019 and 2021, more than 1.2 million people have gotten health insurance through the ACA marketplaces.

Many people who lost their jobs and employer-sponsored health insurance enrolled in Medicaid and CHIP between March and August 2020. Prior to the pandemic, most states had adopted the Affordable Care Act’s Medicaid expansion, making poor adults under 65 with incomes below 138% of the poverty line eligible for Medicaid.

This almost certainly helped many residents of those states remain insured during the crisis.

Figure 12 shows Medicaid and CHIP enrollment growth in 2020. Four states (Florida, Missouri, Utah, and Wyoming) that have not implemented the ACA’s Medicaid expansion saw enrollment increases of over 10% in the 6 months following the pandemic. 7

Two-thirds of the 29.8 million uninsured Americans in 2019 were eligible for subsidized health insurance: 20% qualified for Medicaid and CHIP, and 50% qualified for marketplace subsidies or employer-sponsored coverage.

Many people get employer-sponsored health coverage through employer contributions and arrangements that exclude premium payments from taxable income.

5.9 million uninsured in 2019 were ineligible for subsidized health coverage because their incomes were too high for marketplace subsidies or because they lived in a state that has not expanded Medicaid under the Affordable Care Act (CBO 2020b).

Medicaid and the Children’s Health Insurance Program (CHIP)

Medicaid is the largest means-tested in-kind social insurance program, offering comprehensive health coverage with low copayments and cost-sharing. As a federal-state partnership, Medicaid provides health services and covers health-care costs to improve health among eligible low-income families with children, pregnant women, and people who are 65 or over or have disabilities, including Medicare beneficiaries with low incomes.

FMAP covers 50 to 83% of a state’s Medicaid costs. At times during economic downturns, Congress has temporarily increased the percentage of Medicaid costs the federal government covers in order to deliver fiscal support to states as their Medicaid caseloads rise.

All but 13 states have expanded coverage to low-income adults under 65 with incomes up to 138% of poverty, with the federal government paying 90% of the ongoing cost.

In 2020, the Urban Institute estimated that lack of implementation in 14 states (including Oklahoma, which will implement the expansion on July 1, 2020) led to 4.4 million more low-income people being uninsured.

Fig 11

Medicaid covered 68 million people per month in 2020. Most of the increase in Medicaid enrollment from state expansions came from the uninsured, not people switching from private insurance (Finkelstein et al. 2012 ).

Past roll-backs to Medicaid eligibility in some states increased the uninsured without significant increases in private health insurance enrollment, regardless of employment (Garthwaite, Gross, and Notowidigdo 2014).

Medicaid improves life (Goodman-Bacon 2018; Miller, Johnson, and Wherry forthcoming) (Miller and Wherry 2019). Medicaid increases annual health-care use among children and adults, as well as hospitalizations (Dafny and Gruber 2005), while reducing avoidable hospitalizations (Aizer 2006 ).

Medicaid coverage increased health care use, prescription filling, and self-reported health, according to the Oregon Health Insurance Experiment (Baicker et al. 2013; Finkelstein et al. 2012; Taubman et al. 2014).

Medicaid insures families against certain health-related economic outcomes by reducing medical debt (Boudreaux, Golberstein, and McAlpine 2016; Finkelstein et al. 2012) and bankruptcy (Gross and Notowidigdo 2011).

CHIP is for low-income families with children who don’t qualify for Medicaid. CHIP, administered by the states and funded jointly by the federal and state governments, provides health coverage for children in families whose incomes are too high for Medicaid. CHIP can be a stand-alone program or part of Medicaid.

CHIP has increased children’s health insurance coverage, including immigrant children (Gruber and Simon 2008). (Bronchetti 2014). States can set program terms, such as charging premiums, which can reduce participation and shorten enrollment (Dague 2014).

CHIP improves children’s health (Bronchetti 2014) and educational outcomes like test scores (Levine and Schanzenbach 2009). (Cohodes et al. 2016). Adult enrollment is linked to higher labor force participation and earnings (Brown, Kowalski, and Lurie 2015).

Fig 12


Medicare is for people over 65 or with severe disabilities who have a sufficient earnings record. Individuals qualify at age 65 or two years after receiving federal disability benefits, with some exceptions.

Medicare is multifaceted. Medicare Part A covers hospitalization without a premium. Medicare Part B covers physician, laboratory, and outpatient hospital costs and charges a basic monthly premium.

Low-income enrollees who apply for assistance receive a subsidy, while higher-income enrollees pay a higher premium. Medicare Part D’s prescription drug coverage is premium-based. Most Medicare Part B beneficiaries are enrolled in the federal government’s fee-for-service program.

Nearly 40% of enrollees now choose private Medicare Advantage plans, which operate under federal standards and combine Parts B and D.

Medicare increases health-care use and reduces cancer mortality (Card, Dobkin, and Maestas 2009). (Myerson et al. 2020). Medicare reduces out-of-pocket health care spending (Finkelstein and McKnight 2008) and insures against medical debt (Barcellos and Jacobson 2015; Caswell and Goddeeris 2020; Goldsmith-Pinkham, Pinkovskiy, and Wallace 2020).

Medicare Part D reduces prescription costs and increases use (Duggan and Scott Morton 2010, 2011). Medicare Part D reduces mortality and improves mental health (Dunn & Shapiro 2019; Huh & Reif 2017).

