Policy Barriers Hurt Low Income Families' Economic Well-Being

Prosperity Now’s 2018 Scorecard ranks all 50 states and the District of Columbia on residents’ financial well-being. Their report, Whose Bad Choices? How Policy Precludes Prosperity and What We Can Do About It, dispels the myth that low income families are poor as a result of their own choices. The report provides examples of detrimental policies and federal budget cuts that inhibit low income families’ ability to accumulate wealth.

The national unemployment rate has fallen to just over 4%, but one in four jobs are in occupations that pay wages below the federal poverty line. Low-wage workers often cannot cover rent, medical expenses, transportation, and other essential costs without assistance. At the same time, the recent tax reform gave families earning less than $25,000 per year a $60 tax break, compared to a $51,140 tax cut for the highest 1% of earners. The recent tax bill also did not expand the federal Earned Income Tax Credit (EITC), which increases the gross income of low-income working families.

Nearly 37% of families in the U.S. live in liquid-asset poverty, meaning they lack sufficient savings to replace poverty-level income for three months. A personal crisis, like a lost job or medical emergency, forces these families into precarious financial situations. In 2017, 44% of families did not save a single dollar. In 2017, Congress eliminated funding for the Assets for Independence (AFI) program that provides financial support for programs helping low income households save for major asset purchases. The report also highlights that asset limits tied to assistance programs like Temporary Assistance to Needy Families (TANF) and Supplemental Nutrition Assistance Program (SNAP) punish households for saving even modest amounts. States that have removed these limits have often seen program savings in the form of less administrative costs and lightened caseloads.

With regard to health care, the Congressional Budget Office projects that the repeal of the Affordable Care Act’s (ACA) individual mandate could result in thirteen million people losing their health insurance over the next ten years as costs increase in the health insurance markets. And recently the Trump administration published guidelines allowing states to impose work requirements on Medicaid recipients, while fewer than half of private-sector employers offer health insurance to employees. The new guidelines put many more low income families at risk of lost health insurance and unaffordable health care.

The full report, Whose Bad Choices? How Policy Precludes Prosperity and What We Can Do About It, and Prosperity Now’s Scorecard are available at: https://scorecard.prosperitynow.org/