Entitlement Reform Archives - Progressive Policy Institute

Paying for Progress: A Blueprint to Cut Costs, Boost Growth, and Expand American Opportunity

Posted on July 23, 2024October 23, 2024 by The Progressive Policy Institute

The next administration must confront the consequences that the American people are finally facing from more than two decades of fiscal mismanagement in Washington. Annual deficits in excess of $2 trillion during a time when the unemployment rate hovers near a historically low 4% have put upward pressure on prices and strained family budgets. Annual interest payments on the national debt, now the highest they’ve ever been in history, are crowding out public investments into our collective future, which have fallen near historic lows. Working families face a future with lower incomes and diminished opportunities if we continue on our current path.

The Progressive Policy Institute (PPI) believes that the best way to promote opportunity for all Americans and tackle the nation’s many problems is to reorient our public budgets away from subsidizing short-term consumption and towards investments that lay the foundation for long-term economic abundance. Rather than eviscerating government in the name of fiscal probity, as many on the right seek to do, our “Paying for Progress” Blueprint offers a visionary framework for a fairer and more prosperous society.

Our blueprint would raise enough revenue to fund our government through a tax code that is simpler, more progressive, and more pro-growth than current policy. We offer innovative ideas to modernize our nation’s health-care and retirement programs so they better reflect the needs of our aging population. We would invest in the engines of American innovation and expand access to affordable housing, education, and child care to cut the cost of living for working families. And we propose changes to rationalize federal programs and institutions so that our government spends smarter rather than merely spending more.

Many of these transformative policies are politically popular — the kind of bold, aspirational ideas a presidential candidate could build a campaign around — while others are more controversial because they would require some sacrifice from politically influential constituencies. But the reality is that both kinds of policies must be on the table, because public programs can only work if the vast majority of Americans that benefit from them are willing to contribute to them. Unlike many on the left, we recognize that progressive policies must be fiscally sound and grounded in economic pragmatism to make government work for working Americans now and in the future.

If fully enacted during the first year of the next president’s administration, the recommendations in this report would put the federal budget on a path to balance within 20 years. But we do not see actually balancing the budget as a necessary end. Rather, PPI seeks to put the budget on a healthy trajectory so that future policymakers have the fiscal freedom to address emergencies and other unforeseen needs. Moreover, because PPI’s blueprint meets such an ambitious fiscal target, we ensure that adopting even half of our recommended savings would be enough to stabilize the debt as a percent of GDP. Thus, our proposals to cut costs, boost growth, and expand American opportunity will remain a strong menu of options for policymakers to draw upon for years to come, even if they are unlikely to be enacted in their entirety any time soon.

The roughly six dozen federal policy recommendations in this report are organized into 12 overarching priorities:

I. Replace Taxes on Work with Taxes on Consumption and Unearned Income
II. Make the Individual Income Tax Code Simpler and More Progressive
III. Reform the Business Tax Code to Promote Growth and International Competitiveness
IV. Secure America’s Global Leadership
V. Strengthen Social Security’s Intergenerational Compact
VI. Modernize Medicare
VII. Cut Health-Care Costs and Improve Outcomes
VIII. Support Working Families and Economic Opportunity
IX. Make Housing Affordable for All
X. Rationalize Safety-Net Programs
XI. Improve Public Administration
XII. Manage Public Debt Responsibly

Read the full Blueprint.

Read the Summary of Recommendations.

Read the PPI press release.

See how PPI’s Blueprint compares to six alternatives.

Media Mentions:

How to Make Social Security Work for Government Workers

Posted on September 26, 2023September 18, 2024 by The Progressive Policy Institute

Although workers in 94% of American jobs pay into Social Security, a small segment of the population — most of whom work for state and local governments — do not. Since workers in these jobs do not pay Social Security payroll taxes, those who contribute to Social Security for a portion of their career end up getting a greater return on the taxes they do contribute to the program than other Americans with similar lifetime earnings. To address this issue, Congress passed the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) in the late 1970s and early 1980s as an attempt to provide comparable benefits to these workers.

Now, a bipartisan coalition in the House is pushing to repeal these provisions. While it is true the WEP and GPO are imperfect solutions that can unfairly punish some low-income public workers, Congress would be throwing the baby out with the bathwater if they repealed the provisions altogether. Instead of overcorrecting and providing excessively generous benefits to a small cohort of Americans, Congress should consider a proportional benefits system that reduces benefits based on the individual’s contributions to the Social Security program. Not only is this reform the most equitable solution to an important problem, but it remains more in line with the intention of the WEP and GPO.

Why are the WEP and GPO necessary?

Social Security benefits are designed to be progressive, meaning that low-income individuals will receive a greater benefit for each dollar they paid into the program through payroll taxes than higher-income individuals. To determine one’s benefit, the average of an individual’s highest 35 years of covered earnings is used to calculate their average indexed monthly earnings (AIME). Individuals receive a benefit equal to 90% of their AIME up to the threshold of $1,115. This percentage decreases as lifetime earnings increase, with beneficiaries receiving 32% of each dollar of their AIME between $1,115 and $6,721, and 15% of each dollar of their AIME that exceeds $6,721 up to a maximum of $13,584.86.

Importantly, the AIME formula only incorporates earnings on which employees and their employers pay payroll taxes. Many state and local government jobs are considered uncovered since their employees do not pay Social Security payroll taxes. Instead, these employees contribute to pension plans. Since these employees don’t contribute to Social Security through taxes, their annual covered earnings are zero for each year that they work at an uncovered job. As a result, a high-income worker with many years of uncovered employment would appear to have the same AIME as a worker with a lifetime of low-income employment.

Here’s an example: Worker A makes a steady, inflation-adjusted salary of $100,000 during his 35 years of employment, 10 of which were spent in the private sector. Worker B is a low-income worker in the private sector who makes $30,000 annually. The following graph shows their total lifetime earnings, split between covered and uncovered earnings.

Despite Worker A making nearly four times as much as Worker B, most of Worker A’s earnings are uncovered, meaning that the Social Security benefit formula treats them both as low-income earners and would provide them roughly the same level of benefits.

This formula also results in Worker A getting better treatment than workers with comparable earnings in the private sector. Worker A’s Social Security benefits would replace roughly 59% of his AIME, a relatively high replacement rate meant to assist low-income workers. In comparison, a worker who had the same average salary as Worker A in the private sector would only have a replacement rate of 36%. Without adjustments to the benefits formulas, the high-income public sector workers would be receiving a significantly higher return for each dollar of income on which they paid payroll taxes, representing an unjustified windfall.

The WEP and GPO remain imperfect solutions that disproportionately harm low-income government workers.

The WEP reduces the replacement rate that qualifying individuals receive for their first $1,115 of covered earnings. Rather than receiving 90% of the $1,115 in benefits, the replacement rate for government workers is as low as 40% depending on how many years of covered employment they have. The GPO applies complementary adjustments to spousal and survivor benefits.

This formula leads to proportionally larger benefit reductions for government workers with low AIMEs, leading critics to argue that it is regressive. Since the provisions only affect the earnings made up to the $1,115 of covered earnings, qualifying individuals who have a lower AIME lose a greater share of their total potential Social Security benefit because of these provisions than those who have an AIME over $1,115. For instance, a high-income worker who consistently makes an annual salary of $120,000 over 35 years and spent 10 of those years in the private sector would have their benefits reduced by 36%. On the other hand, a lower-income worker who spent 25 years paying payroll taxes and makes $45,000 a year would have their benefits reduced by 42% under the current law, despite paying into the Social Security program for a longer period.

Additionally, the current wage reduction is not an accurate method of adjusting benefits fairly. WEP and GPO were designed to adjust Social Security benefits so that they are relatively proportional to the length of time they paid into the program. A worker who worked in the private sector for 40% of their career should receive about 40% of the benefits that a worker with similar earnings would receive if they worked their full career in the private sector. However, when these provisions were passed in the 1970s and 80s, the SSA lacked adequate data to make precise adjustments. Instead, the provisions relied upon a roughly approximated formula that has led to benefits being over- or under-adjusted, depending on an individual’s distribution of covered and noncovered earnings.

Repealing the WEP/GPO would create new equity problems and threaten the fiscal security of the trust fund.

In response to criticism about the provisions, Members of Congress have proposed repealing both provisions in the Social Security Fairness Act, which has been garnered bipartisan support in both the House and Senate. However, despite the issues with the current formula, a complete repeal of the WEP and GPO would be costly and unfair to other Americans who paid into Social Security throughout their career.

Eliminating these two provisions would increase benefits for the 2 million individuals that have not sufficiently paid into Social Security through payroll taxes. Unlike individuals who have spent their whole careers in covered jobs contributing to the Social Security program, these individuals spent a portion of their career in jobs not subject to Social Security payroll taxes. As previously noted, they pay into pension plans during their time at uncovered jobs and upon retirement, receive pension benefits on top of Social Security benefits.

If these individuals began receiving non-adjusted Social Security benefits on top of the pension benefits, their total retirement benefits would replace a larger percentage of their lifetime earnings than the benefits of those who worked in covered jobs for their entire career. This outcome would run counter to the intention of the Social Security program, which is intended to provide low-income individuals the most support by replacing a higher percentage of their income.