(Ayyagari and Shane 2015). Medicare’s growth has contributed significantly to federal health care spending since the program’s inception (Finkelstein 2007).


The VA provides health insurance for active-duty military, their families, and survivors. This system covered 9 million people in 2019. Veterans with other health insurance can get VA benefits.

The benefits can supplement Medicare for 65-and-overs. Veterans pay no premiums for health care, but sometimes copayments. The VA provides higher-quality care than the private sector, according to research.

Premium Subsidies

Millions of Americans are uninsured despite programs to increase health coverage. People with incomes between 100% and 400% of the poverty line can use premium tax credits to subsidize the purchase of health insurance in the Affordable Care Act’s marketplaces, along with a series of rules to ensure the marketplaces function effectively.

People with incomes between 100 and 250 percent of the poverty line can get cost-sharing subsidies. The US Treasury sends tax credits directly to the insurance company in which a beneficiary is enrolled.

The ARP increases subsidies and removes the 400% poverty eligibility cutoff for 2021 and 2022. Whether to make these changes permanent is debatable.

The high cost of health insurance premiums and deductibles and the complexity of enrolling create barriers for some eligible to receive coverage, according to the CBO. (CBO 2020b).

Family and Medical Leave

FMLA allows eligible employees to take up to 12 weeks of unpaid leave for caregiving or illness recovery. Employers and employees must meet several criteria for FMLA leave.

The firm must be large (at least 50 employees within a 50-mile radius, though in eight jurisdictions the threshold is lower), and the employee must have worked at least 1,250 hours in the past year. Only 11 jurisdictions apply the FMLA to extended family members.

The US doesn’t have paid leave. Some states and cities require paid leave for eligible workers. Early 2021, only six states offer paid family leave for post-birth/adoption care and sick family members.

Two more are implementing legislation they passed. State-specific funding mechanisms are typically a small payroll tax on wages; wage replacement rates and paid leave weeks vary by state. Without state or local laws, employers determine paid leave.

FMLA reduces worker turnover and improves children’s health (Appelbaum & Milkman, 2011). (Rossin 2011; Ruhm 2000). FMLA increases labor force participation, lifetime earnings and retirement benefits, and leave use (Boushey, O’Leary, and Mitukiewicz 2013).

States with paid leave programs have higher maternal leave take-up and job return rates (Baum and Ruhun 2013; Byker 2016; Rossin-Slater, Ruhm, and Waldfogel 2011).

Leave benefits poor mothers most (Byker 2016; Rossin-Slater 2013). Paid parental leave may have negative wage effects for women, so its ability to close the gender pay gap is uncertain (Bailey et al. 2019).

THP Proposals: Health

Some proposals to reform Medicare, including one developed for The Hamilton Project, would move away from the current fee-for-service model and offer a global payment model in which health plans and provider systems are paid a fixed budget to cover all beneficiary spending. In this model, the regulatory regime should level payments to Medicare Advantage health plans and provider systems (under Accountable Care Organization models).

Medicare’s self-referral ban and usage caps prevent overuse of care. The THP proposal would eliminate these restrictions, allowing for broader coverage that prioritizes health outcomes over cost. Michael Chernew and Dana Goldman’s (2013) THP proposal has more details.

Other changes to Medicare would introduce income-related payment limits on out-of-pocket costs, with the limits rising as income increases.

To further strengthen the demand-side incentives of Medicare, a new tax could be placed on the purchase of supplemental insurance, which would encourage less medical spending by Medicare enrollees. (To learn more, read the THP proposal by Jonathan Gruber [2013].)

Structure federal rules so the federal share of Medicaid costs rises automatically during economic downturns to facilitate temporary enrollment increases and ease contractionary pressure on state and local governments.

Under another THP proposal, a state would be eligible for relief if its unemployment rate exceeded the 25th percentile of its unemployment rates over the previous 15 years plus 1 percentage point, ensuring that assistance is targeted at serious downturns and not small fluctuations.

A state’s base federal Medicaid matching rate would increase by 3.8 percentage points for each percentage point above this threshold. Medicaid expansion states would get a 1 percent boost. (Read Matthew Fiedler, Jason Furman, and Wilson Powell III’s THP proposal [2019] for more.)

A THP proposal would expand access to paid leave to support caregivers. An employee would get one hour of flexible, multipurpose leave for every 30 hours worked (capped at 40 hours per year), with unused leave carried over to the next year.

Nicole Maestas’s (2017) THP proposal would give states discretion on the type of structure to implement, allowing either employer provision or the creation of a new statewide sick pay fund.

Christopher Ruhm (2017) proposes a paid parental leave program that draws on federal general revenues. This structure would separate workers’ access to leave from their employer’s hiring decisions, preventing a payroll tax from discouraging employment and burdening low-wage workers.

Another THP proposal would combine family and medical leave policies, ensuring that all workers, regardless of life stage, could benefit. Tanya Byker and Elena Patel’s (2021) THP proposal would offer paid leave to all workers and have minimal work and earnings requirements to accommodate part-time, low-income, and other workers in certain industries.

The flexible, gender-neutral program structure would provide up to 16 weeks of partially paid parental leave and 12 weeks of family medical leave.

