Should ‘Mercedes Mom’ have sold the car before applying for government assistance?

Mercedes Benx
(Courtesy of Daimler AG)

A couple of weeks ago, a young woman wrote about the shame she felt after driving a Mercedes to the local church to apply for government assistance. “To this day, it is the single most embarrassing thing I’ve ever done,” wrote Darlena Cunha in a special feature for the Washington Post that has been widely read and has made her a minor celebrity with appearances on CNN and elsewhere.

Her story is compelling.

Her family had fallen on hard times and she needed financial help to purchase a special baby formula for her new born twins. Although she and her husband had recently earned enough to purchase a $240,000 home, the financial crisis of 2008 caused the value of their home to plummet to $150,000 and, even worse, led to the loss of her husband’s job. Their combined income fell from $120,000 to just $25,000, making them potentially eligible for Medicaid and assistance through the federal Women, Infants, and Children (WIC) program.

That particiular experience isn’t unique. It’s the fact that she drove to the WIC office in a Mercedes that created the passionate response from the general public. Many commentators said she should have sold the car before applying for assistance. Others felt that keeping a fully-paid for car was irrelevant to her needing financial assistance.

One point that was sort of lost in the story is that owning a car has nothing to do with being eligible for WIC payments. The WIC program is a type of federal assistance that is income-based, or “means tested,” meaning that only people whose income falls below a certain level are eligible for the program. Medicaid and the Temporary Assistance for Needy Families are other examples of these means-tested programs. These programs differ from the federal “entitlement” programs, in which people are entitled to receive the benefits if they meet certain non-income tests. For example, people who lose their jobs are entitled to unemployment benefits regardless of their income. The same is true of Social Security and Medicare, which are based on a person’s age, not income.

In the case of WIC, eligibility depends on where a family’s income falls relative to federal poverty guidelines and, generally, can’t exceed 185 percent of those guidelines. For example, a four-person household in Virgia making about $44,000 a year meets the income test. WIC imposes other tests as well. The woman must be pregnant or six months post-partum, infants must be less than one year old, and children must be younger than 5 years old. In addition to these income and category requirements, the person applying for benefits must be at a “nutritional risk.” That’s why Cunha had to undergo a medical evaluation as part of the process.

As Cunha explained, her twins’ needs and her family income allowed her to pass these tests. What she didn’t explain, however, is that she wasn’t under any legal obligation to sell the Mercedes before she could receive WIC benefits. People don’t have to trade-in their expensive cars for a cheaper model, empty their bank accounts, or sell their art work or any other resources to become eligible for WIC benefits.

This contrasts with many other federal assistance programs, such as food stamps (known formally as the Supplemental Nutrition Assistance Program or SNAP) and the Earned Income Tax Credit, or EITC, which limit the value of resources a beneficiary may own. For example, under the SNAP rules, households may have up to $2,000 in what’s known as countable resources, such as a bank account. (The amounts are higher for households with a person over age 60 or if someone is disabled.) Homes, as well as most pension plans and certain other resources are excluded from this test. Under the EITC, investment income must be no more than $3,300 a year.

Vehicles have special rules under SNAP. Under federal rules, households may exclude up to $4,650 of the fair market value of one car per adult household member. (States may modify the rules that apply to cars.) Thus, Cunha might have had to sell the Mercedes to receive food stamps. For this reason, she differs sharply from the Cadillac-driving welfare queen that Ronald Reagan disparaged as a fraud while campaigning for president in 1976. (As recently explained in Slate, the welfare queen was a Chicago woman known as Linda Taylor who drove her Cadillac to the public aid office and embodied the stereotype of a welfare cheat.)

Although she kept the car, the point of the “Mercedes mom” story isn’t so much about whether that was the right thing to do, but about how financial difficulties can strike at any time and that no one is immune from economic difficulties.

As Diana Reese explained in a She the People piece about an “actual poor person” who recently testified before a Congressional budget hearing, financial need can be a temporary situation, as was the case for Cunha. Or it can be a relatively long-term economic situation, as is the case for Tianna Gaines-Turner, who explained her family’s plight at the hearing. She and her husband are part of the working-class poor whose jobs don’t pay enough to cover their living expenses.

Poverty takes may forms. That’s why the federal government provides these financial assistance programs — because someday, somebody you know, or maybe even you, might be in need of a boost up.

Joann Weiner teaches economics at George Washington University. She has written for Bloomberg, Politics Daily, and Tax Analysts and worked as an economist at the U.S. Treasury Department. Follow her on Twitter @DCEcon.
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