William Arnone, Chief Executive Officer
You may have seen Bob Greenstein’s seminal framing paper, “Targeting, Universalism, and Other Factors Affecting Social Programs’ Political Strength,” published in June by Brookings Institution’s Hamilton Project. In it, he has made a provocative and persuasive case for developing an effective blend of targeted and universal policies that will better address economic insecurity in our nation.
The paper coincides with the release of the Academy’s latest report on Economic Security for the 21st Century, the final report of the Academy’s Study Panel on Economic Security on which Bob served, which addresses the many dimensions of economic insecurity and identifies a comprehensive, evidence-based portfolio of policy options to address its root causes.
A Founding Member and former Member of the Board of Directors of the National Academy of Social Insurance, Bob was the recipient of the Academy’s 2021 Robert M. Ball Award. (Click for information about our 2022 Ball Award recipients.) Bob currently serves on the Academy’s COVID-19 Task Force’s Policy Translation Working Group. Its final report is expected to be issued later this year.
In the following paragraphs, I have distilled what I see as key social insurance takeaways from the paper, “Social Programs,” and I encourage Members to read the full paper. The Hamilton Project also hosted a webinar, “Policies to Protect Workers and Families: Lessons for Strengthening Social Insurance,” in which Bob discussed his paper with the Washington Post’s E.J. Dionne.
Focus of the Paper
Bob’s paper, an expanded version of which is expected to be issued later this year, seeks to challenge the widely accepted policy narrative that “federal programs that are targeted by income almost invariably fare poor politically and tend to be cut or eliminated over time.” He quotes the popular adage (often attributed to Academy Founding Board Member Wilbur Cohen) that “programs for the poor are poor programs.” (p.1)
He strives to enable policymakers to address a critical issue: “whether and (if so) to what degree we should seek to expand targeted programs or whether we should concentrate instead on expanding universal programs and converting targeted aid to universal forms of support.” He asserts that the main reason not to do so is that universal programs cost considerably more than targeted programs, and political opposition makes it extremely difficult to raise the federal taxes needed to support a fully universal strategy.” He adds: “Proposals to create a Universal Basic Income (UBI) help illustrate some of these trade-offs.” (p. 16)
He notes that “in 2019 United States tax revenue equaled 25 percent of GDP,” which is considerably less than most other developed countries, most of whom have tax revenues ranging from 33 percent to 47 percent of GDP. (p.17)
Bob also warns that in the absence of more tax revenue, “overreliance on universality could squeeze funds for other vital needs, and people of lesser means could fare less well than they would under a mix of universal and targeted programs.” (p.17)
With meticulous research and an array of data, including extensive compilations by Richard Kogan of the Center on Budget & Policy Priorities (CBPP), Bob concludes that, from 1979 to 2019, “mandatory programs that are targeted by income grew faster and expanded more as a group than mandatory programs that are universal.” (p.1)
He identifies eight critical factors that enable a policy program to be “stronger and more durable politically:”
- “Tied to work, especially when beneficiaries have financed their benefits at least in part through payroll-tax contributions;”
- “Serve working families significantly above the poverty line and often at least part of the middle class along with those who are poor, rather than only the latter;”
- “Are fully federally financed;”
- “Are federally administered or, if not, at least have federally established minimum eligibility, benefit, and access standards that apply nationally, rather than leaving those standards largely or entirely to the states;”
- “Provide benefits either in-kind or through the tax code rather than as straight cash (except for those going to people who are elderly or have disabilities);”
- “Are focused on groups such as the elderly or children, for whom there is more public support (and who are not expected to be employed);”
- “Operate as entitlement programs rather than as discretionary programs that policymakers fund through the annual appropriations process;”
- “Are considered by policymakers as highly effective in achieving important goals.” (p.2)
He also points out: “While targeted programs have some political weaknesses compared to universal programs, they appear to have one relative advantage: their lower cost.” (p.9)
He adds: “The targeted mandatory programs that have fared badly…are limited to the very poor, with state-determined income limits that are well below the poverty line.” (p.2) Also faring poorly are “targeted programs that deliver cash assistance to people who are not elderly or disabled – programs that are often labeled ‘welfare.’” (p.3)
Bob concludes that “policymakers can broaden the constituencies of targeted programs and strengthen them politically without making them universal.” (p.7)
Take-Up Rates
Bob’s paper devotes considerable attention to the issue of take-up rates among various social programs. Take-up rates measure the percentage of eligible individuals who actually receive a particular program’s benefits. While he notes that “(u)niversal programs generally have higher take-up rates and fewer barriers to access than targeted programs,…the story is more complex than is often recognized.” He finds that “(s)ome major targeted programs now have impressive target rates that equal or exceed those of some universal programs.” (p.2)
He also points out that “take-up rates do not tell us what share of the eligible benefits are claimed.” (p.14) He further cautions that a “program’s overall take-up rate can mask disparate take-up rates for different parts of the same program.” (p.14)
He notes that “Social Security and Medicare’s Part A…have take-up rates close to 100 percent.” Unemployment Insurance, on the other hand, “has a much lower take-up rate than a number of key targeted programs.” Also, “Medicare’s prescription drug benefit (Medicare Part D) has (has) a take-up rate of 88 percent. (p.13)
He also points out that a Congressional Research Service (CRS) study found that “in 2017, some 111 million people – about one-third of the U.S, population – received benefits from one or more targeted programs at some point during that year.” (p.8)
Social Insurance Policies and Programs
Although Bob uses the phrase “social insurance” only twice in his entire paper (ps.9 and 14), he provides in-depth analyses of, and insights into, three core U.S. social insurance programs: Social Security; Medicare; and Unemployment Insurance. (He does not include Workers’ Compensation in his analysis because of the limited federal role in that program.)