3. Income Support Programs

Income support programs boost income through transfers, refundable credits, and tax reductions for retirees, low-income people, and others. Social Security, unemployment, CTC, EITC, SSI, and TANF.

Income support programs accounted for 5.8% of GDP and 28% of the federal budget in 2019. Figure 13 shows that Social Security payments make up nearly 4.9% of GDP (or $1 trillion). UI, which increases in recessions to provide countercyclical support, peaked in 2010 at 1.1% of GDP (or $160 billion) before declining pre-pandemic (and growing dramatically during the pandemic and related economic downturn).

Federal spending on TANF as a share of GDP has fallen since it replaced AFDC in 1996, falling to 0.1% of GDP in 2019 from 0.5% in 1972 when AFDC was in place. EITC and CTC payments are a larger share of GDP than before 2010.

Child Tax Credit (CTC)

The CTC provides financial resources to qualifying families with minor children. With the 2017 tax act’s changes, married filers with incomes up to $400,000 can get the full credit, and those with two children and incomes between $400,000 and $480,000 can get a partial credit. Prior to ARP changes (and after they expire), the CTC was more valuable to higher-income families than to lower-income families.

Families with no or very low earnings don’t qualify, the credit phases in slowly for working-poor families as their earnings rise, and filers without federal income-tax liability have a credit limit. In 2020, 27 million low-income children received no or a partial credit.

The ARP raised the full credit per child from $2,000 to $3,600 for children under 6 and $3,000 for children 6–17, and made the full amount available to low-income households.

It made 17-year-olds eligible and changed the tax credit distribution from annual to periodic (unless a filer opts to receive the credit annually). After 2021, these changes and other ARP measures are projected to reduce child poverty from 14% to 8%. (CPSP 2021).

Earned Income Tax Credit (EITC)

The EITC is a refundable tax credit available to income-eligible working households. The IRS sends eligible claimants a refund check after they file their taxes.

The EITC phases in as a family’s income rises, then phases out above a certain level. The credit increases with family size (up to three). To reduce marriage penalties, the credit is larger for married filers in certain income ranges.

Fig 13

In 2020, a married filer with two children could receive a maximum EITC of $5,920 (most families receive less), and it phased out when their earnings reached $53,330.

In 2020, the maximum EITC benefit for workers without children at home was $538; single workers (most childless EITC beneficiaries are single) became ineligible at $15,820.

For tax year 2021, the ARP nearly triples the maximum childless workers’ EITC benefit to about $1,500, raises the income at which the credit phases out completely for single workers to $21,427, and makes workers 65 and over and workers 19 to 24 years old eligible for the credit for the first time, excluding students under 24 who are in college at least half time.

(29 states and DC have state EITCs that supplement the federal credit; most are a percentage of the federal credit.)

EITC participation is high (Figure 14). Westerners are more likely to be eligible for the credit but not claim it. Most eligible non-claimants do not file a federal tax return (Tax Policy Center n.d.).

Other differences across states include living in rural areas, experiencing a change in income, marital, or parental status, and receiving disability benefits (IRS n.d.).

Also, audits are more common among EITC filers than other filers (though a small share is audited), and audits reduce future EITC filing (CBO 2020c; Guyton et al. 2018).

Studies find that EITC raises low-income families’ labor force participation and annual income (Eissa and Liebman 1996; Meyer and Rosenbaum 2001; Hoynes and Patel 2018; Bastian 2020; Schanzenbach and Strain 2020; see Hoynes and Rothstein 2016 for a review of the literature).

In fact, the EITC has a bigger impact on labor force participation than on hours worked (Saez 2010). Scholars have found that EITC improves economic, health, and human capital well-being (Baughman and Dickert-Conline 2009; Neumark, Asquith, and Bass 2019). (Chetty, Friedman, and Rockoff 2011; Bastian and Michelmore 2018).

Social Security

The Social Security Administration (SSA) administers Social Security, which provides monthly cash benefits to aged or disabled workers, their spouses, children, and survivors of insured workers.

These cash benefits are known as Old-Age, Survivors, and Disability Insurance (OASDI). Social Security covered 180 million workers in 2020. (SSA 2021). In a typical month of 2020, the program had 64 million beneficiaries (CBPP 2020).

Fig 14

Individuals must have paid into OASDI for a certain number of years to qualify (or have been married to a qualifying worker for at least a specified number of years or be a child of such a worker).

OASDI’s near-universal access means low administrative costs compared to private retirement annuities (CBPP 2020).


Social Security is the costliest and most-popular federal program. Individuals can begin receiving old-age benefits at age 62, but they receive higher monthly benefits for life for each year (until age 70) they wait. Social Security benefits are taxable for those with high incomes.

Figure 15 shows that Social Security is a progressive program that gives higher benefits to low-wage earners (Catherine, Miller, and Sarin 2020). Replacement rate = average lifetime benefits/previous earnings.

Figure 15 shows that women have higher replacement rates than men because they have lower lifetime earnings and longer life expectancies (and hence draw benefits for more years). Women’s benefits are 20% lower than men’s.

Seniors rely heavily on Social Security benefits. Without Social Security, one in three seniors would be poor (Romig 2020). Half of the workforce has no private pension, and one-third has no retirement savings, according to the SSA (SSA 2021).

