# Presentation: 541439

## Introduction

Chapter 1: Welfare vs. “Making Work Pay”

Chapter 2: In Sickness and in Health: The Importance of Public Health Insurance

Chapter 3: Feeding the Hungry

Chapter 4: Home Sweet Home?

Chapter 5: Who’s Minding the Kids?

Chapter 6: Defending and Mending the Safety Net

**Chapter 1: Welfare vs. “Making Work Pay”**
**Chapter 2: In Sickness and in Health: The Importance of Public Health Insurance**
**Chapter 3: Feeding the Hungry**
**Chapter 4: Home Sweet Home?**
**Chapter 5: Who’s Minding the Kids?**
**Chapter 6: Defending and Mending the Safety Net**

## Welfare reform in 1996 was accompanied by predictions of disaster:

- “It would be a great moral and practical wrong for you to sign any welfare ‘reform’ bill that will push millions of already poor children and families deeper into poverty....” (Marian Wright Edelman, Children’s Defense Fund).
- “is not ‘welfare reform,’ it is ‘welfare repeal’.  It is the first step in dismantling the social contract that has been in place in the United States since at least the 1930s.” (Senator Daniel Patrick Moynihan).

## But the expected increase in poverty did not materialize.

- One reason is that most aid was already delivered “in kind”.
- And the EITC was becoming a more important source of cash assistance to low income families.
- Less than 16% of aid to poor families is in the form of welfare payments.

## Spending on Families and Children		(Billions, 2002)

## In contrast to cash welfare, we know what outcomes in-kind programs are expected to affect.

- Medical programs should affect health and access to care.
- Nutrition programs should affect hunger and nutrition.
- Housing programs should affect the quality of housing and related outcomes.
- Child care should affect developmental outcomes.

## Expenditures on Children:

- The federal government spends about $198 billion on children under these programs.

**Notes:**
Source is my Table 1.

## Spending on Families with Children as % Federal Total, 2006

## Despite Spending, Poverty Has Been Relatively Stable Since the 70s

## Stability in the Poverty Numbers 

- Leads people to believe that the “War on Poverty” has failed and the government is incapable of taking effective action.
- As Ronald Reagan said “The government declared war on poverty, and poverty won”.

## But the War on Poverty

- created an “invisible safety net” that has changed the nature of poverty.
- Poverty today is not the same as poverty 40 years ago.
- Real improvements have been made in living standards, though in-kind programs can be improved to make even more of a difference in future.

## Medicaid/SCHIP – Public health insurance for poor women and children.

- Originally available only to those on welfare.
- Expansions of eligibility to people of higher income over the late 80s and 90s made all poor children eligible.  Pregnant women are eligible up to 200% of the poverty line or higher in many states.
- States started with different cutoffs and implemented expansions at different rates, allowing identification of effects.

## Among Infants

- Expansions of Medicaid eligibility for pregnant women and young children, have had a dramatic effect.
- Today most births are in hospitals, and 40% of are paid for by Medicaid.  These children are automatically covered for one year.
- The result of better access to medical care has been a dramatic decline in infant deaths.

## Medicaid Eligibility for Pregnant Women and Decline in Infant Mortality Rates

## Among Children, Expansions of Eligibility

- Increase access to preventive care (e.g. the probability that a child has had at least one doctor visit in the past year).
- Reduce preventable hospitalizations.
- But increase hospitalization overall.

## Threats to Medicaid/SCHIP

**The most important problem facing Medicaid is rising costs.**
**These costs lead many states to try to trim the Medicaid rolls when budgets are tight.**

**Notes:**
These figures are from Macurdy et al. (2005)

## But Medicaid costs are mainly accounted for by elderly/disabled

- 75% of most Medicaid enrollees, including most children, incur only 6% of the costs.
- 63% of the costs are incurred by 5% of the caseload.
- Cutting children from the rolls will not cut costs, but is likely to have a negative impact in terms of health.

## Low Take up a Persistent Problem

- Many eligible children are not enrolled.
- There is much “churning” on and off the rolls.
- Eligible but uncovered children may lack preventive care and get care only after a medical emergency.

