A savings account can be a powerful thing, especially for someone struggling to make ends meet. A little extra money on the side—even the tiniest of sums—can be a life-preserving cushion in the case of an unexpected injury, illness, or sudden unemployment. Building a financial base can also be a ticket out of poverty for families long relegated to economic hardship.
In Maine, though, the governor has fired up a debate about whether an individual can have a bit of money in the bank and still need governmental assistance. Starting as early as Nov. 1, Maine is going to limit the financial assets of welfare recipients, effectively discouraging them from saving money.
The state will place a $5,000 cap on the savings and other assets of residents enrolled in the Supplement Nutrition Assistance Program (SNAP). Those whose bank accounts, secondary vehicles and homes, and other assets considered non-essential by the government, exceed the limit will no longer be eligible to participate in the food stamp program. An individual's primary home and vehicle won't count toward the limit.
The thinking, according to the Gov. Paul LePage's office, is simple: People shouldn't be allowed to take money from the government if they don't need to. "Most Mainers would agree that before someone receives taxpayer-funded welfare benefits, they should sell non-essential assets and use their savings,” LePage said in a written statement.
"What people see, what they're concerned about these days, is the abuse of the welfare system," added David Sorensen, who is the director of media relations and policy research for Maine's Department of Health and Human Services. "Well, it's an abuse to enroll in the system when you've got $5,000 in the bank."
But the unintended consequences of asset tests, like the one soon to be implemented in Maine, can be crippling, according to a growing pool of people who oppose such requirements. They argue that impoverished Americans, hoping to break from the cycle of poverty, are instead further bound by it. Many in Maine, struggling to make ends meet, will no longer put money aside, since doing so could jeopardize their ability to eat.
"There's a reason most states have moved away from asset tests," said Ezra Levin, who is the associate director of the Corporation for Enterprise Development, a nonprofit organization that fights poverty. Levin specializes in tax and asset-building policies, and is highly critical of LePage's plan. "The tests are counterproductive. They don't help people become self-sufficient. They actually do just the opposite."
Up until 1996, federal assistance programs were more preoccupied with providing indefinite income support than lifting families out of poverty. That year, President Clinton signed the 'Personal Responsibility and Work Opportunity Reconciliation Act,' which effectively flipped the goal around. But many quirks about the programs, including their reliance on asset tests, weren't reconsidered along with their central purpose.
Today, asset tests have become unpopular. Increasingly, they have been viewed as inhibitors to self-sufficiency—people need to build a safety net, in the form of savings or assets, before they can transition away from government aid.
Only a handful of states, including Michigan, Wyoming, and Virginia, still require that food stamp recipients pass such exams. The rest—36 in all—have chosen to drop them in recent years. Most recently, Pennsylvania shed the practice.
Levin is not alone in his disapproval of the Maine governor's plan. Amy Fried, who teaches political science at the University of Maine, penned an opinion piece for local newspaper Bangor Daily News on Tuesday, detailing how the policy will hurt low income students hoping to save for college. Rachel Black, who is a senior policy analyst for New America, a Washington, D.C.-based think tank, told the Portland Press Herald last month that the legislation is "antithetical to the idea of promoting self-sufficiency."
Perhaps the most poignant criticism comes from an investigation published in 2013 by the Deseret News. The piece chronicles the struggles of Melissa and Jimmy, a couple living on food stamps. They saved money to wean themselves off of the program, but were forced off too soon, thanks to asset limits. They had no choice but to spend some of their savings so they could afford to eat.
"It felt like a no-win situation," Melissa told the Deseret News. "We were being forced to choose between what is good for our family in the long term and what our kids need right now."
Sorensen acknowledges that the forthcoming legislation has met ample disapproval. He says the governor's office expects the criticism to grow louder as the mechanics are implemented. But he believes the governor's plan is more careful than many realize.
"We're not penalizing anyone for having an IRA account or a 401K," he said. "We don't include personal items either, as some have people have suggested. The truth is that we're not actually being very strict about this."
Sorensen points to the fact that the USDA's default limit for bank accounts is $2,250, less than half the cap that will be implemented in Maine, as evidence of the program's leniency (though the default limit is neither binding nor adhered to by many states anymore). He also notes that it only applies to people without dependents (i.e. children).
But that's less generous than it sounds, says Levin. "Just because someone doesn't have officially registered dependents doesn't mean there aren't people who depend on them," he said.
Currently, a household of one can earn no more than $1,276 of gross income per month in order to receive food stamps. That same household can qualify for up to $194 dollars a month, or fewer than $7 dollars day, as part of SNAP, according to the Department of Agriculture. It doesn't take much math to figure out that neither that kind of income nor the daily food allowance affords any kind of lavish lifestyle.
"If someone manages to save money while earning next to nothing, why would we punish them for it?" Levin said. "Why would we discourage sound financial practices?"
The number of welfare recipients has shot up in Maine in recent years, largely thanks to the recession, but there is little evidence to suggest there is rampant abuse of the system. Studies have, in fact, suggested that the opposite is true. Only a tiny fraction of welfare recipients have enough in their bank accounts to fail the sort of asset test soon to be implemented in Maine.
Gov. LePage's policy is part of what Levin calls a long history of complicating the plight of the poor in America. The problem, he says, is that there's so much focus on people who don't deserve support that the people who do are made to suffer.
"Normally it's Republicans who support programs that create incentives for poor people to save," Levin says. "The crux of conservative thinking around welfare is that people shouldn't grow dependent, but this policy does exactly that."
LePage says asset tests are necessary if his state is going to rein in a system he believes has grown too large for its own good. "What the governor is doing is breaking the cycle of generational dependency," Sorensen said. "Our goal here in Maine is to change the culture, and change the expectations of the system."
Janet Smith, a grassroots activist in Maine who helps impoverished communities with financial capability and asset building, sees only irony in that statement. "One of the few ways to break out of generational poverty is to build assets, to save money," she says. "The governor is effectively closing that window."
Poverty involves a complex web of sacrifices that policymakers aren't always privy to, she says. To demonstrate that disconnect, Smith tells the story of a man she once worked with, who couldn't afford to live on a street that was regularly plowed during the winters—which are long in Maine. Each day, he was forced to use a beat-up snowmobile to get from his home to his car, an unconventional but necessary step. From there he drove to work. And at day's end, the process repeated itself, in opposite order.
"I'm not saying SNAP recipients need snowmobiles," Smith says. "What I'm saying is that we're focusing on the wrong things."