Additionally, repealing the WEP and GPO would worsen the already financially insecure Social Security trust funds, which are slated to be exhausted after 2032. By increasing benefits for 2 million retirees, a complete repeal is estimated to cost $182.8 billion in ten years, pushing up the date of OASI and DI trust fund insolvency — and the 23% across-the-board benefit cut it would trigger for all beneficiaries — by six months to a year.

Proportional Social Security benefits would mitigate current issues with the WEP and GPO without providing uncovered employees an unjustified windfall.

To make the Social Security system more equitable, Congress should adjust the benefit reduction formula for public employees to more accurately account for their covered earnings. Now that the Social Security Administration collects data on non-covered earnings, the GPO and WEP should be reformed to keep in line with the initial intention behind the provisions. Congress should amend the benefit reduction formula to make reductions proportional to the ratio of an individual’s covered earnings to their total earnings, a solution previously proposed by Reps. Brady and Neal in the Equal Treatment of Public Servants Act of 2015. This proposal would apply the current benefits formula to the “Super AIME,” which is calculated with both covered and uncovered earnings. These benefits would, then, be adjusted by multiplying it by the percentage of total earnings that were covered.

Here are three hypothetical workers to demonstrate how the new proposal would work in practice:

The above table shows the hypothetical benefits that these three individuals would receive if a) the WEP and GPO were repealed, b) under current law, and c) under a proportional benefits formula.

Under the current law, the low-income public sector worker sees a larger cut in their Social Security benefits than the high-income public sector worker, reflecting the issue that the current formula has with accurately adjusting benefits. However, if the WEP and GPO are repealed, the high-income public sector worker’s benefits would be roughly the same amount as low-income workers. As discussed above, this means that the high-income public sector worker would be receiving an unjustifiably high replacement rate that similar workers in the private sector do not. In contrast, the proportional formula would adjust their benefits based on their length of covered employment. In this example, the low-income public sector worker, who spent double the time in the private sector paying payroll taxes, will receive more benefits to account for the different lengths spent in covered employment.

Private sector workers would not be affected by this reform. Their benefits, which have not been affected by the existing WEP/GPO provisions, would remain at the same level under the proportional system.

Ultimately, Social Security benefits should be updated to better reflect the original intentions of the WEP and GPO adjustments, as well as maintain its progressivity for public sector retirees. Reforming the program to make Social Security benefits proportional to the length of covered employment would allow all retirees, both covered and noncovered, to receive their fair share of benefits.

Ritz for Forbes: Finding A Budget Compromise Despite Republican Extremism

Posted on May 11, 2023 by The Progressive Policy Institute

By Ben Ritz

Republicans have refused to raise or suspend the debt limit – which multiple independent forecasters have warned could cause the government to default on its debts for the first time in history as soon as June 1st – unless “substantive reforms” to federal spending are made. Biden spent most of this year refusing to indulge in the GOP’s hostage-taking but agreed to negotiate on a broader budget deal once Republicans made an opening offer. After Republicans coalesced around a position by passing the Limit, Save, Grow Act through the House, both sides began negotiations this week in the hopes of striking a deal that Republicans could claim is a precursor to raising the debt limit and Democrats could claim is independent.

Part of the challenge is that Republicans have entered into the negotiation with extreme positions that no Democrat could ever accommodate. The GOP’s bill would raise the debt limit through early next year and pair that increase with $4.5 trillion of spending cuts over the coming decade and other conservative policy changes. Cuts of this magnitude might make sense in the context of a balanced and comprehensive package that addresses all areas of the budget, including raising new revenues – particularly at a time when inflation remains high and our projected long-term debt growth is unsustainable. But the conditions Republicans have imposed to target these cuts are unrealistic at best and economically ruinous at worst.

Read more in Forbes

Ritz for Forbes: The Biden Budget’s Medicare Mirage

Posted on March 20, 2023 by The Progressive Policy Institute

By Ben Ritz

President Biden has used his budget proposal to Congress to position himself as a champion of Medicare and Social Security. Even before the budget’s official release, Biden took to the guest essay pages of the New York Times to outline his plans to tackle Medicare’s looming insolvency.

It’s good that the administration is at least acknowledging the need for action to shore up the finances of these vital social insurance programs and has offered a few concrete proposals to do so. But the specifics of his plan are both convoluted and problematic, and the large shortfalls that would remain even if the president could enact his policy wishlist make clear the need for policymakers to consider a much broader menu of options.

Biden’s Medicare proposals are largely limited to increasing revenue for the Hospital Insurance (HI) Trust Fund, which finances Part A benefits (hospital services, nursing facilities, home health assistance, and hospice care) and is projected to run out of money in just five years. If no action is taken before then, payments would be limited to what can be financed by incoming revenue, resulting in an automatic spending cut of roughly 10%. The Biden budget would increase the dedicated taxes that finance Part A by about 30% — but only for people with annual incomes over $400,000. This is a real revenue increase that would delay the trust fund’s insolvency by several years.

Read more in Forbes.

Stronger Automatic Stabilizers Would Make Timely Stimulus The Norm

Posted on May 4, 2021September 18, 2024 by The Progressive Policy Institute

Congress responded to the pandemic recession with bold aid and stimulus programs that are fueling the economy’s impressive recovery. Yet lawmakers also set arbitrary expiration dates for many of those programs, such as the expanded unemployment insurance (UI) benefits that expire in September and the $350 billion aid program that state and local governments can use until 2024. These arbitrary dates risk ending aid well before — or after — the economy stops needing it.

To avoid these risks during future recessions, federal lawmakers should replace most ad hoc stimulus with stronger “automatic stabilizers,” stimulus programs that naturally adjust in size to the economy’s needs and can pay for their spending in downturns with savings during expansions.

Automatic stabilizers are government programs that benefit more people when incomes fall — such as UI and the Supplemental Nutrition Assistance Program — or those that grow more generous during downturns, such as the Extended Benefits program within UI that lengthens benefits by 13–20 weeks in states with high unemployment. Economic stimulus from automatic stabilizers is well-timed to ramp up at the start of downturns and wind down at the end because it responds directly to changes in peoples’ incomes or the unemployment rate. Timely stimulus can forestall layoffs early in a downturn without overheating the economy once it has recovered. As a result, automatic stabilizers dampened the severity of economic swings roughly as much as discretionary stimulus bills did between 1980 and 2018, according to experts at the Brookings Institution.

The enhanced stabilizers should include:

Adjusting the size and duration of UI benefits when the unemployment rate changes, as President Biden has proposed, as well as expanding UI eligibility and paying for the costs across the business cycle by taxing higher incomes than UI does today.
Increasing the federal share of Medicaid funding during recessions and reducing it during expansions.
Providing matching funds for state and local infrastructure maintenance projects with a higher matching rate during downturns.
Giving state and local governments direct aid during downturns, which could be paid for by making the cap on the regressive deduction for state and local taxes (SALT) permanent.

Lawmakers can always vote to spend more or less than automatic stabilizers prescribe, but strong stabilizers would mitigate changes in economic demand even if Congress failed to change aid policy quickly, as they often have during recent downturns. For example, Congress did not expand UI until six months after the Great Recession began, and Republicans let that expansion expire in 2013 even though nearly 4 million people were long-term unemployed.

As the pandemic lockdowns took hold last May, Congress passed the CARES Act more quickly, but interrupted that aid by creating and then missing self-imposed deadlines to extend the bill’s programs. Republicans let a $600/week UI benefit increase expire in July after claiming it discouraged work, even though few jobs existed for unemployed people to fill even if they wanted to. President Trump then let expansions of UI’s duration and eligibility lapse briefly in December 2020 when he temporarily refused to sign a bill extending the provisions into 2021.

Republicans also opposed sending federal aid to state and local governments to cover income and sales tax revenue shortfalls, even though those shortfalls forced cuts to essential services such as education. Congressional squabbles such as these would be less likely to undercut the recovery if automatic stabilizers were more robust.

Expand Unemployment Insurance

As part of his new American Families Plan, President Biden proposed making UI a stronger economic stabilizer by extending benefits for longer and making benefits larger during downturns but offered few specifics for doing so. PPI recently recommended increasing the share of a worker’s lost wages replaced by UI when a state’s 3-month average unemployment rate is both above 5 percent and rises by more than 1 percentage point in a year. This proposal would have provided roughly $190 billion in stimulus during the Great Recession and ensured that unemployment benefits never deterred work by exceeding the jobseeker’s lost income. Unemployment benefits would also be extended by 14 weeks in states with unemployment rates above 9 percent and 13 more weeks where rates surpass 10 percent.

State UI programs should use $2 billion made available by the American Relief Plan Act that President Biden signed in March to ensure their computer systems can quickly calculate and deliver these benefits. The federal government should support state modernization efforts further if this aid proves insufficient, possibly by creating their own computer systems that states can use.

PPI also proposes to provide unemployment benefits to more workers. For example, although self-employed workers are hard to insure through traditional UI because they often set their own schedules, lawmakers could let them defer taxes on savings for periods when they cannot work. Congress should also expand work-sharing programs, which give prorated benefits to workers who temporarily lose hours instead of their jobs. Only 26 states currently have work-sharing programs and employers often underutilize them. UI should pay for all these expansions across the economic cycle by taxing higher incomes than it does today.

