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The More Things Change, the More They Stay the Same? The Safety Net and Poverty in the Great Recession

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  • Marianne Bitler
  • Hilary Hoynes

Abstract

Much attention has been given to the large increase in safety net spending, particularly in Unemployment Insurance and Food Stamp spending, during the Great Recession. In this paper we examine the relationship between poverty, the social safety net, and business cycles historically and test whether there has been a significant change in this relationship during the Great Recession. We do so using an alternative measure of poverty that incorporates taxes and in-kind transfers. We explore the mediating role played by four core safety net programs—Food Stamps, cash welfare (AFDC/TANF), the Earned Income Tax Credit, and Unemployment Insurance—in buffering families from negative economic shocks. This analysis yields several important findings. Our most robust and important finding is the safety net is doing less to provide protection for the most disadvantaged. In the post-welfare reform world, TANF did not respond in the Great Recession and extreme poverty is more cyclical than in prior recessions. On the other hand, Food Stamps and UI are providing more protection-or at least providing no less protection-in the Great Recession, although these results are less robust across our different models. These programs are more likely to affect households somewhat higher up the income distribution; we find some evidence of a reduction in cyclicality at 100% poverty and little evidence about this at higher income-to-poverty levels.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19449.

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Date of creation: Sep 2013
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Publication status: Forthcoming: The More Things Change, the More They Stay the Same: The Safety Net, Living Arrangements, and Poverty in the Great Recession , Marianne Bitler, Hilary Hoynes. in The Labor Market in the Aftermath of the Great Recession , Mas and Card. 2014
Handle: RePEc:nbr:nberwo:19449

Note: CH LS PE
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  1. Rebecca M. Blank, 1997. "What Causes Public Assistance Caseloads to Grow?," NBER Working Papers 6343, National Bureau of Economic Research, Inc.
  2. Yonatan Ben-Shalom & Robert A. Moffitt & John Karl Scholz, 2011. "An Assessment of the Effectiveness of Anti-Poverty Programs in the United States," Mathematica Policy Research Reports, Mathematica Policy Research 6980, Mathematica Policy Research.
  3. Marianne Bitler & Hilary Hoynes & Elira Kuka, 2014. "Do In-Work Tax Credits Serve as a Safety Net?," NBER Working Papers 19785, National Bureau of Economic Research, Inc.
  4. Bruce D. Meyer & James X. Sullivan, 2012. "Identifying the Disadvantaged: Official Poverty, Consumption Poverty, and the New Supplemental Poverty Measure," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 26(3), pages 111-36, Summer.
  5. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
  6. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, American Economic Association, vol. 73(5), pages 1023-35, December.
  7. Bruce D. Meyer & Wallace K. C. Mok & James X. Sullivan, 2009. "The Under-Reporting of Transfers in Household Surveys: Its Nature and Consequences," NBER Working Papers 15181, National Bureau of Economic Research, Inc.
  8. Stephan Lindner & Austin Nichols, 2012. "The Impact of Temporary Assistance Programs on Disability Rolls and Re-Employment," Working Papers, Center for Retirement Research at Boston College wp2012-2, Center for Retirement Research, revised Jan 2012.
  9. Thomas M. Fraker & Alberto P. Martini & James C. Ohls & Michael Ponza & Elizabeth A. Quinn, 1992. "The Evaluation of the Alabama Food Stamp Cash-out Demonstration. Vol. 1: Recipient Impacts," Mathematica Policy Research Reports, Mathematica Policy Research 1206, Mathematica Policy Research.
  10. James P. Ziliak & David N. Figlio & Elizabeth E. Davis & Laura S. Connolly, 2000. "Accounting for the Decline in AFDC Caseloads: Welfare Reform or the Economy?," Journal of Human Resources, University of Wisconsin Press, vol. 35(3), pages 570-586.
  11. Jim C. Ohls & Thomas M. Fraker & Alberto P. Martini & Michael Ponza, 1992. "The Effects of Cash-Out on Food Use by Food Stamp Program Participants in San Diego," Mathematica Policy Research Reports, Mathematica Policy Research 1253, Mathematica Policy Research.
  12. David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 1-74.
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Cited by:
  1. Lucie Schmidt, 2013. "The New Safety Net? Supplemental Security Income after Welfare Reform," Department of Economics Working Papers, Department of Economics, Williams College 2013-07, Department of Economics, Williams College.
  2. Ganong, Peter & Liebman, Jeffrey B., 2013. "The Decline, Rebound, and Further Rise in SNAP Enrollment: Disentangling Business Cycle Fluctuations and Policy Changes," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp13-037, Harvard University, John F. Kennedy School of Government.
  3. Peter Ganong & Jeffrey B. Liebman, 2013. "The Decline, Rebound, and Further Rise in SNAP Enrollment: Disentangling Business Cycle Fluctuations and Policy Changes," NBER Working Papers 19363, National Bureau of Economic Research, Inc.

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