Social Security provides more than 90% of older adults’ family income (Dushi, Iams, and Trenkamp 2017). Without Social Security benefits and payroll taxes, many households would increase private saving (Scholz, Seshadri, and Khitatrakun 2006).

Fig 15

Social Security Disability Insurance (SSDI)

SSDI provides cash payments to people who have worked in the past but are now disabled. People of any income or resource level can receive SSDI if they are under 65, their disability is expected to last at least 12 months or result in death, and they have worked a specified number of years, the exact number depending on when they became disabled.

2019 SSDI benefits totaled $125 billion. 8.3 million workers got SSDI in June 2020. (CBPP 2020). During recessions, SSDI rolls rise because disabled people have a harder time finding jobs that accommodate them.

(Autor & Duggan 2003; Kearney & Price 2021; Maestas & Mullen 2015) SSDI improves the financial alternative to working with a disability, reducing labor force participation, albeit slightly (Abraham and Kearney 2020).

Supplemental Security Income (SSI)

SSI is a separate program from OASDI (though it uses the same disability test as SSDI) that provides monthly payments to the blind, disabled, and low-income elderly.

It provides a minimum income for those with limited work history, usually due to a disability occurring too early in life or late immigration into the U.S. SSI is a federal benefit administered by the SSA, which pays monthly.

Some SSI beneficiaries also receive Social Security, but the combined benefit is only $20 a month above the low SSI benefit; most older people who worked for low wages throughout their careers receive Social Security benefits that put them over SSI’s income limits.

SSI has a strict asset test; countable assets (excluding a home, car, and household goods) cannot exceed $2,000 for an individual and $3,000 for a couple. In 2021, the maximum federal payment for beneficiaries with little or no other income is $794 for a single person and $1,191 for a couple.

(Some states offer modest supplements.) Many disability advocacy groups argue that these benefit levels and eligibility thresholds are too low and limit disabled people’s ability to save for emergencies (or even get married, since a couple’s benefit is only three-quarters of two singles’) (SSA 2003). SSI eligibility includes Medicaid.

SSI improves household financial security, say researchers (Duggan and Kearney 2007; Schmidt, Shore-Sheppard, and Watson 2016). SSI disincentives labor supply because households lose benefits at modest income levels (Wittenburg, Mann, and Thompkins 2013). When kids stop receiving SSI, parents work more (Deshpande 2016a).

When young children get SSI, parents work less. Parents could use that time to invest in children (Guldi et al. 2018). SSI improves children’s human capital and adult earnings by increasing household resources, research shows (Deshpande 2016b).

Temporary Assistance for Needy Families (TANF)

TANF is a block grant program that gives states a fixed amount annually. TANF’s main purpose is to help very poor families with children (and pregnant women). In 1996, 70% of its spending went toward such aid.

Today, less than a quarter goes to basic assistance (Safawi and Schott 2021). States use TANF funds for workforce development, child care, and marriage promotion.

Several states have effectively shifted TANF funds to other parts of their budget by substituting federal TANF funds for some state expenditures (a practice called “supplantation”).

State-by-state, TANF benefits and services vary greatly. In all but one state, the maximum TANF cash benefit for a mother and two children with no other income is less than half of the poverty line.

TANF and the EITC had major and nearly simultaneous changes in the 1990s, making it difficult to separate their effects on labor supply (see Ziliak 2016 for a review).

Macroeconomic conditions and EITC expansions are given more weight than TANF (Chan 2013; Meyer and Rosenbaum 2001). Long-term gains are more likely from programs that emphasize human capital development over work first (Bloom, Loprest, and Zedlewski 2011; Dyke et al. 2006; Hotz, Imbens, and Klerman 2006).

TANF households’ after-tax-and-transfer income is estimated to be lower than what it would have been under pre-TANF policies (namely, the AFDC program) (Bitler, Gelbach, and Hoynes 2006; Bollinger, Gonzalez, and Ziliak 2009).

Unemployment Insurance (UI)

Most workers have UI. It’s funded by state and federal employer payroll taxes and administered state-by-state as a federal-state partnership. This means eligibility requirements, benefit levels, and duration vary across states.

To receive UI, a worker must meet state requirements for wages earned (and reported to the IRS) and/or calendar quarters worked during the state’s “base period” and must have been laid off or quit with good cause. UI recipients must be available and accept a suitable job offer.

UI coverage varies based on job characteristics, tenure, and separation circumstances. Over time, UI has declined. In 2019, less than 30% of unemployed people received UI benefits (DOL 2019).

Low-wage workers are less likely to receive UI after a job loss due to restrictive eligibility rules in most states. Figure 16 shows the percentage of UI-covered jobs in each state in 2019.

Even in states with the lowest UI coverage, at least two-thirds of jobs are covered. In the Midwest, more jobs qualify for regular UI benefits than elsewhere. 8

Congress has augmented UI ad hoc during economic downturns. Rapid expansions of UI use during recessions can affect state unemployment trust funds and state budgets.

In recessions, the federal government plays a larger role, with Congress increasing the number of weeks of benefits an unemployed worker can receive and, in some cases, increasing UI benefit levels and covering those costs.

In the pandemic and recession of 2020–21, the federal government acted aggressively to broaden the number of unemployed workers who can qualify, with particular gains for laid-off low-wage workers, and to supplement weekly UI benefit levels and the number of weeks people can draw the benefits. In April 2020, states and federal government paid unemployed workers $48 billion in UI (Treasury 2020).