Use Medicaid Matching Dollars to Moderate Fluctuations in State Revenues

Automatically ramping up direct federal aid to state and local governments should prove simpler than these UI reforms because Washington already has pre-existing channels to give states money through pre-existing federal-state partnerships, such as Medicaid. The federal government sent states $103 billion in aid during the Great Recession and $70 billion so far in the pandemic recession by increasing its share of the cost of Medicaid. That money not only freed up state funds for other spending priorities without creating a new bureaucracy, but also helped Medicaid cover laid-off workers who lost job-based health insurance. It makes sense to use the federal government’s ability to borrow at favorable rates to cover more of a state’s Medicaid costs when its unemployment rate rises, and less as its unemployment rate falls.

Provide Variable Matching Funds for Infrastructure Maintenance Projects

Since state and local governments may sometimes need more support than Medicaid can deliver, federal lawmakers should also pick up a greater share of intergovernmental infrastructure projects during downturns. President Biden recently proposed the federal government commit $1.3 trillion to rebuilding the nation’s physical infrastructure as part of his American Jobs Plan. Such an investment is badly needed, as the McKinsey Global Institute found in 2017 that the United States must raise infrastructure spending by 0.5 percent of GDP through 2035 — about $2.6 trillion — just to keep economic growth from slowing. Downturns exacerbate underinvestment because state and local governments often deal with budget crunches by pulling back their spending on infrastructure.

PPI recommends that federal lawmakers structure some of the President’s infrastructure investment as permanent new federal grants that match spending by state and local governments on infrastructure projects of national importance. Whereas local leaders will generally want to spend as much of the federal government’s money on their constituents as possible if it comes with no strings attached, requiring state and local governments to contribute some funding incentivizes them to pursue only useful projects. The matching rates for these grants should rise during recessions so state and local governments are encouraged to undertake deferred maintenance efforts when it is more cost-effective to do so and discouraged from discontinuing worthwhile long-term projects just because of temporary revenue losses.

These infrastructure grants could not only make the nation more productive in the long run but could also stimulate the economy in the short-term by creating well-paying construction jobs at times when the economy needs them most. Funding maintenance work would be especially stimulative, as such work can often begin more quickly than new capital projects can. Routinely maintaining infrastructure can also reduce the cost of future repairs and replacements. Yet despite these benefits, almost three-fourths of federal investment in water and transportation infrastructure went to new capital projects in 2017, leaving maintenance work to state and local governments. The federal government should focus more of its spending on maintenance at all times, but especially during downturns.

Cover Remaining State and Local Revenue Losses Directly

Finally, if state and local governments need more aid than these channels provide, the federal government should make up the difference through direct aid. Experts at the Tax Policy Center recently proposed creating a “State Macroeconomic Insurance Fund” that would automatically give state and local governments aid based on factors those governments cannot control, such as the unemployment rate. Unlike aid through federal-state partnerships, which states would need to pass through to local governments themselves, such a fund could also give to local governments directly.

TPC would encourage fiscal responsibility among state and local governments by letting them pay into the fund with any surpluses they run in good times in exchange for larger benefits during downturns. TPC would finance the rest of the fund’s benefits by making the $10,000 cap on federal income tax deductions for state and local taxes (SALT) permanent instead of allowing it to expire in 2025 as it would under current law. Although many Democrats from high-tax states want to repeal the cap, their efforts are deeply misguided: 56 percent of the benefit of ending it would go to the highest-earning one percent. Keeping the cap and using its revenues to give state and local governments direct aid would prevent regressive budget cuts during contractions instead of giving the rich a lavish tax cut.

These and other automatic stabilizers would make timely, proportional aid the default policy when Congress is too inflexible to act quickly. Ensuring the federal government automatically mitigates swings in economic demand will lessen the pain of downturns, spread the cost of stimulus across the business cycle, and free Congress to focus on addressing the unique issues each downturn presents.

Hunger in America: A Comprehensive Federal Response

Posted on February 19, 2021 by The Progressive Policy Institute

EXECUTIVE SUMMARY

This policy brief highlights recent developments in the federal response to the hunger crisis resulting from the Covid pandemic and recession. It discusses the valuable policies contained in President Biden’s recent executive orders and the proposed American Rescue Plan legislation, and also identifies additional policies to address hunger, including reducing concentration in the food industry, using modern information technologies to help low-income Americans cut through siloed bureaucratic obstacles, and expanding food aid for low-income children.

As the pandemic unfolded across the country last spring, one of the first major disruptions was widespread school closures. When teachers locked up their classrooms last March, few thought that a year later schools would still be shuttered. Among the troubling losses to students, especially for the low-income, have been the social services that schools provide, such as meals. Millions of children around the country rely on school for breakfast, lunch, and daytime snacks. In April 2020, as policymakers scrambled to address spiking food insecurity, 35 percent of households with children under 18 said they didn’t have enough to eat, a dramatic rise from already high rates of hunger pre-pandemic. A recent analysis of food insecurity data found that the number of children not getting enough to eat was ten times higher during the pandemic, comparing December 2019 to December 2020.

Food insecurity doesn’t just affect children; adults and the elderly also don’t have enough to eat. Covid relief has certainly helped, but nearly 1 in 6 adults – or close to 24 million Americans – reported that their households did not have enough to eat sometimes or often in the past seven days, according to the latest Census Household Pulse survey in January. Households experiencing food insecurity include close to 5.3 million senior citizens. America’s ongoing hunger crisis requires a forceful response encompassing several different dimensions of public policy.

The sharp rise of hunger during the pandemic is yet another woeful legacy of the Trump administration’s mishandling of the Covid crisis. Last spring, in response to widespread school closures, Congress launched Pandemic Electronic Benefit Transfer, or P-EBT, a program to replace the free and subsidized meals that children would normally get at school. However, the Trump administration placed unnecessary bureaucratic barriers on states which meant that many households eligible for the P-EBT program never received the benefits, even as Congress re-funded the program in September 2020. The Trump administration went so far as to try to kick nearly 700,000 unemployed people off of food assistance late last year in the midst of this public health crisis, but this move was stopped by a federal judge. The consequence of these actions was that while spending for food assistance went up by nearly 50 percent in 2020, some of that aid never reached families in need.

President Biden’s swift call for legislative and executive action on hunger is a welcome sign that U.S. leaders finally are determined to give this problem the attention it deserves.

During his first week in office, President Biden moved quickly to address the acute hunger crisis afflicting millions of Americans during the Covid pandemic and recession. Unveiling his $1.9 trillion coronavirus relief plan in January, Biden struck an urgent note, decrying a reality in which “…folks are facing eviction or waiting hours in their cars — literally hours in their cars, waiting to be able to feed their children as they drive up to a food bank. It’s the United States of America and they’re waiting to feed their kids… But this is happening today, in America, and this cannot be who we are as a country. These are not the values of our nation. We cannot, will not let people go hungry.”

To meet this emergency, Biden’s American Rescue Plan extends the 15% increase in Supplemental Nutrition Assistance Program (SNAP) benefits and proposes $3 billion in additional funding for the Women, Infant and Children (WIC) program. The plan also includes $350 billion in aid to state and local governments to support their anti-hunger initiatives, including food pantries, senior nutrition, and other nutrition programming.

President Biden is not waiting for Congressional legislation to provide a much-needed increase in food assistance to families. In his first week in office, the President signed an executive order that will alleviate the hunger crisis in three critical ways.

First, Biden’s executive order will increase food benefits for the P-EBT program by 15 percent, which will give a family of three children an additional $100 every two months, according to National Economic Council Director Brian Deese. The P-EBT was created by Congress in 2020 to give benefits to eligible households with children who would have received free and reduced meals under the National School Lunch Act had schools not been closed. Second, the President has directed the USDA to increase the SNAP Emergency Allotments for those at the lowest rung of the income ladder. And lastly, the executive order calls for modernizing the Thrifty Food Plan to better reflect the cost of a market basket of foods upon which SNAP benefits are based. Collectively, these changes should make food assistance more generous and better targeted.

While these are welcome steps, we call on the Administration to go further by addressing the underlying causes and structural barriers to food access and affordability. We focus on three in particular: Growing concentration in the food industry; siloed social service bureaucracies that make it difficult for low-income Americans to get public assistance; and the difficulty in expanding food aid for low-income children in hard-to-reach places. The pandemic has shined a light on the silent nutrition and food insecurity epidemic in our country and our policy brief outlines a comprehensive federal response.

KEY RECOMMENDATIONS:

Extend the Pandemic EBT program through the pandemic and economic recovery to provide low-income children with free or subsidized meals during weekends, holidays, and summer break. To be better prepared for a future crisis, Congress should also leverage the P-EBT program to create a permanent authorization for states to issue replacement benefits, giving them more flexibility to respond in a crisis.
Study the success of the P-EBT program with an eye to converting it into a Summer EBT program post-Covid to bridge the gap in nutrition during the summer months and reach more low-income children in rural and underserved communities.
Pass legislation, such as the Pandemic Child Hunger Prevention Act, in future recovery legislation, to allow all children free access to breakfast, lunch, and after school snack programs either in school or through “grab and go” and delivery options, as well as reduce bureaucratic barriers for schools to deliver meals to kids.
Focus on stricter antitrust enforcement in the food industry to help consumers facing increasing prices for basic nutrition staples, such as meat and eggs.
Use information technology to modernize social service delivery and reduce the administrative burden on low-income people. For example, Congress should enact the HOPE Act, which would create online accounts that enable low-income families to apply once for all social programs they qualify for, rather than forcing them to run a bureaucratic gauntlet.
Pass the bipartisan Healthy Food Access for All Americans (HFAAA) Act, put forth by Sens. Mark R. Warner, Jerry Moran, Bob Casey, Shelley Moore Capito, which provides incentives, including tax credits or grants, to food providers who serve low-access, rural communities. Draft legislation that provides grants to states to fund the establishment and operation of grocery stores in rural and underserved communities.