## Nutrition Programs include Food Stamps, School Nutrition Programs, WIC

- These programs were created in the 60s and 70s following reports such as “Hunger in America” by a team of physicians.
- “Wherever we went and wherever we looked, whether it was the rural south, Appalachia, or an urban ghetto, we saw children in significant numbers who were hungry and sick, children for whom hunger was a daily fact of life and sickness in many forms, an inevitability.” (report to Congress, 1968)

## Food and Nutrition Programs

**Have been subject to much negative publicity.**
**E.g. stories of fraud and abuse in Food Stamps, WIC, School Nutrition programs.**
**Complaints about poor quality of diet offered in School Nutrition programs and to a lesser extent WIC.**

## But the amount of fraud is small in absolute terms:

**E.g. only $.025 of every food stamp dollar is lost to fraud. **
**In the late 1990s, the number of infants in WIC exceeded estimates of the number of eligible infants, but an NRC Panel concluded that official estimates of eligibles were much too low because they did not take into account children who were eligible because of their participation in the Medicaid program. **

## Eligibles who are not enrolled greatly exceed ineligibles who are enrolled

- Pilot studies of stricter verification procedures for School Lunch (e.g. requiring households to submit income documents, or randomly verifying income)   increase administrative costs but have no effect on fraud because most families report accurately.  Stricter requirements did discourage eligible families from applying.
- Similarly, a plan to fingerprint food stamp participants in CA was found to cost more than it saved in fraud deterred.

## Food and Nutrition Programs

- Vary widely in the extent to which participants are required to consume nutritious food.
- Food Stamps can be used to purchase virtually any foods (not hot foods or vitamins though).
- School lunches/breakfasts must conform to federal guidelines.
- WIC benefits may be used only for certain foods.

## Programs that constrain food choices are more effective at improving nutrition.

- Should Food Stamps be used for junk food?
- All food in schools (not just that served under National School Lunch Program) should be held to high standards.
- Issue is the quality, not quantity of calories.  Even obese children are often lacking specific nutrients.

## WIC is most restrictive

**WIC increases the consumption of the target nutrients  included in WIC foods.   **
**WIC has positive effects on the consumption of protein, vitamin B6, vitamin E, folate, thiamin, riboflavin, niacin, iron, magnesium, and zinc.   **
**WIC has been credited with a dramatic decline in the incidence of anemia among young children that took place between 1975 and 1985 (from 7.8 to 2.9%)**
**Improvements in nutrition affect children’s behavior and ability to learn.   Children on WIC prenatally have higher scores on the Peabody Picture Vocabulary Test,  a good predictor of future scholastic achievement. **

## These programs have changed the meaning of hunger.  Today, hunger is defined as food insecurity

- Since 1995 the U.S. Census Bureau has tracked food insecurity in the Current Population Survey by asking questions about:
- anxiety that the household food budget is insufficient;
- inadequacy in the quantity or quality of food eaten by adults and children in the household;
- instances of missed meals for adults and for children.

## Food Insecurity

- Has many negative consequences
- E.g. it may even lead to higher rates of obesity by causing people to “stock up” on empty calories
- But it is not the same as starvation

## Housing Policy

- Federal housing policy has been successful in largely eliminating substandard housing.
- Even among  very low income households (incomes < 30% of area median income) >80% have physically adequate housing.
- But > 70% of these households pay > 30% of their income in rent and utilities (40% pay > 50%).

## Federal Housing Expenditures, Billions $2002 (total=$43)

## But public housing assistance is a lottery

- 43% of households served are above the poverty line.  And only 30% of poor  renters are served.
- Housing assistance provides huge subsidies to lucky households.
- A family paying >50% of income for housing who joined the housing program would reduce their rental payments from 50% to 30% of their income.  This subsidy would “free up” 20% of the family budget to be spent on other things.

## Specifically, suppose that a poor family of four in Los Angeles earned $18,800 a year and was able to find a modest two bedroom apartment for $750 per month.   
Their annual rental payments of $9,000 would eat up 48 percent of their earnings.   
If they got into Section 8, their rent would be capped at 30 percent of their income.  
This family would  save $4,360 per year, which is greater than the maximum EITC credit of $4,204. 

- Their annual rental payments of $9,000 would eat up 48 percent of their earnings.
*If they got into Section 8*, their rent would be capped at 30 percent of their income.
- This family would  save $4,360 per year, which is greater than the maximum EITC credit of $4,204.

## Slide 32

## Potential Reforms of Housing Policy

- More families could be served with existing resources.
- It costs 35% - 91% more to house a family through construction/rehab of housing vs. Section 8 vouchers.
- Olson (2003) calculates that switching all project-based aid to vouchers would allow 900,000 more families to be served.
- Evidence about the benefits of moving poor families to better neighborhoods (used to justify mixed income construction projects) is mixed.

