One of the key ways House Republicans want to impose harsh cuts on the Supplemental Nutrition Assistance Program (SNAP, often referred to as food stamps) is by bringing back, in force, a policy item that had slowly been removed by the states: asset tests. Rather than minor, technocratic fixes, this is an important change that shifts the program in a major way. And, independent of what one thinks of the scale of the food stamp program, this is a particularly bad policy, and understanding why it is so bad might give us some clues about why our social policy apparatus is such a mess.
The assets test change is accomplished in the House bill by removing the ability of states to use “categorical eligibility” in determining eligibility for SNAP. That practice allows states the ability to line up how people qualify for food stamps with other programs. And one reason categorical eligibility has been expanded has been to not use federally imposed assets tests to determine eligibility.
Assets tests are a type of test designed to see if the family has means to survive without aid. (Hence the term in social insurance, means-testing.) According to the CBO, for the “purpose of that test, assets include cash, amounts in bank accounts, and other types of financial resources, but they exclude the value of houses, retirement or education savings accounts, and (in most states) cars.”
Normally, if you have more than $2,000 in assets, you do not qualify for SNAP. In the past 10 years however, 41 states have opted to go with categorical eligibility in order to circumvent this test, either eliminating assets tests or raising them much higher. You can see a map of the evolution of this trend here.
It’s worth noting that the GOP’s aggressive implementation of these asset tests pushes against major trends in social policy, and there’s at least five major problems with this approach from the policy point of view.
1. Poverty traps
One thing policymakers are concerned about when it comes to creating social insurance is whether or not it creates bad incentives for those in the program. Having an assets test at such a low level forces people into situations where they might have to spend money they wouldn’t otherwise spend, and defer savings, in order to continue to qualify for using food stamps to fight poverty and food insecurity.
These problems are usually described as “poverty traps.” Understanding them, and working to fix or blunt them, has been a major piece of policymaking for decades. Having savings is essential for any kind of real income security, as well as doing things like moving in order to take advantage of a new job. As Reid Cramer of New America told me, “the introduction of asset tests are trying to solve a problem that does not exist by introducing a serious one - forcing people to choose between building an emergency fund to deal with crisis and food security.”
2. A really fast phaseout
A second problem is that it’s a pure cutoff. If you have $1,999 dollars, you are fine. If you have $2,001 dollars, you are cut off. So you get stories about people surprised by a bit of good luck who are suddenly tossed from the program. These steep cliffs are a terrible way to design policy, especially when we want poor people to be saving money.
3. And the phaseout starts pretty low
Let’s also remember how low this cutoff is, which is the third problem. Take a family living in poverty, earning $12,000 a year. A financial planner would say that you should have enough liquid savings to survive three to six months. That is going to be incredibly hard for this family; the definition of poverty we should think of is someone having to choose between essentials, meaning there’s no money left over. However, ideally, three to six months is, of course, saving between $3,000 and $6,000, or well above the cutoff.
Families simply couldn’t get to a level of financial stability when it comes to their savings without the government pushing against them. President Obama moved to create a universal $10,000 asset limit for all federally funded means-tested programs in his 2011 budget.
Indeed many states that do use an assets test have them set much higher. Texas, for instance, has a $5,000 cutoff, which is consistent with this. So we are doing policy in bad faith, cutting against commonly accepted financial planning advice.
4. Inflation
A fourth problem is that it is not indexed for inflation from when it was created. Though this changed, the $2,000 limit was set in 1986, and hasn’t been adjusted for inflation. Even as they start adjusting for inflation now, a retroactive adjustment would put it closer to $4,250 today.
5. It makes life more complicated
The fifth, and arguably most important, problem is that it gets in the way of efforts for governments to simplify their procedures. As Rachel Black of the New America Foundation notes, reinstating “asset limits can add substantial time, effort, and cost to their administration.” This also goes for individuals too. As Black and her colleague Aleta Sprague summarize, many people are uncertain about how the assets test is administered, and there’s reason to believe some people forgo banking accounts out of worry.
Notice that this is added efficiency in both people receiving, and the government administering, these programs. By folding eligibility into a single requirement, instead of overlapping ones for different programs, there’s fewer errors and headaches in administration, and it's easier for people to both understand if they qualify and take advantages of the programs if they do.
That, of course, is the issue. If you don’t want SNAP to work well, if you want to make it miserable and complicated in order to benefit from it, if you want them confused as to what terms they qualify, then making changes like this is important. By making the design, to use the political scientist Steve Teles’s term, kludgey, the fact that it is poorly run is a feature, not a bug.
It’s worth remembering that wonky policy analysis isn’t just about the glamor and fun of it all -- minor changes like this can have major consequences for how policies actually interact with day-to-day people. Worries about how to best simplify government services while preventing program-inflicted traps are generally considered important things to take into account when designing policies.
But here Republicans are actually using the poor design to sabotage making a good program work better. They are also giving up on allowing states to run programs how they see fit, which was supposed to be an important part of how they think. It’s bad enough that the GOP wants to use every procedural tactic at their disposal to dismantle social insurance; it’s worse when they’ll actively pursue programs designs they know are bad ideas to make them work less well.