GO BIG ON HUNGER — FAST

Food insecurity is not just a moral issue, it also has economic and social costs. Adults who go hungry are less productive and are more likely to suffer from chronic illness. The nutrition crisis has been called a “slow epidemic” by Dr. Dariush Mozaffarian, dean of the Freidman School of Nutrition Science and Policy at Tufts University.

The rate of households reporting that they do not have enough to eat is much higher than pre-pandemic levels, especially for families with children. Hungry children are more likely to get sick and fall behind in school. One in five Black and Hispanic households report they are unable to afford food. Poor nutrition and soaring rates of metabolic disease are a drag on the economy and contribute to rising healthcare costs and early deaths in minority and low-income families that are disproportionately more likely to experience poor nutrition and health as a result of food insecurity.

Food assistance spending now can also speed economic recovery. A 2019 report from the U.S. Department of Agriculture quantified the economic impact of SNAP spending during the Great Recession and found that this program can serve as an “automatic stabilizer” during a downturn. The authors analyzed program data and observed that low-income SNAP participants quickly spent the benefits after receiving them and the overall effect was a boost in the economy. Every $1 billion in new SNAP benefits led to “an increase of $1.54 billion in GDP – 54 percent above and beyond the new benefits.” SNAP benefits also generated $32 million in income for the agriculture industry and helped create jobs.

BUILDING RESILIENCE INTO OUR ANTI-HUNGER POLICIES

Despite the pandemic’s many tragic aspects, the disruption of our everyday lives has had some silver linings. Many innovations have been born of necessity, such as pioneering new approaches to feeding children who rely on meals at school despite school closures, and these can inform how we tackle food insecurity going forward.

The U.S. has a patchwork of programs to feed children, and the efficiency of this system has been sorely tested during the pandemic. The School Breakfast Program and the National School Lunch Program feeds over 22 million children per year who rely on meals provided by their schools as a significant source of nutrition. During a normal schoolyear, the lack of access during weekends, holidays, and summer break can leave kids hungry. During the summer, only 1 in 6 of these children still receive meals through the USDA Summer Food Service Program. In 2011, in response to this gap in nutrition, the USDA launched a pilot called the Summer EBT to provide meals to children during the summer months. The program is aimed at reaching low-income families in rural and hard-to-reach communities where the Summer Food Service Program has not been as successful. Results from the demonstration are promising and, so far, more than 250,000 children have gained access to nutrition as a result of the program. Despite the early successes of the Summer EBT demonstration projects, the Trump administration took the controversial step of closing sites in some places, such as Connecticut and Oregon.

Some researchers have called for expanding the Pandemic-EBT program through the rest of the pandemic and recovery to allow states to provide free or subsidized meals for children during these breaks in the school calendar. Once schools reopen, the Biden administration should explore preserving the systems set up by schools during the pandemic to provide meals to low-income children outside of the usual school day and year, including potentially by expanding Summer EBT.

Forced to improvise when schools shut down, many school districts have developed more flexible and varied ways to get meals in the hands of hungry families. School meals now are more widely available to children learning at home through “grab and go” distribution centers or meal delivery. School systems should go further to ensure that other family members in low-income households can take away meals during pickup to eat off-site. For example, Rep. Suzanne Bonamici has co-sponsored a bill that would allow schools to distribute meals to students and other community members in need, and to extend meal service for afterschool meals and snack programs. We applaud this bill as temporary and essential pandemic-relief legislation. This flexibility and the waivers aimed at making it easier to serve meals for low-income families in school districts could end up having unintended consequences, such as impacting funding levels as these waivers are used to determine need across districts. Policymakers should remain aware that funding will need to be determined differently during the pandemic as a result of fast-changing policies.

We do not know when the next pandemic or economic crisis may strike, but we can be better prepared. As we’ve learned from Covid, systems that we take for granted, such as schools, can be shut down overnight. In order to stay ahead of a future crisis, researchers at the Center on Budget and Policy Priorities have suggested that Congress “leverage the P-EBT structure to create a permanent authorization for states to issue replacement benefits (similar to P-EBT, and perhaps renamed “emergency-” or E-EBT) in case of lengthy school or child care closures resulting from a future public health emergency or natural disaster.” This will make it easier for states to act quickly and not rely on Congressional action should schools need to close in the future.

Making our food delivery system more resilient against future pandemics or other emergencies should be a national priority. That will require attacking the structural roots of food scarcity in the world’s richest country.

STRUCTURAL BARRIERS TO FOOD ACCESS AND AFFORDABILITY

Of course, America’s hunger problem did not start with the pandemic. Before Covid, as many as 13.7 million households or 10.5 percent experienced food insecurity. In addition to dealing with the present crisis, the White House should develop new strategies for tackling the structural causes of food access and unaffordability. Three stand out today in particular: a decades-long trend of concentration in the food industry; bureaucratic inertia and dysfunction that discourages enrollment in aid programs; and the stubborn blight of rural hunger.

As PPI economist Alec Stapp has documented, market concentration in the food industry is driving up prices for basic sources of protein, such as chicken and eggs. A recent antitrust conference at Yale Law School noted that “the country’s four largest pork producers, beef producers, soybean processors, and wet corn processors control over 70 percent of their respective markets. Four companies control 90 percent of the global grain trade. Agrochemical, seed, and many consumer product industries are likewise now controlled by just a few mega-sized firms.”

Low-income households spend the bulk of their budgets on housing, transportation, and food and, as a share of their household income, these families spend close to a third on food, with meat and eggs being especially pricey. To make food more affordable for all families, the White House should focus on stricter antitrust enforcement in the food industry by appointing leaders to the USDA, the Antitrust Division of the Department of Justice, and the Federal Trade Commission who will make this issue a priority.

Recent evidence from communities hit especially hard by the pandemic also highlights how formidable bureaucratic barriers deter many eligible households from accessing food aid. Policymakers should use information technology to modernize social service delivery and reduce the administrative burden on people to increase take-up in food assistance programs.

PPI has called for modernizing safety net programs to reduce the high “opportunity costs” of being poor in America. Federal and state governments should adopt modern digital technologies that help low-income families apply once for public benefits without having to run a bureaucratic gauntlet of siloed programs for nutrition, housing, unemployment, job training, mental health services, and more.

“While it’s true that government safety net programs help tens of millions of Americans avoid starvation, homelessness, and other outcomes even more dreadful than everyday poverty, it is also true that, even in ‘normal times,’ government aid for non-wealthy people is generally a major hassle to obtain and to keep,” notes Joel Berg, CEO of Hunger Free America.

“Put yourself in the places of aid applicants for a moment,” Berg added. “You will need to go to one government office or web portal to apply for SNAP, a different government office to apply for housing assistance or UI, a separate WIC clinic to obtain WIC benefits, and a variety of other government offices to apply for other types of help—sometimes traveling long distances by public transportation or on foot to get there—and then once you’ve walked through the door, you are often forced to wait for hours at each office to be served. These administrative burdens fall the greatest on the least wealthy Americans.”

In a 2016 PPI report, Berg proposed the creation of online “HOPE” accounts for families to better manage and access their benefits, and into which they could deposit their public assistance.

This idea is at the heart of the Health, Opportunity, and Personal Empowerment (HOPE Act) introduced by Reps. Joe Morelle (D-NY) and Jim McGovern (D-Mass) and Senator Kirsten Gillibrand (D-NY). The HOPE Act would fund state and local pilot projects setting up online HOPE accounts to make it easier for low-income people to apply for multiple benefits programs with their computer or mobile phone. In addition to saving them time, money, and aggravation, HOPE accounts enable people to manage their benefits – effectively becoming their own “case manager” – and easing their dependence on often inefficient and unresponsive social welfare bureaucracies.

WIC (formally the Special Supplemental Nutrition Program for Women, Infants, and Children) is a concrete example of how bureaucratic barriers can impact program enrollment. Despite increases in funding and strong evidence for its boost in outcomes for mothers and children, the share of eligible household participating in the program has fallen over the past ten years. One significant barrier to uptake is the requirement that families take time off of work to apply in person and bring their children to multiple appointments at clinics. HOPE accounts, if implemented well, could help families by creating an online platform where they can complete an initial application and better manage their benefits.

Policymakers should also make it easier for the elderly and other vulnerable groups to navigate eligibility and participate in SNAP. Researchers recently found that “providing information on eligibility or information plus application assistance” can significantly increase take-up rates among the elderly. Interventions should be designed with the behavioral differences of eligible groups for various social safety net programs, including food assistance.