Fig 16

Federal actions over the past year have helped unemployed workers’ incomes, but their importance shows the UI program needs improvement. Many states struggled to respond to the labor market crisis and federal UI changes.

In part, that was because the system is plagued by outdated IT systems. Disturbingly, the unreliability of a state’s IT system appears to be positively correlated with the size of its Black population (Dixon 2020).

(Dixon 2020). Black men and women were 50% and 33% as likely as whites to receive UI in June 2020. (Spriggs 2020). Racial disparities in UI recipiency predate the Great Recession (Grooms, Ortega, and Rubalcaba 2020).

UI helps households maintain consumption after job loss (East and Simon 2020; Ganong and Noel 2019); after being laid off (but before receiving UI benefits) and after exhausting benefits, households reduce spending (Farrell et al. 2020).

UI allows workers to extend their job searches, resulting in longer spells of unemployment but better matches (Farooq, Kugler, and Muratori 2020). During the Great Recession, UI receipt increased the unemployment rate by keeping the unemployed looking for work (Farber and Valletta 2015; Mazumder 2011; Rothstein 2011).

When labor demand is weak, UI’s effect on the unemployment rate is smaller (Kroft and Notowidigdo 2016). Evidence from the COVID-19 recession shows smaller employment effects from UI than in previous business cycles, including in states with high replacement rates (see Dube 2021 for a review).

THP Proposals: Income Support

Since TANF’s inception in 1997, the real value of federal TANF funding has declined, reducing the effectiveness of direct cash assistance and other state-based non-cash programs.

THP would restore TANF funding to its inflation-adjusted 1997 level and index it to inflation going forward, and periodically review the allocation of federal TANF funds across the states to better align them with state-level child poverty rates.

The proposal also requires states to spend a certain percentage of TANF funds on cash assistance and core support. It suggests requiring states to spend all TANF money on families below 150% of the poverty threshold.

Part of the proposal would create a permanent emergency TANF fund modeled after the 2009 recovery fund. State-level unemployment metrics would trigger access to the Fund.

Using these metrics, TANF work requirements and lifetime limits would be waived during recessions. (Read Marianne Bitler and Hilary Hoynes’s (2016) THP proposal to learn more.)

Creating a TANF Community and Family Stabilization Program could improve its ability to respond to downturns. The program, proposed in another THP-commissioned paper, would establish two types of support:

(1) basic cash assistance that can expand countercyclically to act as an automatic stabilizer, and (2) subsidized employment with wraparound supports to stimulate job creation and retention in downturns and throughout the business cycle, with resources devoted to this rising during downturns.

The program would be triggered by national and state economic weakness. A countercyclical federal matching rate would increase federal support when state and national triggers are activated. (Read Indivar Dutta-THP Gupta’s proposal [2019] for more.)

THP would increase the maximum EITC by 10%, giving families with fewer than three children their first real boost in 25 years. (Read Hilary Hoynes, Jesse Rothstein, and Krista Ruffini’s THP proposal [2017] for more.)

Another proposal would expand EITC eligibility to more childless adults, raise benefit levels for one-child families (the largest group of recipients), and encourage greater labor-force participation, especially among low-wage childless workers. (For more, see Hilary Hoynes’s (2014) THP proposal.)

UI is strengthened by several THP proposals. Adriana Kugler’s (2015) proposal is experimental. Early-stage entrepreneurs, workers pursuing apprenticeships or other on-the-job training, and those accepting part-time work while seeking full-time employment would be allowed to receive UI benefits as well as additional supports including occupational training, transportation and child care stipends, and retention bonuses awarded to either the worker or the hiring firm following program completion.

Other proposed changes to UI would automatically boost the level and duration of benefits during recessions to help buffer the economy against sharp job loss and mitigate long-term labor market scarring.

As was the case after the Great Recession and during the COVID-19 recession, making UI extended benefits fully federally funded would remove the disincentive for states to opt into extended benefits.

Automatic recession triggers could extend the number of benefit weeks available (through regular UI and extended benefits) to 60 weeks during recessions, with an additional 13 weeks added if a state’s unemployment rate breach a certain level. (For more, see Gabriel Chodorow-Reich and John Coglianese’s (2019) THP proposal.)

Arindrajit Dube’s (2021) THP proposal would fully federalize UI. Centralizing employment and earnings data and standardizing eligibility and benefit formulas across states would improve the UI system’s responsiveness to economic downturns.

Maximum benefit duration would scale automatically based on national and state economic triggers, reaching 98 weeks. Dube also proposes an automatic increase in UI benefits when the unemployment rate reaches 6% and 8%.

To broaden UI eligibility, the minimum earnings requirement would be lowered and eligibility would be extended to workers who voluntarily left jobs for good cause, such as extenuating family circumstances or cuts to hours or wages beyond the employee’s control.

A new Jobseeker’s Allowance program would offer less generous UI benefits to those with insufficient earnings histories. Reduced work hours would be partially compensated by UI.

THP covers Social Security. Beneficiaries could better time their benefits under one proposal. The proposal would allow beneficiaries to opt into a modified benefit schedule that reduces benefits in early years of recipiency or while both spouses are alive and increases payments upon death of one spouse or later-life disability. (Read Jason Brown and Karen Dynan’s THP proposal [2016] for more.)

