Sunday , June 16 2019
Home / Jared Bernstein: On the economy / The Trump administration’s proposed “update” to the poverty threshold is a wolf in sheep’s clothing

The Trump administration’s proposed “update” to the poverty threshold is a wolf in sheep’s clothing

Summary:
The Trump administration’s proposal to change the way the poverty line is annually adjusted for inflation is the policy equivalent of a wolf in sheep’s clothing. Sounds technical and weedy, but a new paper by CBPP’s Aviva Aron-Dine and Matt Broaddus shows just how damaging the change will be for the health coverage and benefits of millions of low- and moderate-income people. (An earlier CBPP report focused on other forms of assistance that would be less accessible under the change.) Because the change will make the poverty line grow more slowly than it would otherwise, fewer people will be counted as poor and thus, fewer will benefit from government programs whose eligibility or benefits are keyed to the poverty line. Over time, millions will lose health coverage or face benefit

Topics:
Jared Bernstein considers the following as important:

This could be interesting, too:

Jared Bernstein writes Un- vs. Under- (K. Bryant in the house!)

Jared Bernstein writes Headwinds in the job market? Payroll gains slow and wages fail to accelerate

Jared Bernstein writes Trump and the Mexican tariffs: How far is this administration willing to go to achieve their protectionist, anti-humanitarian goals? Maybe farther than we thought.

Jared Bernstein writes Pushing back gently but firmly on Michael Strain’s non-stagnation argument

The Trump administration’s proposed “update” to the poverty threshold is a wolf in sheep’s clothing

The Trump administration’s proposal to change the way the poverty line is annually adjusted for inflation is the policy equivalent of a wolf in sheep’s clothing. Sounds technical and weedy, but a new paper by CBPP’s Aviva Aron-Dine and Matt Broaddus shows just how damaging the change will be for the health coverage and benefits of millions of low- and moderate-income people. (An earlier CBPP report focused on other forms of assistance that would be less accessible under the change.)

Because the change will make the poverty line grow more slowly than it would otherwise, fewer people will be counted as poor and thus, fewer will benefit from government programs whose eligibility or benefits are keyed to the poverty line. Over time, millions will lose health coverage or face benefit reductions.

Importantly, note that none of these people will be better off due to the proposed change. Their actual (nominal) income will grow however it’s going to grow, regardless of the change in the price index. But because the new index will make the poverty threshold grow less quickly, some who would have been counted as poor or near-poor by the current system will no longer be so under the new system.

In other words, the Trump administration is proposing to lower the poverty rate without lifting a finger to help the poor.

In so doing, as Aviva and Matt point out, eligibility and benefits for many health programs would be cut, including:

–A Medicare subsidy that helps “low-income seniors and people with disability afford prescription drugs.”

–Medicaid and CHIP coverage, including maternal/child health and family planning.

–Premium tax credits that help people afford ACA marketplace coverage.

The table below shows how, after being in place for a decade (since its damage builds over time) at least hundreds of thousands of people would lose coverage or benefits from the change. Millions buying coverage in the exchanges would lose receive smaller credits against the cost of their premiums. Relative to today’s cost-sharing levels, “more than 50,000 people who would see their deductibles increase from about $850 to about $3,200.”

The Trump administration’s proposed “update” to the poverty threshold is a wolf in sheep’s clothing

Source: Aron-Dine, Broaddus.

The switch to the slower-growing price index is being pitched as an innocent attempt to make the poverty line more accurate. But the phoniness of that argument is immediately apparent. The official poverty line is already too low and this change makes it even lower. The official threshold is based on an outdated methodology derived in the 1960s, and as such, it hasn’t evolved to incorporate the costs faced by low-income families today, like child care costs or the increase in housing relative to other costs. For these reasons, as Aviva and Matt report, “households just above the poverty line have high rates of material hardship: for example, high uninsured rates and difficulty affording health care, as well as high rates of food insecurity.”

Administrations have a fair amount of leeway in terms of making such changes, and right now their proposal is in a 45-day comment period. We’re following this very closely and will keep folks posted.

For now, just recognize that far from a benign, technical adjustment, this change threatens the economic and health security of millions of vulnerable people. I guess I should be inured to their regulatory (i.e., non-legislative) actions in this space (e.g., work requirements to hassle people off of SNAP or Medicaid rolls), but once again, the Trump administration is laser focused on solving the problem that America’s poor have too much and the rich have too little.

Jared Bernstein
Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, Executive Director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute, and between 1995 and 1996, he held the post of Deputy Chief Economist at the U.S. Department of Labor.

Leave a Reply

Your email address will not be published. Required fields are marked *