The third major contributor to food insecurity is geography. According to the USDA, nearly 40 million Americans live in rural communities considered “food deserts” because they lack a nearby grocery store or food pantry or bank. And although rural communities make up 63% of counties in the U.S., they represent 87% of counties with the highest rates of food insecurity. These “food deserts” tend to disproportionately impact the rural poor, Black and Hispanic households, and families with children. To address this disparity, some organizations have launched mobile food pantries and food delivery programs that ship food in bulk to low-income families, but more access is needed to bridge this geographical barrier.

Earlier this month, Senator Mark Warner, along with several senators from both sides of the aisle, introduced the Healthy Food Access for All Americans (HFAAA) Act which provides incentives, including tax credits or grants, to food providers who serve low-access communities and become designated as a “Special Access Food Provider” certification process through the U.S. Treasury Department. This legislation is a crucial way to incentivize food providers to set up shop in rural and hard-to-reach communities.

CONCLUSION

The Trump administration’s feeble response to America’s hunger crisis was a national disgrace, one of the many ways in which it thoroughly bungled the nation’s response to the Covid pandemic. The contrast with the Biden administration’s sharp focus on hunger and decisive moves to alleviate it couldn’t be more dramatic.

Nonetheless, it should be just the beginning of a new national commitment to wiping out hunger and malnutrition in America. It’s time for a vigorous public response to growing concentration in the food industry, as well as a new push to use modern information technologies to help low-income Americans cut through burdensome bureaucratic obstacles and take charge of their economic security. We’ve also learned lessons during the pandemic for how to provide meals to families outside of the traditional systems, and we should preserve these going forward in the effort to be better prepared for a future crisis and to curb hunger in America.

Weave a Stronger Safety Net Post-COVID

Posted on August 10, 2020 by The Progressive Policy Institute

The coronavirus pandemic has opened some gaping holes in our nation’s social safety net, especially where hunger and malnutrition are concerned. Millions of low-income workers have lost their jobs (and will soon lose expanded unemployment benefits if Congress fails to extend them) and millions of children in low-income families have lost access to school meals because the K-12 system has shutdown. These twin blows have triggered a dramatic rise in hunger and food insecurity in America.

Even before the pandemic hit, an estimated 37 million people, including 11 million children, reported experiencing food insecurity or hunger. Unless Covid-19 is contained, that estimate could reach 54 million by the end of 2020.

America’s most vulnerable populations – poor families with children, Black Americans, Hispanics and those living in rural areas and the South – are disproportionately affected by food insecurity and hunger. Their school-aged children also are more likely to rely on free and reduced-price school meals to meet their nutritional needs.

In March, Congress passed the Families First Coronavirus Response Act, which provided emergency food assistance and authorized the U.S. Department of Agriculture and the states to adapt the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) to meet the needs of the hungry during the crisis. According to a Center on Budget Policy Priorities report, almost all states have taken advantage of the flexibility the Act provides to maintain SNAP benefits to households with children missing school meals.

Before Covid-19, the national school lunch program on average served nearly 29 million students, and the school breakfast program served nearly 15 million students. When the schools closed in March, many school districts scrambled to keep feeding their students, by establishing “Grab and Go” sites for picking up meals, or establishing daily meal delivery routes using buses to deliver food rather than transport students.

Despite these improvisations, however, most school aged children apparently are not receiving as much food as they did before their schools closed. For example, a survey of school nutritional professionals found that 80 percent of school districts reported serving fewer meals since school closures. Of those districts, 59 percent have seen the number of meals served drop by 50% or more.

In response to the K-12 shutdown, the Families First Act created the Pandemic Electronic Benefit Transfer program that provides food to families that have lost access to free and reduced-priced meals. This one-time meal replacement benefit is added to an existing electronic benefits transfer card for families already receiving SNAP. Families with school-age children that don’t receive SNAP can also get a card.

SNAP historically has proven to be one of the nation’s most effective programs for providing low-income households with food during economic downturns. That makes it a powerful counter-cyclical policy tool. Research shows each $1 of SNAP benefits generates between $1.50 and $1.80 in total economic activity. Yet when Congress in April passed its next pandemic relief measure, the CARES Act, it increased more operational funding for SNAP operations but failed to increase SNAP direct benefits.

There are compelling moral and economic reasons why U.S. lawmakers should make offering more food aid a top priority as Covid-19 infections climb in most of the states, slowing economic recovery and causing more workers to file for unemployment. In the first place, hungry and malnourished people are more vulnerable to disease. There’s also a strong possibility that many K-12 students will not be able to go back to school in September, despite President Trump’s ill-considered calls for a general reopening. Additionally, by supporting food consumption by low-income families, more aid stimulates demand and keeps our stricken economy afloat.

To meet the immediate crisis, PPI endorses anti-hunger provisions of the HEROES Act that House Democrats passed in May, but is now blocked by Republican Senate Majority Leader Mitch McConnell. These include:

• Increasing the SNAP maximum benefit by 15 percent through September 30, 2021, which translates into an additional $25 per person each month;

• Raising the minimum monthly benefit from$16 to $30;

• Adding $3 billion for child nutrition programs; and,

• Extending the Pandemic Electronic Benefits program through the fall of next year.

MODERNIZING THE SAFETY NET

This is also the right time to look beyond the current crisis and ask how our country can build a more resilient system of social supports that can better protect our most vulnerable citizens against future pandemics and other emergencies.

A survey of low-income households by Hunger Free America found that 42 percent said it was “time-consuming and/or difficult to apply” for Unemployment Insurance, and nearly a quarter said the same about applying for SNAP. In addition, “40 percent of respondents said they had problems reaching government offices while applying for SNAP, with 36 percent stating that they never received a call back after leaving
a message.”

To reduce the high “opportunity costs” of being poor in America, the federal and state governments should adopt modern digital technologies that help low-income families apply once for public benefits without having to run a bureaucratic gauntlet of siloed programs for nutrition, housing, unemployment, job training, mental health services, and more. Specifically, as Berg proposed in a 2016 report for PPI, governments at all levels should cooperate to create online accounts from which families can apply remotely for all the benefits they qualify for, and into which they can deposit their public assistance.

This proposal is the centerpiece of a new bill introduced by U.S. Reps. Joe Morelle (D-NY) and Jim McGovern (D-Mass) and Senator Kirsten Gillibrand (D-NY). The Health, Opportunity, and Personal Empowerment (HOPE Act) would fund state and local pilot projects setting up online HOPE accounts to make it easier for low-income people to apply for multiple benefits programs with their computer or mobile phone. In addition to saving them time, money and aggravation, HOPE accounts enable people to manage their benefits – effectively becoming their own “case manager” – and easing their dependence on often inefficient and unresponsive social welfare bureaucracies.

In keeping with former Vice President Joe Biden’s “Build back better” theme, expanding food aid now to stem a surge in hunger, while deploying digital technology to give low-income Americans more control over their economic security, can help us weave a stronger and more resilient social safety net, rather than simply plugging holes in the old one.

Create a “Fiscal Switch” to Make Our Economy More Resilient Against Recessions

Posted on August 10, 2020 by The Progressive Policy Institute

The federal government is on track to run a record-shattering $4 trillion budget deficit in 2020, in large part due to its aggressive fiscal response to the pandemic-induced recession. Some on the right have raised alarm about this borrowing, despite their support for budget-busting tax cut and border-control policies over the last three years. The hypocritical chorus will likely only grow louder if Democrat Joe Biden is elected president in November.

But temporary deficits are an invaluable tool for mitigating the damage caused by economic downturns, as government spending replaces a drop in demand from the private sector. The long-term fiscal costs of failing to support an economy with a double-digit unemployment rate would far exceed those of even the most overzealous stimulus measures. Necessary fiscal support should therefore continue as long as the economy remains hobbled by the coronavirus, no matter the cost.

However, Washington also faces structural deficits that will persist long after the pandemic has been contained. Thanks to the Trump administration’s reckless borrowing binge at a time when the unemployment rate was below 5 percent, the federal government was already projected to spend over $1 trillion more than it raised in revenue even before the pandemic hit. This structural deficit will only grow worse in the coming years because our nation’s aging population is causing federal spending on health-care and retirement programs to grow significantly faster than the revenues needed to finance them. The Trump administration did not create these problems, but it did make them significantly worse with its pre-pandemic fiscal policy and its disastrous handling of the public health crisis.

In the two years following the 2008 financial crisis, the national debt grew from less than 40 percent of gross domestic product to more than 60 percent of GDP. In 2020 alone, the debt will likely surpass the all-time high it reached following the end of World War 2 (106 percent of GDP). The rising cost of servicing this growing debt threatens to crowd out critical public investments that lay the foundation for long-term growth after the recession ends.

The federal government spent more money servicing the national debt last year than it spent on critical public investments in education, infrastructure, and scientific research combined. Although interest rates are low now, they eventually will rise as the economy recovers. Allowing interest payments on our debt to further crowd out these investments – which have already fallen by nearly 40 percent in real terms since the 1980s – would have disastrous consequences, including lower incomes, fewer high-quality jobs, and reduced economic mobility.

It is therefore essential to pay down the debt during expansions to create fiscal space for the necessary surge in short-term borrowing during recessions. Unfortunately, Washington has often waited too long to enact sufficient stimulus in response to recessions, and then failed to summon the will to narrow the structural gap between taxes and spending when the economy rebounds.