Another THP proposal would create universal insurance to help families with sharp income declines due to job loss, spouse death, illness, or disability.

Benefits would be triggered if a family’s total income drops more than 20% (including other benefits) or if out-of-pocket medical expenses exceed 20% of family income.

Once a threshold is breached, additional losses would be partially covered on a sliding scale, with higher income replacement for low-income families. (For more, see Jacob Hacker’s (2006) THP proposal.)

Claudia Sahm (2019) proposes automatic, direct household stimulus payments during recessions. Each adult and dependent would receive a base payment regardless of household income, time use, or tax liabilities.

The payments would be triggered if the 3-month average national unemployment rate rose by 0.5% over the 12-month low. In the first year of a recession, the stimulus payments would be set so that the total federal cost equaled 0.7% of GDP. In extended downturns, subsequent years’ distribution and benefit amounts would depend on unemployment and be scaled down as unemployment fell.

THP requested disability insurance proposals. One proposal would require firms to give most workers private disability insurance. A worker with a disability would receive partial wage replacement, workplace accommodations, rehabilitation services, and other services for 24 months before moving into the SSDI system.

The proposal would also offer employers incentives to accommodate disabled workers and reduce SSDI enrollment. (Read David Autor and Mark Duggan’s THP proposal [2010] for more.)

In a THP proposal by Jeffrey Liebman and Jack Smalligan (2013), they propose three demonstration projects to test early interventions for disability applicants.

The first trial would screen applicants to target those with the highest potential for returning to work if given the right range of services. Candidates would receive targeted vocational and health interventions and wage-replacement to test improvements in well-being and employment outcomes.

A second trial would allow states to redirect portions of Medicaid, TANF, and vocational training funding to target populations at risk of receiving lifetime SSI and SSDI benefits, offering incentive funding for measures to reduce disability program participation.

The third demonstration project would provide a tax credit to employers who reduce disability incidence by at least 20%.

4. Nutrition Programs

Between the Great Recession and the COVID-19 pandemic, moderate to severe food insecurity in the US continued to decline, as did participation in nutrition assistance programs (Ganong and Liebman 2013; Ziliak 2015). 9 With COVID-19, food insecurity rose, especially for families with children, children, single-mother households, and Black and Hispanic households.

(Bauer 2020, 2020 et al., 2021; Gupta, Gonzalez, and Waxman, 2020). With fiscal support and a recovering economy, these rates have started falling. As of May 24, 2021, food insecurity has dropped 30% since December 2020. (Schanzenbach 2021).

The COVID-19 pandemic and recession have expanded eligibility for and generosity of U.S. nutrition assistance programs. These programs help families and individuals eat well.

Through the automatic expansion of SNAP to serve more households as incomes fell and more households qualified, as well as the provision by policymakers of additional resources for existing programs like SNAP, WIC, and child nutrition programs (NSLP, SBP, and SFSP), and the creation of temporary new programs like P-EBT and USDA’s Farmers to Families Food Box program, millions of eligible households have benefited.

Figure 17 shows 2020 spending growth.

Supplemental Nutrition Assistance Program (SNAP)

EBT cards can be used at more than 250,000 grocery stores by SNAP beneficiaries. Maximum benefit levels are based on the cost of the Thrifty Food Plan (TFP) for a family of four, then adjusted by household size. A household’s benefit is the difference between its TFP cost and 30% of its net income (i.e., its income after certain deductions).

SNAP has 36 million monthly participants in FY2019. All low-income households can qualify, though the thresholds vary by state. Undocumented individuals are ineligible, and some legally authorized immigrants are eligible only after a five-year waiting period or not at all.

Non-disabled 18–49-year-olds without minor children can only receive benefits for three months while unemployed or working less than half time in 36 months, unless they are in a qualified work or training program (which typically are in short supply).

High-unemployment areas can get temporary waivers from the three-month limit.

Fig 17

In March 2020, Congress authorized SNAP emergency allotments (EAs), which topped up participating SNAP households to the maximum benefit amount for their household size. In early 2021, USDA authorized EAs for households already eligible for the maximum benefit.

Congress increased the SNAP maximum benefit by 15% in December 2020; it expires in September 2021. During the COVID-19 pandemic, SNAP’s three-month time limit has been suspended nationwide.

SNAP increases families’ short- and long-term health and economic security (Bailey et al. 2020; Hoynes, Schanzenbach, and Almond 2016). SNAP reduces a household’s risk of food insecurity, according to several studies (Hoynes and Schanzenbach 2016).

SNAP improves infant and child health, including birthweight and neonatal deaths (Almond, Hoynes, and Schanzenbach 2011; East 2020). Increases in SNAP spending during economic downturns are estimated to be among the most effective automatic stabilizers (on a bang-for-the-buck basis) in generating economic activity (Zandi and Yaros 2021).

SNAP benefits are sometimes called “near cash” because, on average, a portion of a household’s benefit substitutes for food funds, freeing up those funds for other purposes.

Child Nutrition Programs and WIC

WIC, NSLP, and SBP are child nutrition programs. WIC provides federal grants to states for the WIC food package, health-care referrals, and nutrition education for low-income pregnant women, new mothers, infants, and children up to age 5, including immigrants.