He finds that, between 1979 and 2019, these three major universal benefit programs “grew at an average annual rate of 2.36 percent…nearly a third less quickly” than targeted mandatory programs, which grew at a rate of 3.39 percent. In addition, he finds that these three programs “did not rise as a share of total mandatory spending…and accounted for 61 percent of it in both 1979 and 2019.” (p.3)
Unfortunately, Bob refers to the financing challenges facing Social Security and Medicare as “approaching insolvency,” although he clarifies later in his paper that this terminology refers to the programs’ trust funds, not their entirety. As part of his observation that policymakers are unlikely raise the significant new revenue it would take to support a major expansion of universality — including increased taxes on middle-class households as western European nations do — he asks whether “policymakers (can) avoid Social Security and Medicare benefit reductions that lower living standards for tens of millions of nonaffluent people, and…also address gaps in the current Social Security benefit structure, in part by raising…payroll tax rates and thereby raising tax rates on middle-class households.” One policy option, which Bob describes as “not a panacea,…is making more programs universal and taxing program benefits as income.” He notes that even under such an approach. the price tag still can be very high. He also points out that “research shows that taxing UI benefits has reduced UI take-up rates.” (ps.17 and 19)
Social Security
While Social Security grew overall, Bob points out that “policymakers in the early 1980s reduced Social Security retirement benefits, mainly for people who would retire in future decades, and those reduced benefits are now a part of the program’s benefit structure.” He adds that the increase in Social Security’s “full retirement age” enacted in 1983translates into a benefit reduction of up to 14 percent for many of the people born in 1960 or later (the age group for whom the increase in the retirement age will be in full effect).
Among the other benefit reductions, policymakers: “eliminated Social Security’s minimum benefit; phased out benefits for children of elderly, disabled, or deceased beneficiaries who are students over age 19 or enrolled in post-secondary school; and limited eligibility for Social Security’s lump-sum death benefits.” (p.6) He also points out that “(p)olicymakers…made a portion of Social Security benefits taxable.” (p.8)
Bob notes that “(u)niversal programs have their greatest anti-poverty impact on the elderly because of Social Security.” (p.12) In 2017, Social Security kept “26.9 million out of poverty and lowered the poverty rate by 8.3 percentage points.” He adds that “Social Security’s poverty-reducing impact is greatest among those 65 and older.” Among children under 18, however, “targeted programs kept 9.5 million out of poverty in 2017, compared with 1.5 million kept out by Social Security.” (p.12)
Bob also notes that Social Security has “less administrative burden…due in part to how (the program) define(s) eligibility units for…benefits.” He points out that, in Social Security, “eligibility is determined on an individual basis, based on the person’s earnings data, which the administering agency has readily available and does not need to ask an applicant to provide.” (P.14)
Medicare
Between 1979 and 2019, Bob finds that “the universal Medicare program and the targeted Medicaid program both grew at impressive rates, but Medicaid grew more swiftly…4.94 percent per year vs 4.12 percent for Medicare.” (p.3)
He notes that “Medicare expanded in 2003 when policymakers added a prescription drug benefit, but they also enacted some provider cuts and raised premiums substantially for higher-income beneficiaries.” (p.1) He adds: “Policymakers established large income-related premiums for Medicare Part B coverage, so that very affluent beneficiaries now pay most of the coverage costs themselves, with only a relatively modest government subsidy.” (p.8)
Bob finds that “the Medicaid expansions during this period often were funded at least in part by measures producing Medicare savings (a pattern repeated in the ACA of 2010). He adds that “policymakers enacted 10 reconciliation bills between 1981 and the early 1990s and all but one included measures reducing Medicare costs.” (p.6)
Bob also notes that “the [House-passed] Build Back Better legislation…included expansions on two targeted health programs – Medicaid and the Patient Protection and Affordable Care Act’s (ACA) premium subsidies – but not the addition of a universal dental and vision benefit in Medicare, primarily due to its high cost.” (p.1)
Although not defined as a social insurance program, Medicaid is characterized by Bob as experiencing a transformation “from a program that was largely linked to welfare to one serving a broader population.” He notes: “Today, Medicaid covers about half of all births in the United States.” He adds: “In a survey conducted in 2019 and issued in early 2020, 66 percent of all Americans said they had a personal connection to Medicaid, meaning that they or a family member or friend had received Medicaid coverage at some point.” He also points out, citing Mark Schmitt of New America, that “Medicaid’s enhanced political strength was on full display in 2017…the Medicaid cuts that would have resulted (from repeal of the ACA) proved a key reason why proponents fell short of gathering the needed votes for repeal.” (p.6)
As noted above, Medicare also has the same low administrative burden as does Social Security. (p.14)
Unemployment Insurance
