Stimulate the Economy by Mending Our Safety Nets

Lots of talk this week about the proposed stimulus. One high priority ought to be the most vulnerable members of our society. The safety net created in the 1930s to protect Americans from extreme poverty is in tatters. Now that we’re in the worst downturn since the Depression, that safety net needs mending. This should be a key part of any stimulus plan.

Unemployment insurance, for example, was created in 1935, when most people who lost jobs had held those full time positions for some years. But most people who are losing jobs now have not been in them all that long. Typically, the last ones hired are the first fired. And many job losers have only worked part time.

Either way, they don’t qualify for unemployment benefits. In fact, fewer than 40% of people now losing their jobs qualify. So a necessary step toward mending our safety net is to get unemployment benefits to everyone who loses a job. And if it’s a part-time job, partial benefits.

Or take welfare. Remember it? It was also started in the depths of the Depression. We officially abolished it in 1996, during the strongest job-creating recovery in memory. We substituted a new law that gives people a maximum of 60 months in their lifetimes to get aid for themsleves and their kids. Over the last dozen years, as more and more people hit that 60 month limit, the nation’s welfare rolls naturally declined — even though the percent of families in poverty stayed roughly the same, just under 10%.

But now that we’re in a Mini-Depression, many more families are moving toward poverty. So that 60-month limit should be lifted, at least until the economy turns up again.

Food stamps are another strand of the safety net. As of September, 2008, a record 31.5 million Americans were receiving them. That’s roughly 10.3% of the population, each receiving $100 per month per family member. These numbers can be expected to rise considerably in 2009 and 2010. The current economic emergency is putting many more Americans at risk. Food stamp allocations should be increased.

Finally, let’s make the Child Tax Credit fully refundable. Right now, it’s not fully refundable to low-income families who don’t pay enough income taxes to qualify. As a result, an estimated 10.6 million children were ineligible for it in 2007, and an additional 11 million received less than the full amount.

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Giving American families more economic security during this meltdown isn’t just fair. It’s also good policy, because the money they get to buy goods and services keeps other people in jobs. In fact, strengthening our national safety net is one of the fastest and most direct ways to stimulate the economy.

And, after all, if executives and directors on Wall Street and in Detroit deserve a safety net, why should American families be left out in the cold?

by Robert Reich

Robert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton.

This article first appeared on Robert Reich’s Blog. Republished with permission

Articles by Robert Reich:

Published by the LA Progressive on January 6, 2009
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About Robert Reich

Robert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine.

Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.