To make our economy more resilient against downturns, PPI proposes the federal government adopt a “fiscal switch” that automatically balances out the business cycle by increasing spending during recessions and recouping the cost during subsequent periods of economic growth. This switch would trigger based on economic variables such as the unemployment rate and operate through three mechanisms: a rebalanced relationship between federal and state governments, a more dynamic and progressive tax code, and phased-in reforms to mandatory spending programs driving our structural deficits. Implementing these automatic mechanisms, as recommended here and in PPI’s Emergency Economics report earlier this year, takes politics out of these decisions and ensures stimulus or deficit reduction will be implemented as warranted by economic conditions.

The first step is to better leverage the federal government’s unique borrowing capacity, which is unavailable to the vast majority of state and local governments required by law to balance their budget each year. Many government programs, including Medicaid, infrastructure, and education spending, are partnerships in which the federal government provides matching grants for state and local spending.

Some of these partnerships could be improved by allowing matching rates to adjust up or down automatically based on a state’s unemployment rate. This would prevent state and local governments from having to cut essential services during a downturn while asking them to shoulder a greater share of program costs when their budgets are healthy.

Other programs that currently function as a federal-state partnership but whose costs fluctuate significantly with the business cycle would benefit from becoming more nationalized. For example, when Congress tried to ensure that unemployment insurance replaced a minimum percentage of lost wages for everyone who was laid off in the early days of the coronavirus recession, lawmakers found they were unable to do so because of outdated operational infrastructure in a messy patchwork of 50 different state programs. As a result, policymakers were forced to settle for a controversial across-the-board benefit increase of $600 per week that gave some laid-off workers even more income from unemployment benefits than they lost in missed wages, while failing to make others whole. Even worse, Congressional squabbling over how long to maintain this benefit increase allowed them to lapse temporarily in the midst of an economic crisis.

Moving the operations of unemployment insurance and similarly-situated safety-net programs off state balance sheets and onto the federal government’s, in addition to automatically making benefits more generous during downturns and phasing them out in recoveries, would leverage Washington’s fiscal firepower in recessions when it’s needed most.

The second step is to make the income tax code more progressive, which serves as a strong automatic fiscal stabilizer by boosting average tax rates when incomes rise in expansions and lowering them when incomes fall in recessions. This objective could be accomplished by closing tax preferences for the wealthy, such as lower tax rates on inherited income and income from capital gains, while expanding the Earned Income Tax Credit and other pro-worker tax incentives. PPI also favors replacing the antiquated payroll tax with a dynamic value-added tax – which has a rate that automatically falls during recessions and rises during expansions – to encourage hiring and consumption when the economy needs it most and reclaim substantial revenues during economic expansions.

Finally, lawmakers must take additional measures to rein in the drivers of underlying structural deficits automatically when the fiscal switch calls for a pivot away from stimulus. Social Security and Medicare – the two largest programs in the federal budget – both face the prospect of becoming insolvent within the next decade, potentially leading to sudden and across-the-board benefit cuts for millions of seniors if lawmakers take no action to close the growing gap between dedicated revenue and scheduled benefits. Significant deficit reduction that takes effect in the middle of a recession could be catastrophic, but lawmakers should put in place a process now to develop and phase in a balanced package of revenue increases and benefit changes as the economy recovers. PPI’s Progressive Budget for Equitable Growth offers policymakers a model for how they can modernize these programs to strengthen work incentives, retirement security and financial sustainability in a way that is fair to both younger workers and older beneficiaries.

The right fiscal policy in a recession is not the right fiscal policy for an expansion, and vice versa. Washington politicians are often too slow or ideologically beholden to react sufficiently swiftly to changing economic circumstances. Taking these steps and creating a two-sided fiscal switch will give our government the tools it needs to manage the economy through both the ups and the downs of the business cycle.

Ritz for Forbes: “The Trillion-Dollar Question Missing From The Presidential Debate”

Posted on December 20, 2019 by The Progressive Policy Institute

Congress voted this week for a $1.9 trillion tax and spending deal, over a quarter of which was added to our $23 trillion national debt. Thanks to this and other fiscally irresponsible legislation signed into law by President Donald Trump, the federal government will run an annual budget deficit of over $1 trillion this year and every year that comes after it. Yet of over 500 questions asked throughout six presidential debates, not a single one has raised the issue.

Read the full piece on Forbes.

PPI’s Ben Ritz Talks Social Security with Ric Edelman

Posted on November 30, 2019September 18, 2024 by The Progressive Policy Institute

The Director of PPI’s Center for Funding America’s Future, Ben Ritz, joined personal-finance advisor Ric Edelman on his nationally syndicated radio show to discuss the challenges facing Social Security, their role in the 2020 election, and PPI’s proposal to strengthen the program for future generations. Listen to the interview below and read our full plan here.

On the Blog: Good News for Low Income Taxpayers

Posted on October 15, 2019September 18, 2024 by The Progressive Policy Institute

IRS Free File and VITA programs should be improved not discarded.

According to the Internal Revenue Service (IRS), 90 percent of taxpayers hire paid tax preparers or utilize tax preparation software to file their taxes.

For low-income families the cost of tax preparation can significantly reduce the value of their refunds. A 2016 study by the Progressive Policy Institute (PPI) found that low-income taxpayers in the Washington-Baltimore metropolitan areas can expect to spend between 13 and 22 percent of the average Earned Income Tax Credit (EITC) refund when using tax preparation services.

One way working families can give themselves a “tax break” is to take advantage of the IRS Free File program. This public private partnership between the IRS and the software industry makes free online tax preparation and electronic filing available to 70 percent of the taxpaying population, and together with the Volunteer Income Tax Assistance (VITA) program serve between 2.5 to 3 million needy taxpayers a year.

In recent years some have criticized these programs for low enrollment rates and encouraging deceptive business practices. But a recent third-party report commissioned by the IRS shows that the Free File program (while in need of improvement) has saved taxpayers $1.6 billion and is responsible for 53 million free returns since 2002.

One way working families can give themselves a “tax break” is to take advantage of the IRS Free File program or the Volunteer Income Tax Assistance program. The Free File program, public-private partnership between the IRS and the software industry, makes free online tax preparation and electronic filing available to 70 percent of the taxpaying population and currently serves 2.5 to 3 million taxpayers annually. The Volunteer Income Tax Assistance (VITA) program helps another 3 to 3.5 million taxpayers file every year.

Ritz for Forbes, “Projected Deficits Grew $872 Billion In Three Months. Here’s How To Rein Them In”

Posted on August 22, 2019 by The Progressive Policy Institute

A new report from the Congressional Budget Office projects federal budget deficits between 2019 and 2029 to be $872 billion higher than was projected just three months ago. As a result, Donald Trump will be forced to campaign for re-election next year with his government running a trillion-dollar deficit. Democrats should hold the “king of debt” accountable for his inability to manage the nation’s finances and present voters with a compelling alternative: a new progressivism that invests in our country without burying young Americans under a mountain of debt.

The increase in CBO’s deficit projections is largely due to the bipartisan budget deal signed into law this month and other spending policies enacted over the summer, which CBO says together will cost nearly $2 trillion – making them almost as expensive as the tax-cut bill enacted by Trump and the Republican-controlled Congress in 2017. Projected deficits also increased by almost $280 due to technical changes in CBO’s modeling. Partially offsetting these costs was a reduction in CBO’s forecast for interest rates, which brought projected deficits down by a whopping $1.4 trillion.

That a change of less than one percentage point in interest rates can cost nearly as much as the budget deal or the Trump tax cuts is a testament to the size of our national debt on which that interest is owed. The $16.5 trillion debt (which grows to almost $22.5 trillion if one includes intragovernmental debt such as that owed to the Social Security and Medicare Trust Funds) will only become worse moving forward as the government is projected to spend $1 trillion more than it raises in revenue every single year from 2020 onward if current laws remain unchanged.

Continue reading at Forbes.

New Ideas for a Do-Something Congress No. 11: Encourage Employers to Help with Student Debt

Posted on May 29, 2019 by The Progressive Policy Institute

More than anything else, a higher education remains the ticket to the proverbial American Dream. It offers the skills prized by employers in an increasingly global marketplace, and puts graduates on a path to higher wages over a lifetime of work. But for too many Americans, it comes at the price of student loans that can saddle them with debt just as they’re launching their careers and stunt their financial wellbeing for years to come.

New thinking can address the challenge. One promising solution is gaining traction in the private sector. A small but growing number of U.S. employers have begun offering student loan repayment benefits to their employees—helping them erase student debt faster and, not incidentally, earning the loyalty of employees in a competition for the best workforce talent. Though these programs are still uncommon, they are in high demand, leading some to dub student loan assistance “the hottest employee benefit” today (1).

Congress can help spur widespread adoption of this solution by encouraging more employers to offer this benefit to their workers, such as through the tax code. While current law gives employers a tax break for offering tuition assistance benefits to their employees, student loan assistance doesn’t get the same favorable treatment. Lawmakers should take up bipartisan legislation in this session to equalize the tax treatment of student loan assistance benefits.

THE CHALLENGE: Student Loan Debt is Skyrocketing For Generations of American Workers

American college graduates collectively face a student loan debt crisis of eye-popping proportions. As of December 2018, more than 44.7 million borrowers owed $1.5 trillion in student loans(2)—a sum that exceeds the gross domestic product of all but a dozen countries around the globe.

