The economic impacts of the COVID-19 pandemic will be felt for months to come. Congress has taken some good initial steps to expand key safety net programs and help stabilize our economy. But to ensure the wellbeing of our communities and country in the long term, lawmakers must provide assistance for as long as it’s needed, not just during the initial spike of the pandemic.
During the last economic downturn Congress passed the American Reinvestment and Recovery Act (ARRA), which significantly increased funding for federal safety net programs. As a result, millions of people were kept out of poverty and the economy covered more quickly. If we want to follow this successful formula, we should look at these four programs, which offer the biggest positive impact:
Supplemental Nutrition Assistance Program (SNAP)
SNAP is America’s largest and most effective anti-hunger program. It helps millions of families put food on the table. When SNAP recipients use their benefits, it provides stimulus to the local economy. Every $1 of SNAP spending leads to $1.50-1.80 in total economic activity during a recession.
The second COVID-19 relief bill passed by Congress (H.R. 6201) included additional SNAP assistance for kids who are missing school meals. It also allowed states to temporarily increase SNAP benefits and made it easier for participants to qualify for the program. But these efforts fall short of what is needed and what Congress did to address the economic crisis in 2008.
Support for Medicaid and the Children’s Health Insurance Program (CHIP)
Medicaid and CHIP, which provide essential health care to our most vulnerable neighbors, are funded through a federal matching system called the federal medical assistance percentage (FMAP). As states lose tax revenue during the economic downturn, they will have less to spend on Medicaid and CHIP. This, combined with increased demand, will lead to dramatic cuts in services and to other crucial safety net programs, deepening the economic fallout and slowing our recovery.
H.R. 6201 boosted the FMAP for states by 6.2 percent, and the CARES Act (H.R. 748) established a $150 billion fund to help states address budget short falls. This will not be enough to prevent states from making deep budget cuts. Congress should increase the FMAP rate to 100 percent and provide more flexible funding for states. Studies show that this will generate jobs and protect access to care.
Unemployment Insurance (UI)
UI provides crucial financial support for people who have lost their jobs. Like SNAP and FMAP, it helps stimulate the economy. One analysis found that in the second quarter of 2009, UI benefits keep people out of poverty and boosted employment by approximately 1.75 million jobs.
Good news: Congress expanded funding and coverage for UI in the CARES Act (H.R. 748)!
The Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) are two of the most effective anti-poverty programs. They also are also powerful drivers of economic activity, providing $1.24-$1.38 in economic activity for each $1 included in the credits. The EITC alone lifted 5.6 million of people out of poverty in 2018, including 3 million children. These credits don’t currently reach everyone who needs access to them: the EITC provides meager benefits for childless adults, and current rules prevent millions of families from claiming the full CTC.
While the CARES Act (H.R. 748) included tax provisions for business owners, it failed to expand the EITC and CTC. Instead of passing tax policies that help those who are already well off, Congress should include provisions to help those hardest by COVID-19.
What Comes Next
Congress is already negotiating what to include in a fourth COVID-19 relief package. The programs named here were tried and tested in the Great Recession. Our leaders must enact bold measures that will enable families to weather the coming recession and stimulate quick economic recovery.