Policy: Economy

Big Ideas: On Medicare reform, food stamps and child poverty

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James Capretta for Economic Policies for the 21st Century: As the political back and forth over Obamacare intensified this summer, it largely went overlooked that the Medicare prescription drug benefit continues to outperform expectations. In July, the Department of Health and Human Services announced that the average premium for the drug benefit in 2014 would be just $31. That's remarkable given that the average premium had held steady at $30 in the three previous years. HHS also announced that, because of very moderate spending growth in the program, the standard deductible would fall from $325 in 2013 to $310 in 2014.

Perhaps the reason no one has taken much notice of this good news is because it has become so commonplace with the drug benefit. In December, it will have been 10 years since President George W. Bush signed the new benefit into law. Very few federal programs have had such a successful first decade.

This was not the expectation of the law’s early critics. During congressional debate over the drug benefit, opponents openly predicted the program would fail because of its reliance on marketplace competition and consumer choice. They also predicted too few insurance companies would offer coverage and that beneficiaries would stay away from enrolling because of its complexity. Most importantly, they predicted costs would soar without government regulation of prescription drug pricing.

All of these predictions have been proven wrong.

 

NOW'S NOT THE TIME TO CUT FOOD STAMPS

Elise Gould and Hilary Wething for the Economic Policy Institute: The Census released its annual income and poverty report, which, among other highlights, calculates the number of people who are kept out of poverty by various government assistance programs. While many of the headline numbers stayed the same, the number of people kept out of poverty by the Supplemental Nutrition Assistance Program (SNAP) increased to an all-time high of 4 million people.

The data arrived, coincidentally, as the House of Representatives announced it will be voting to cut SNAP spending by 5 percent over the next 10 years, cutting 3.8 million people from the program by as early as next year. Understanding why SNAP has increased over the last five years helps us understand why it would be irresponsible –indeed cruel and stupid — to cut spending on the program now.

As of 2011, about 45 million people (more than 1 in 7 Americans) participate in SNAP. More than 41 percent of all recipients live in households where family members are employed; these are largely families that have been left behind by a deeply damaged labor market.

Majority Leader Eric Cantor seems to think cutting these benefits will make people more self-sufficient, but today’s economic problem is not that Americans are unwilling to work, it’s that there are not enough jobs.

 

HOW TO HALVE CHILD POVERTY

Austin Nichols for the Urban Institute's MetroTrends Blog: More than 16 million children in the United States are poor, and the child poverty rate has been at historic highs since the Great Recession.

We could effectively end child poverty now, at least in the short run. The question is whether we’re willing to do that.

If the United States offered cash benefits to children in poor families, we could cut child poverty by more than half. According to calculations using the 2012 Current Population Survey, poor children need $4,800 each, on average, to escape poverty. That’s $400 a month for each child.

If we issued a $400 monthly payment to each child and cut tax subsidies for children in higher-income families, we would cut child poverty from 22 percent to below 10 percent. If we further guaranteed one worker per family a job paying $15,000 a year and each family participated, child poverty would drop to under 1 percent.

A child benefit is now common across developed countries, with amounts of about $140 a month in the United Kingdom, $190 in Ireland, $130 in Japan, $160 in Sweden and $250 in Germany. A smaller child benefit of $150 per month would chop child poverty from 22 percent to below 17 percent. Adding the job guarantee would lower child poverty to 8 percent.

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