While this student debt burden impacts Americans of all ages and socioeconomic groups, it hits younger workers the hardest. An estimated 65 percent of the total is owed by people under 40—no surprise, considering that more than two-thirds of college seniors graduating in recent years have left campus with student loan debt, averaging $28,650 as of 2017.(3)

Now, there’s evidence that this mounting IOU has consequences for financial wellbeing more broadly. Indebted graduates enter the workforce with less money available to save, and this constraint soon catches up with them. By age 30, those with student debt have accrued only about half as much in retirement assets as those without debt, according to the Center for Retirement Research at Boston College.(4) Other studies suggest that student loan debt also makes it harder for young people to pursue graduate studies, buy their first home (5) and achieve other important life milestones—including, anecdotally, even starting a family.

In recent weeks, the issue has drawn the attention of candidates on the Presidential campaign trail. With an eye toward the coveted youth vote, several Democratic contenders have made college affordability a rallying cry and unveiled proposals to address the crushing debt burden. The most ambitious plan to date would “cancel” up to $50,000 in student debt for every borrower with a household income under $100,000—helping an estimated 42 million Americans.(6) This plan, however, would be immensely expensive for U.S. taxpayers and potentially create perverse incentives for borrowers. Workers need better and more cost-effective help.

THE GOAL: Encourage Employers to Help Ease Workers’ Student Debt Burdens

In the search for solutions to the student debt crisis, America’s employers are an important part of the answer. Today’s historically tight labor market and demand for young workers with the right skills presents big challenges—and a big opportunity. In particular, more employers are finding that offering student loan assistance benefits is an effective way to attract and retain workers.

Under this approach, employers can choose to make monthly contributions against an employee’s student loan balance—either directly to the employee, or to the employee’s lender—and speed up pay-off of the loan. This benefit is actually something that Congress and most federal agencies have offered to eligible staff members for more than a decade. In both cases, the repayment programs were implemented as a way to recruit highly skilled young employees to government service. The specifics vary, but broadly speaking, Senate staffers can qualify for up to $500 per month to pay down their student loans, and House staffers can receive as much as $10,000 yearly in assistance, up to a total $60,000. Similarly, all federal agencies are permitted to make payments of up to $10,000 annually against federal student loans for qualifying employees who agree to remain on the job for at least three years. Most recently through this program, 34 agencies assisted nearly 10,000 federal employees with more than $72 million in student loan repayment benefits.(7)

From the perspective of today’s workforce, there’s unmistakable demand for this “perk” in the private sector, too. Recent surveys have found that student debt is a primary source of stress, distraction, and impaired productivity for young workers. More than half worry “all the time” or “often” about repaying their loans, and many say this anxiety has impacted their health.(8) Moreover, big majorities would welcome proactive solutions from their employers.

• Fully 92 percent say they’d take advantage of an employer match for their student loan payments if one were offered.(9)

• 58 percent would even prefer that their company make payments against their student debt over contributions to a retirement fund.(10)

• And—most importantly for companies—offering help with student loans would earn major points for participating employers. In one survey, 90 percent of employees said that having a loan repayment benefit would positively influence their decision to accept a job offer,(11) while in another, 86 percent said they’d commit to a company for five years if it helped pay off their student debt.(12)

Some forward-thinking employers have responded to this growing market demand and launched student loan repayment plans. Among the early adopters:

• Fidelity. Through its Step Ahead student loan assistance program, the investment company has helped more than 9,000 employees by offering a monthly subsidy—totaling up to $10,000 per borrower—toward student loans.(13)

• Abbott. The pharmaceutical company encourages employees to repay student debt and save for retirement simultaneously through a 5 percent employer “match” in its Freedom 2 Save Plan.(14)

• Others ranging from PricewaterhouseCoopers to Peloton, the fitness cycling company, have partnered with Gradifi, an employee benefits platform, to offer monthly contributions to eligible associates, helping them whittle their student debt.

Notwithstanding these models, employer-provided student loan assistance remains rare. According to an annual Employee Benefits Survey by the Society for Human Resource Management (SHRM), just 4 percent of U.S. companies offered this benefit last year.(15) Far more commonplace, found SHRM, are traditional tuition assistance programs: 51 percent of employers provided tuition support for their associates attending undergraduate studies, and 49 percent offered assistance for graduate school.

THE PLAN: Equalize Tax Treatment of Employer Student Loan Assistance Benefits

There’s a simple reason why so few employers currently offer student loan repayment assistance—current tax law discourages them for doing so. Currently under Section 127 of the Internal Revenue Code, businesses receive a tax break for subsidizing their qualified employees’ postsecondary tuition. (Indeed, that’s been the case for 40 years, when the tuition deduction was first enacted by Congress as a pilot.) But there’s no tax incentive to support employees who have already incurred student loan debt in college or grad school. If student loan repayments were treated the same way tuition assistance is today under federal law, many more employers would be eager to adopt such programs.

Congress could jumpstart private-sector engagement on this pressing issue by passing the Employer Participation in Repayment Act. Introduced by Reps. Scott Peters (D-CA) and Rodney Davis (R-IL) in the House and Sens. Mark Warner (D-VA) and John Thune (R-SD) in the Senate, the legislation would build on the current educational assistance program by allowing employers to contribute up to $5,250 a year, tax-free, toward any employee’s student loan repayments. The contribution would be tax-exempt for the employee, and could be made against qualified education loans to the employee directly, or through a payroll deduction to the employee’s lender.

At this writing, the measure has broad, bipartisan support, with 128 cosponsors in the House and 21 in the Senate—reflecting much wider interest than in the previous session of Congress. The legislation also enjoys the support of leading education organizations, such as the National Education Association and the National Association of Independent Colleges and Universities, as well as the Democratic House leadership and key figures from the Trump Administration, according to the bill’s sponsors. There’s no official score, but the Joint Committee on Taxation has estimated the measure would cost $3.6 billion over 10 years—far less than the price tag for having the federal government “cancel” all outstanding student debt. The bill’s lead Democrats are pushing to get it attached to an appropriate vehicle—perhaps a tax extenders package—in the current session.

Student debt has saddled millions of Americans and can remain a lifelong drag on their families’ financial health. Employers can help provide much-needed relief, and many seem eager to do so. With a straightforward change in the tax code, Congress could provide a powerful incentive for more companies to help—delivering benefits for workers, their families, and the 21st-century workforce.

Sources:

Zack Friedman, Forbes Magazine, October 18, 2018. https://www.forbes.com/sites/zackfriedman/2018/10/18/student-loan-repayment-employee-benefits/#3481b84a566f
Federal Reserve Bank and Federal Reserve Bank of New York, February 2019. https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2018q4.pdf
Institute for College Access & Success, Project on Student Debt, https://ticas.org/posd/home
Center for Retirement Research, June 2018. https://crr.bc.edu/briefs/do-young-adults-with-student-debt-save-less-for-retirement/
Center for Retirement Research, 2018.
Senator Elizabeth Warren, Medium.com: Election 2020 Coverage, April 22, 2019.
U.S. Office of Personnel Management, Federal Student Loan Repayment Program (2016), February 2018. https://www.opm.gov/policy-data-oversight/pay-leave/student-loan-repayment/
American Student Assistance, February 2017. https://www.asa.org/innovation/
American Student Assistance, 2017.
Oliver Wyman, 2017. https://files.acrobat.com/a/preview/c52b032b-4e17-458f-8c66-bc25d7daf01f
Oliver Wyman, 2017.
American Student Assistance, 2017.
https://www.fidelity.com/about-fidelity/who-we-serve/easing-the-pressures-of-student-debt
https://www.abbott.com/corpnewsroom/leadership/tackling-student-debt-for-our-employees.html

2018 Employee Benefits Survey, Society for Human Resource Management, June 2018. https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/pages/2018-employee-benefits.aspx

Repairing Credit: The Right Way to Fix a Broken System

Posted on May 14, 2019 by The Progressive Policy Institute

If you think your credit report is accurate, there is a good chance you are wrong. According to the Federal Trade Commission (FTC), one in five Americans has a potentially material error in their credit file, and one of the biggest contributors is medical bills—with half of all medical bills containing an error.

In fact, mistakes on credit reports have become so pervasive that around a third of all complaints filed annually to the Consumer Financial Protection Bureau (CFPB) resulted from problems with consumer credit reports.

Credit report errors are a serious threat to the financial well-being of American families. As Senator Elizabeth Warren has noted, “credit reports regularly contain errors that can make it harder for families to access credit, find jobs, and get housing.” And as many consumers know all too well, it’s very difficult to get those errors corrected.” (1)

Under the Fair Credit Reporting Act, the company that furnished the information to the credit bureau must conduct an investigation to verify the information and correct a mistake, if they find one. Unfortunately, consumers who want to try to fix mistakes on their credit report face three daunting obstacles.

First, the system put into place by the credit reporting agencies heavily favors creditors and other data furnishers. Credit bureaus almost exclusively depend on lenders (such as banks, credit unions, credit card providers, and mortgage underwriters).

