Never shy about lampooning government dysfunction, Ronald Reagan famously said that if you want more of something, subsidize it. But even the Gipper couldn’t have imagined today’s growing zeal to subsidize getting more people on government benefits, which undermines work and leaves too many on the sidelines of the economy. Welfare programs achieve that dubious distinction when they ignore the value of other government benefits in determining eligibility. Yet liberal policymakers today are proposing not only massive federal benefit increases, but also ensuring that growing largess is ignored by programs designed to aid the needy.
The problem involves “income disregard” policies that ignore the value of government benefits in calculating eligibility for welfare programs meant to help low-income individuals and families. Ignoring such income makes benefit recipients appear artificially poorer than someone with the same income from work. That encourages benefit collection over work, and artificially expands safety net programs meant for those with low incomes.
During the pandemic, temporary federal laws mandated welfare programs ignore a record $1.4 trillion in stimulus checks, expanded unemployment benefits, and enhanced child tax credit payments when assessing whether applicants were poor enough to qualify. That meant a household with two adults and two young children could collect more than $67,000 in pandemic benefits without a penny being counted in determining its eligibility for Medicaid. Two-thirds of that amount, or nearly $47,000, would have been similarly ignored when the family applied for food stamps. Instead of recognizing those significant benefits, income disregard policies could make them appear to have no income at all.
The results were predictable: income disregards contributed to Medicaid and food stamp rolls soaring to record highs. Between February 2020 (the month before the pandemic struck) and a recent peak in April 2023, Medicaid caseloads soared from 64.1 million to 87.1 million, an increase of 36 percent. Similarly, food stamp caseloads rose from 36.9 million in February 2020 to a high of 42.8 million in January 2023. Caseloads have since declined as pandemic expansions expired.
Income disregards were embedded in welfare programs long before the pandemic and remain there in its wake. In 2017, the Government Accountability Office (GAO) found major programs ignore multiple sources of benefit income. Then as now, Medicaid fails to count earned income tax credit (EITC) payments, Temporary Assistance for Needy Families welfare checks, food stamp benefits, and Supplemental Security Income payments. The GAO could have added refundable child tax credit (CTC) payments to that list. Those disregarded benefits collectively provided over $340 billion in support to families in FY 2022.
Starting long before the pandemic, key disregarded benefits like food stamps grew rapidly. Tax credits based on prior work and earnings have grown fast, too. Especially if liberals succeed in converting the EITC and CTC into “universal” benefits (thus removing their current work requirements and work incentives), that would only exacerbate the growing tilt toward benefit collection over work. Current legislative proposals would make matters far worse by permanently ignoring significant new taxpayer-provided benefits each year.
For example, increased Social Security benefits payable under the Social Security Enhancement and Protection Act would be disregarded under “any Federal program or under any State or local program financed in whole or in part with Federal funds.” The same goes for multiple unemployment benefit expansions authorized by the Unemployment Insurance Modernization and Recession Readiness Act. Authored by Senate Finance Committee Chairman Ron Wyden (D-OR), that legislation creates — and immediately disregards—a new federal entitlement paying at least $1,000 per month to even never-employed individuals. Under Rep. Rashida Tlaib’s (D-MI) End Child Poverty Act, “universal child allowance” payments worth over $5,000 per year per child would be similarly disregarded.
Indicating how some liberals think about universal basic income (UBI) policy, cash benefits averaging almost $25,000 per year under the Guaranteed Income Pilot Program Act would be ignored. The American Opportunity Accounts Act authored by Sen. Cory Booker (D-NJ) would create new government “baby bond” deposits worth as much as $35,000 over the life of a child—all disregarded when calculating eligibility for “any benefit or service, paid for in whole or in part with Federal funds, including student financial aid.” Even new government funding for diapers under the End Diaper Need Act, and for menstrual products under the Menstrual Equity for All Act, would be ignored.
Congress should review current income disregards and reform or repeal those that subsidize benefit receipt over work. It should also reject proposals to disregard major new benefit increases. To do otherwise would permanently subsidize growing benefit collection, contradicting politicians’ claims of concern for hardworking Americans who ultimately have to pay the bill.