Unemployment Insurance (UI) has fared poorly outside of recessions, with cuts at both the federal level and the state level in various states. Bob notes: “Other than during recessions – when the federal government typically expands UI benefits with federal financing but only on a temporary basis – UI has been serving less than 30 percent of the unemployed, which is considerably less than several decades ago.” (p.1)
He also notes that “UI suffered from cuts at the federal level, especially in the early 1980s, when the president and Congress scaled back UI’s Extended Benefits program, making it harder for states to qualify, and imposed significant interest charges on loans that many states take from the federal UI trust fund during recessions.” He adds: “The interest charges provided incentive for states to pare back UI eligibility or benefits…(and) over the past decade…various states reduced the number of weeks of available UI benefits or tightened eligibility restrictions.” (p.4)
Bob also points out that “take-up rates are particularly low for UI,” (p.2) and that, “on average from 2011 through 2019 only 27 percent of the unemployed received UI in an average month.” (p.4) He also notes that “(p)olicymakers…made UI benefits taxable.” (p.8)
He adds that when “a program depends in substantial part on state funding or, as with UI, on state taxes on employers, the program is more likely to face cuts and eligibility restrictions in the states.” (p.10)
He quotes political scientist Paul Pierson, who rated UI as “one of the most vulnerable of U.S. income support programs.” He cites “public opinion data showing public resentment toward providing cash for jobless individuals who are viewed as able to work.” (p.4)
Bob concludes: “UI is another cash program that needs substantial strengthening but that faces formidable political obstacles.” He adds: “Its financing (through state and federal taxes on employers) pits employers against workers, giving employers incentives to press their states to limit access to benefits and keep benefits low and to challenge workers’ claims.” (p.18)
He also notes: “The UI expansions that were in effect for most of 2020 and much of 2021 came about only because they were fully federally financed and mandated.” He adds: “That suggests that reforming and strengthening UI so it does a more adequate job in supporting unemployed workers is likely to necessitate a much greater federal role both in UI financing and in setting program rules. That, however, would entail substantial federal budget costs and likely face serious opposition from some stakeholders, making such reforms politically very difficult to achieve, at least in the near term.” (p.18)
The Academy’s Unemployment Insurance Task Force will be issuing its report on UI policy options by the end of this year.
Equity
Bob notes that “the extensions of various programs to cover at least part of the middle class may have altered the racial imagery surrounding some programs.” In contrast, he points out: “Cash welfare has been infused with racist themes and negative stereotypes of Black female-headed households. (p.2)
In addition, Bob cites studies that have found that “Black workers who lose their jobs are less likely to receive UI benefits than White workers who do.” (p.4)
He notes research that identifies “race (as) the single most important predictor of support or opposition to welfare.” He adds that “the targeted programs that have expanded robustly in recent decades now extend to families above – and often far above – the poverty line, which may have led to their being viewed in less racially charged terms.” (p.7)
He cites research by CRS that “found that targeted programs reduced poverty rates among Black households in 2017 from 31.6 to 18.9 percent and poverty rates among Hispanic households from 30.8 to 19.3 percent, while lowering poverty rates among White households from 12.9 to 9 percent.” Targeted programs also “reduced the ‘poverty gap’ – the aggregate amount by which the incomes of all who are poor fall below the poverty line – by 57 percent among Black households, 51 percent among Hispanic households, and 38 percent among White households.” (p.13)
Despite these outcomes, Bob reminds us that “the United States still has unusually high levels of poverty for a Western, industrialized nation.” He adds: “Most other such countries do more than the United States does to reduce poverty and raise living standards.” (p. 16)
With regard to immigrants, Bob states: “Various targeted programs make certain categories of immigrants lawfully residing in the United States ineligible for benefits for their first five years here. But, in some respects, Social Security and Medicare are more restrictive; to be eligible for Social Security retirement benefits and for Medicare, an individual generally must have worked at least 10 years in the United States. As a result, many lawfully present immigrants can qualify for programs such as SNAP (Supplemental Nutrition Assistance Program, aka “food stamps”) and Medicaid years before they can qualify for Social Security and Medicare, and many people who immigrated to the United States relatively late in life and did not amass a significant work record here cannot qualify for Social Security and Medicare at all.” (p.8) Bob acknowledges, however, that “Social Security Administration data bases…can verify citizenship and immigration status virtually overnight.” (p.16)
Conclusion
Bob concludes: “A key question is whether policymakers can find ways to strengthen both targeted and universal programs to address some of the most significant gaps in the current social support system.” (p.18) He suggests: “In strengthening both targeted and universal programs, policymakers should also aim for strong federal financing and federal eligibility, benefit, and access standards where possible.” (p.19)