WIC recipients must be below 185% of the poverty line or enrolled in Medicaid. As noted, they must also be at nutritional risk, but the standard is broad and the vast majority of people who meet the program’s income test do so.

WIC serves an average of 6.4 million participants per month in fiscal year 2019 at a cost of $5.3 billion, and 6.2 million participants per month in fiscal year 2020 at a cost of $5 billion.

Since 2007, policymakers have provided enough resources to serve all eligible applicants. Each WIC participant receives her and her children’s food package (the food packages do not vary in size according to income among those eligible).

WIC reduces low birthweight (Currie and Rajani 2015; Figlio, Hamersma, and Roth 2009; Hoynes, Page, and Stevens 2011) and increases birth weight (Bitler and Currie 2005; Rossin-Slater 2013). (Chorniy, Currie, and Sonchak 2020).

NSLP and SBP fed an average of 29 million and 15 million children daily in FY19. Children can qualify for free or reduced-price meals based on their family’s income, participation in SNAP or Medicaid, or by submitting an application.

Community Eligibility Provision allows all students in a school or district to receive free meals without individual applications if a certain share of students qualify for free or reduced-price meals based on other data.

These programs, along with SFSP and Child and Adult Care Food Program, provided prepared meals for pick-up in 2020 when schools and child-care centers were closed.

Congress also authorized a new program, P-EBT, to replace missed school meals with grocery store vouchers for families with schoolchildren during the public health emergency.

NSLP reduces food insecurity (Nord and Romig 2006), improves education (Hinrichs 2010), but increases childhood obesity (Schanzenbach 2009). Community Eligibility Provision improves student achievement (Gordanier et al. 2020; Ruffini 2021).

Preliminary evidence suggests P-EBT reduced food insecurity during its initial rollout in 2020. (Bauer et al. 2020; Keith-Jennings 2020).

THP Proposals: Nutrition

One THP nutrition proposal would revise the TFP, used by the USDA to estimate the cost of an adequate diet, to better align its dietary cost estimates with modern food consumption patterns and current dietary guidance. Adding time spent shopping and preparing food to the TFP formula is one way to help recipients.

This proposal calls for other changes in SNAP that would increase benefit levels for some participants by modifying the program’s calculation of net income, including an increase to the program’s earned income deduction from 20% of earnings to 30% (to dampen potential work disincentives from the phase-out of benefits as income rises) and by raising the maximum amount a household can deduct from its gross income to reflect the impact of high housing costs (and allowing that maximum amount to vary based on local housing prices).

Massachusetts’ Healthy Incentives Pilot program encourages recipients to buy more fruits and vegetables. (For more, see Diane Schanzenbach’s (2013) THP proposal.)

Other SNAP proposals would change the program’s assumptions, such as allowing regional benefit levels instead of a single national standard. In calculating the TFP cost, the USDA uses antiquated consumption samples and reference families; one THP proposal would address this. (For more, see James Ziliak’s (2016) THP proposal.)

SNAP is among the most efficient programs at expanding quickly during economic downturns. Allowing the program to expand further at the onset of slowdowns and to continue offering elevated benefits during downturns would boost the program’s efficacy as an automatic stabilizer and broader stimulus.

Following the Sahm Rule, proposed reforms would automatically suspend SNAP work requirements and raise maximum benefit levels when the 3-month average national unemployment rate rises 0.5 percentage points above its 12-month low. (Read Hilary Hoynes and Diane Schanzenbach’s THP proposal [2019] for more.)

5. Shelter Programs

34 million people were poor before COVID-19. By August 2020, many households had trouble paying bills and faced eviction or foreclosure (CBPP 2021b; Chun and Grinstein-Weiss 2020; Lake 2020). 8 million households and 20 million renters could face eviction in early 2021, according to one analysis (National Council of State Housing Agencies [NCSHA] 2020).

Deferred principal, interest, taxes, and insurance payments totaled $90 billion by March 2021. (Consumer Financial Protection Bureau [CFPB] 2021). Current housing assistance programs, especially for low-income renters, are insufficient. In 2019, only 25% of low-income people lived in subsidized housing (figure 18).

Fig 18

Benefits help low-income renters afford housing. Some programs help low-income people become first-time homeowners and avoid foreclosure. Others help veterans and rural residents. Most homeownership programs help middle- to upper-income homeowners, do little for low-income households, and are not social insurance.

The Housing Choice Voucher program subsidizes a family’s choice of rental unit, and public housing assigns renters a unit in a specific housing development overseen by the local public housing agency.

The Department of Housing and Urban Development (HUD) enters into long-term contracts with private landlords of multifamily properties to provide affordable housing in exchange for subsidies to cover rent that exceeds 30% of a tenant’s income and to maintain the property.

In addition, LIHEAP, is available to both renters and owners to help with home energy and weatherization costs but is small and meets only a fraction of the need.

Another program, the Low Income Housing Tax Credit provides a tax credit to developers and investors to develop affordable housing and is arguably not a social insurance program.

The Housing Choice Voucher Program

The housing choice voucher program is a “tenant-based” program that provides low-income families with vouchers to reduce rent in private housing (CBPP 2021a). Families pay 30% of their income for rent, and the housing program makes up the difference as long as the rent doesn’t exceed a local standard for a modest unit.