## Early Intervention May Be the Most Effective Anti-Poverty Strategy

- Government can intervene through nurse home visiting programs, which have been shown to be effective in randomized trials.
- Government already is a major player in the child care market, intervening through tax credits, regulation, subsidies, and direct provision.

## Direct provision is most important for poor children because:

- Tax credits don’t benefit poor families.
- Subsidies are unevenly available, and more concerned with maternal employment than child care quality.
- Regulation is weak, and concerned only with minimum standards.  Increasing regulation in the absence of direct provision is likely to drive poor families out of regulated care (Joe Hotz and I show this effect).

## Randomized trials prove that early intervention through child care can be effective.  E.g. = Carolina Abcedarian

| Program Description | Age of Participation | Outcomes |
| --- | --- | --- |
| Preschoolers: | Entry 6 weeks to 3 months | IQ: T>C at age 12, T=C at age 15 |
|     full-day child care | Exit: 5 to 8 years | Achievement tests: T>C at ages 8, 15, 21 |
| School age: parent  | Sample: T=57, C=54 | Special education: T<C at age 15 |
|   program |  | Grade retention: T<C at age 15 |
|  |  | School dropout: T<C at age 21 |
|  |  | College attendance: T>C at age 21 |
|  |  | Employment status: T=C at age 21 |
|   |   | Average age first child born: T>C at age 21 |

## Direct Provision of Child Care- Can Government Do A Good Job?

- The U.S. Head Start program is a preschool program for poor 3-5 year old children.
- Serves 800,000 children per year at a cost of $6.2 billion.
- Local organizations apply to federal gov’t for matching funds on a 3-year cycle.
- Grantees must follow detailed performance guidelines.

## Head Start Regulations Cover:

- Parent participation.
- Programming.
- Mental Health Services.
- Nutrition.
- Selection into the program.
- Facilities.
- Training and staffing.
- Family and community partnerships.

## But Does Head Start Work?

- Government is now funding a randomized trial, but it will follow children only to the first grade.
- If Head Start is an “investment”, then we need to know the longer-run return.

## Sibling studies

**Use existing national data sets. **
**Compare children who attended Head Start to their own siblings who did not.**
**Control for the fact that Head Start children are worse off than other children.  In fact, Head Start centers are *****required***** to select the neediest children.**

## Effect of Head Start on probability of attending college, adults 18-30:Source=Garces, Thomas, and Currie using data from the PSID.

## Effect of Head Start on probability of being booked or charged with a crime among 18-30 year old adults. Source=Garces, Thomas, and Currie using data from the PSID.

## The cup is either

**1⁄2 Empty** – Head Start does not bring attendees up to the level of the average child.
**1⁄2 Full** – Head Start has long lasting positive effects on schooling attainment and other outcomes.   Among whites, Head Start closes about 60% of the gap in the probability of high school completion, for example.

## Would spending more help?

- Currie and Neidell (2004) use national data matched to administrative data about Head Start budgets.
- We look at the test score gap between Head Start and non-Head Start children within a county and ask whether this gap is smaller where per capita Head Start spending is higher (controlling for characteristics of individuals, families, and counties, and for state).

## For each $1000. in per capita Head Start spending, scores of Head Start children increase: (coefficients on interaction Head Start and per capita spending).

## Conclusions about early intervention:

- Quality child care/early education programs are one of the most effective known interventions for disadvantaged students.
- While Head Start has positive effects, it is not of the same quality as model preschool programs, and more spending might help.

## There are many effective programs

- Together these programs form a largely invisible, and often ignored, safety net.
- But it is haphazard and patchwork.
- Eligibility requirements vary from program to program and it is difficult for eligibles to know of and enroll in all of the available programs.
- Many children fall through the cracks.

## A proposal for reform

- Harmonize eligibility requirements across programs
- Make all children eligible
- Charge parents who use the program a sliding fee
- Administer the fee through the tax system (as the EITC is administered)
- Allow parents to opt out

## Conclusions

- Contrary to popular belief, there are many successful anti-poverty programs which form an effective, if largely invisible safety net.
- These programs have changed the nature of poverty.
- We need to continue to improve these programs, and to work to ensure that eligible children participate.