Consumers contacted the credit reporting agencies approximately eight million times in 2011 to initiate a credit dispute. But only a small fraction of those disputes was resolved internally by credit bureau staff. According to the CFPB, 85 percent of credit report disputes are passed on to data furnishers (the lenders) to investigate and resolve. (2) Unfortunately, in most cases the disputes are then shelved unless the consumer perseveres.

Second, the credit report agencies earn their profits by providing services such as credit checks to the very entities that provide the data used to create the credit reports – banks, mortgage lenders, credit card companies, retailers, and other businesses that provide credit. This creates a serious conflict of interest.

Third, despite several notable efforts to try to empower consumers, trying to correct errors on your credit report is still tedious, confusing, and time consuming.

CREDIT REPAIR ORGANIZATIONS AND COMPANIES

Because the system is rigged against them, many consumers turn to credit counseling agencies or credit repair companies. The dispute system designed to help consumers fix the problem favors the position of the debt collector over the consumer. Specifically, the credit bureau is only legally required to check with the creditor or debt collector and ask them whether they stand by their claim. As long as the creditor says you owe money, the dispute is resolved in their favor. As the National Consumer Law Center concludes: “Credit bureaus have little economic incentive to conduct proper disputes or improve their investigations.” (3)

Credit counseling agencies are typically a free resource from nonprofit financial education organizations that review your finances, debt and credit reports with the goal of teaching you to improve and manage your financial situation.

A credit repair company is a firm that offers to improve your credit in exchange for a fee. Unfortunately, the quality of these firms varies greatly. Some credit repair firms are highly reputable and follow best practices. Unfortunately, a significant cohort of credit repair firms are not good actors and, in some cases, have committed outright fraud. In 2016 the Consumer Financial Protection Bureau (CFPB) stated that “more than half of people who submitted complaints with the CFPB about credit repair chose the issue ‘fraud or scam’ to describe their complaints.”

There are some telltale signs for consumers trying to separate the bad actors from legitimate credit repair firms. Companies should be avoided that:

Demand an upfront payment.
Don’t provide a written agreement that includes cancellation rights for consumers.
Guarantee they’ll raise your credit score or fix an error.
Have multiple complaints against them with the Consumer Financial Protection Bureau or the attorney general’s office in the state where they operate.
Suggest they can remove legitimate negative information.
Offer to create a new credit profile based on a new employer identification number, rather than your Social Security number.

In contrast, responsible credit repair companies not only follow federal and state law but also:

Offer a free consultation
Have a track record and consistently solid reviews from past clients.
Have an attorney on staff.
Are licensed, bonded and insured.

WHAT NEEDS TO CHANGE?

To protect consumers, some policymakers have suggested new regulations to further police the credit repair industry. They note that credit repair firms don’t do anything someone with a bad credit report couldn’t do on their own. Anyone can dispute credit errors on their own behalf. But the Do-It-Yourself approach can be dauntingly complicated and time-consuming for harried families.

In essense, paying for credit repair assistance is really no different than paying an accountant or purchasing software to do your taxes – something 90 percent of Americans do according to the Internal Revenue Service.

It is important to note that there is already existing legislation to regulate the credit repair system. The Credit Repair Organizations Act (CROA) was signed into law in 1996 to protect consumers from the unscrupulous practices commonly used by several credit scammers.

Because of CROA, credit repair organizations are not permitted to misrepresent the services they provide, including guaranteeing the removal of negative credit listings. Credit repair organizations are also not permitted to attempt to create a “new” credit file or advise you to lie about your credit history. The Act also bars companies offering credit repair services from demanding advance payment, gives consumers certain contract cancellation rights as well as the right to sue a credit repair organization that violates CROA. (4)

CROA is a sensible law, and despite criticisms that it does not go far enough in regulating the credit repair industry, the law does provide consumers with protections against bad actors in the credit repair sector without eliminating legitimate credit repair firms. CROA needs strengthening, not in the form of new regulations but rather more effective enforcement.

Under CROA, the Federal Trade Commission (FTC) is the primary enforcement body at the federal level. The problem is the FTC is severely underfunded and understaffed. In a Senate hearing last year Commissioner Rebecca Slaughter said the FTC’s staff level is 50 percent below its level at the beginning of the Reagan administration in 1981. Senators Jerry Moran (R-Kan.) and Catherine Cortez Masto (D-Nev.) agreed the FTC needs more resources and is “understaffed.” (5)

As Table 1 confirms, FTC staffing levels dropped dramatically during the 1980s and have never really recovered. Yet, over the same time, the responsibilities of the agency have dramatically changed and expanded. Today the FTC has to address some 2.7 million complaints a year in areas from debt collection, to identify theft, to imposter scams. (6)

Better enforcement of CROA would obviate the need to pile on new rules. Unfortunately, in fact, Congress has added to the FTC’s workload even as its workforce has shrunk. The simplest solution is to provide the FTC with additional resources dedicated to enforcing CROA and protecting consumers from those credit repair companies that have acted fraudulently or in bad faith.

To pay for this increase in supervisors, a small annual fee could be placed on the credit reporting agencies (Equifax, TransUnion, and Experian). To create an incentive for these agencies to be more responsive to consumer complaints about credit reporting agencies, the fee could be lowered or raised in synchronization with the number of consumer complaints about their credit reports.

OTHER REMEDIES

Another approach to fixing the current system is to go to the source of the problem, eliminating some of the causes for the extraordinary amount of errors made by the credit reporting industry. As Aaron Klein of the Brookings Institution has noted, there are three major reasons why credit scores are so inaccurate: “size, speed, and economic incentives of the system.”

One way to change the incentive structure would be to create some consequences for credit rating companies that frequently give lenders inaccurate data about borrowers. Lawmakers could consider legislation that would penalize credit reporting agency error rates above a certain level. Klein’s approach would use a random sample method (5 to 10 percent of complaints) to review credit rating firms’ performance. Another approach would be to grade the credit bureaus on their error and response rates.

CONCLUSION

While it is tempting to lump all credit repair firms into the same basket, many of these firms act in good faith and follow CROA to the letter of the law. Yet there is no doubt that a significant number of these companies are misleading consumers and sometimes acting fraudulently. If lawmakers really want to crack down on these bad actors, however, the first step should be strengthening enforcement of existing law.

Otherwise, spawning new laws and regulations would likely enmesh all credit repair firms in new layers of regulatory complexity and compliance burdens, making it even harder for consumers to detect and correct errors on their credit reports. In CROA we have the consumer protection law we need, now it’s time to focus on oversight and enforcement.

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(1) Brian Schatz Press Release: “Following Equifax Breach, Schatz, Warren, McCaskill, Colleagues Reintroduce Legislation to Help Consumers Catch And Correct Credit Report Errors,” September 11, 2017

(2) Kelly Dilworth, “Consumer watchdog report details credit bureaus’ work,” Creditcard.com, December 13, 2013

(3) Aaron Klein, “The Real Problem with Credit Reports is the Astounding Number of Errors,” Brookings Institution, September 28, 2017

(4) 15 USC Chapter 41, Subchapter II-A: Credit Repair Organizations

(5) Kate Patrick, “FTC Asks for More Control Over Big Tech, Privacy Issues,” Insidesources.com, November 30, 2018

(6) Federal Trade Commission, “FTC Releases Annual Summary of Complaints Reported by Consumers,” March 1, 2018

(7) Aaron Klein, “The Real Problem with Credit Reports is the Astounding Number of Errors,” Brookings Institution, September 28, 2017

(8) Ibid

PPI’s Ben Ritz Discusses Social Security Trustees Report on C-SPAN

Posted on May 1, 2019 by The Progressive Policy Institute

PPI’s Ben Ritz joined an expert panel on Capitol Hill last week to discuss the recently published report by Social Security’s trustees. The annual report projected that the program’s trust funds face insolvency within the next 16 years, after which point beneficiaries face the prospect of an across-the-board cut of 23 percent. All panelists encouraged policymakers to close the gap between Social Security’s revenues and spending sooner rather than later, which Ben noted is critical for ensuring the changes are fair to younger and older Americans alike.

Watch the full panel here on C–SPAN.

Ritz for Forbes, “Donald Trump’s Budget For A Declining America”

Posted on March 14, 2019 by The Progressive Policy Institute

After the president’s budget was released on Monday, House Budget Committee Chairman John Yarmuth (D-KY) called it “A Budget for a Declining America.” Unfortunately, that might be an understatement.

The Trump administration’s Fiscal Year 2020 budget proposal is a compilation of the worst ideas to come out of the Republican Party over the last decade. It would dismantle public investments that lay the foundation for economic growth, resulting in less innovation. It would shred the social safety net, resulting in more poverty. It would rip away access to affordable health care, resulting in more disease. It would cut taxes for the rich, resulting in more income inequality. It would bloat the defense budget, resulting in more wasteful spending. And all this would add up to a higher national debt than the policies in President Obama’s final budget proposal.

The most harmful aspect of Trump’s fiscal blueprint is its scheme for gutting investments in public goods that are core responsibilities of government. The administration proposes to reduce the share of gross domestic product devoted to non-defense (domestic) discretionary spending – the category of the budget that is annually appropriated by Congress and includes most federal spending on infrastructure, education, and scientific research – by more than half over the next decade. The result is deep cuts to all three of these important investments that provide the foundation for long-term economic growth.

Continue reading at Forbes.