(Voucher holders can rent units with rents above the standard; tenants pay the difference plus 30% of income.) Eligible households have incomes below the poverty line or 30% of the local median income.

Largest low-income housing subsidy program. 5 million people in 2.2 million households used housing vouchers in 2018. (Mazzara and Knudsen 2019). Vouchers serve families with children, disabled people, and older adults.

The vouchers reduce rent, homelessness, and overcrowding (Fischer, Rice, and Mazzara 2019; Gubits et al. 2015; Jacob and Ludwig 2012). When a low-income family uses a voucher to move to a low-poverty, high-opportunity neighborhood, young children benefit (Chetty et al. 2016). Moreover, voucher holders are less likely to live in high-crime neighborhoods (Lens, Ellen, and O’Regan 2011).

Due to rent prices, limited unit availability, familial ties, and other factors, not all voucher holders live in safe neighborhoods (Collinson and Ganong 2017; McClure 2006; Rosen 2014).

Public Housing

Public housing is a major source of stable, affordable housing for low-income families. More than 2 million low-income Americans live in HUD-funded and PHA-administered public housing (Docter and Galvez 2020). Underfunding, especially for public housing maintenance and capital repairs, has degraded some properties and reduced available units (Ellen 2020; Hayes and Gerken 2020; Popkin et al. 2020).

Some housing agencies have converted public housing units to Section 8 Project-Based Voucher (PBV) and Project-Based Rental Assistance housing to provide more reliable funding (CBPP 2017a).

PBVs don’t require families to stay in the project to receive rental assistance. Families in a PBV unit can move out after a year if another voucher (not necessarily tied to a specific unit) is available (CBPP 2017b, 2017c).

Public housing’s benefits are well-known. Sarah Gold found that public housing families are less likely to pay more than 30% of their income on housing than other families (Gold 2021).

Reduced housing costs improve adult health, food security, and child development (Fenelon et al. 2017; Fletcher, Andreyeva, and Busch 2009; Forget 2011). Public housing is scarce.

A 2012 PHA survey found 1.6 million households on the waitlist. Only one in four eligible low-income renters receives housing choice vouchers, public housing, or project-based rental assistance (Collinson, Gould-Ellen, and Ludwig 2016).

Researchers and housing agencies agree that low-income rental assistance programs need adequate funding and other reforms (AECOM and STV 2018; Finkel et al. 2010; Fischer, Acosta, and Gartland 2021; Popkin, Cunningham, and Burt 2005; Popkin et al. 2020).

Programs to Help First-Time Homebuyers, and Homeowners at Risk of Foreclosure

First-time homebuyers can tap certain retirement savings accounts without penalties to help with down payments. FHA oversees programs to help mortgage holders avoid foreclosure.

A small federal program called the Hardest Hit Fund (HHF) helps mortgage borrowers with lost income. Research shows HHF’s $8 billion investment from 2010 to 2019 prevented foreclosures (Moulton et al. 2020).

Tax Preferences for Homeowners

Several tax provisions reduce the cost of homeownership for higher-income households. Renting is taxed, but homeowners’ imputed rental income is not. Mortgage interest and property taxes are deductible from a homeowner’s taxable income, and most capital gains from a primary residence are not taxed.

In 2020, the mortgage interest deduction (MID) could save homeowners $30 billion (Keightley 2020). The MID is regressive because it only benefits those who itemize instead of taking the standard deduction and because its value rises with a taxpayer’s marginal tax rate.

Low Income Home Energy Assistance Program (LIHEAP)

LIHEAP helps low-income renters and homeowners pay utility bills. The federal government sets eligibility guidelines: households must have incomes below 100% of the poverty line or be enrolled in TANF, SSI, or SNAP.

States can tailor programs to local needs. Millions of families benefit. In 2014, LIHEAP helped 6.3 million households (CRS 2018). Average LIHEAP household energy costs fell from 5% to 18% of income pre-benefit to 1% to 16% post-benefit (Administration for Children and Families [ACF] 2019).

LIHEAP is underfunded. 10-20% of eligible households are served. The program doesn’t help needy families enough (Applied Public Policy Research [APPRISE] 2005; Bohr and McCreery 2020; Graff and Pirog 2019; Kaiser and Pulsipher 2006; Kefer and Greenstein 2009).

THP Proposals: Shelter

Proposed THP reforms would convert the MID into a 15% refundable tax credit available to all homeowners, including those claiming the standard deduction and those with no income tax liability.

This credit would only apply to primary homes with moderate mortgage debt. (For more, see Alan Viard’s (2013) THP proposal.)

In case of weak housing markets and acute housing instability, renters and homeowners can use automatic stabilization mechanisms. Recession indicators trigger these mechanisms. Renters with incomes below 80% of the area’s median would receive emergency aid.

Low- and moderate-income homeowners with less than 100% of the area median income would qualify for automatic three-month forbearance. (For more, see Collinson, Gould Ellen, and Keys’ THP proposal [2021].)


I am Dharmendra Jain, Owner of this website. In point of fact, the author, Dharmendra Jain, writes on Finance Niche, because he enjoys disseminating knowledge to people all over the globe. The author has expressed a desire to maintain communication with all of his or her devoted readers. And in order for me to be connected to the internet in the first place, it compelled me to do so.

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