On a recent Monday evening, 6-year-old Esther lugged a jar of Nutella from the kitchen into the living room where her mother Melissa, nine months pregnant, rested on the sofa in their modest Utah County home. Esther held the jar out to her mother, smiling shyly as she asked for permission to have some. Melissa let out a gentle sigh as she unscrewed the lid. “Not too much,” she said as she handed the jar back to her daughter. In one week she may not be able to give her daughter luxuries like a spoonful of Nutella.
Until recently, Melissa and her husband Jimmy received $400 a month from the Supplemental Nutritional Assistance Program, also known as food stamps. Combined with the $21,000 Jimmy earns as a security guard at a local hospital, it was just enough to feed their four (soon to be five) children ages 2 to 10.
Since 2007, the number of Americans on SNAP has exploded, going from approximately 22 million people at the start of the recession in 2008 to more than 45 million in 2013. The program provides these families a much-needed safety net as they struggle to get back on their feet, according to Jennifer Brooks, policy director with the progressive Corporation for Enterprise Development based in Washington, D.C.
Jimmy and Melissa say they would like to get off food stamps altogether and be on their own, but the rules governing eligibility for the program make it hard. In particular, federal policy stipulates that no matter how small the income or how large the family, persons with assets more than $2,000 — which include savings accounts — are not eligible to take part in SNAP.
According to many social policy experts, this rule needs to be changed. “Asset tests impede the process of moving from dependence on government assistance to self-sufficiency,” said Michael Sherraden, professor of social work at Washington University in St. Louis. Savings are an important part of economic development, he said. “In order to develop capacity, families and communities must accumulate assets and invest for long-term goals.”
A safety net of three months worth of living expenses can ensure that low-income families have some cushion when their car breaks down or work hours get cut, said Brooks. “It will be the difference between going right back on government assistance when an unexpected expense comes up and being able to absorb the cost and remain self-sufficient.”
Wrong to save
Melissa and Jimmy didn’t know about the asset limitation when they decided to put a $3,000 tax refund into a savings account. The couple was eager to get off government assistance as soon as possible. “I never thought I would be in a position where we needed this kind of help,” Jimmy said. Putting some money aside for unexpected expenses and towards a down payment on a home seemed like important first steps.
Several months after depositing their refund, the couple received notice that their food-stamp benefits would be cut at the end of July. The couple understands why the rule exists, but they said it came as an unexpected blow. “You don’t want people with no income and $50,000 in savings taking government benefits,” Jimmy said, “but that isn’t what was going on here. They need to look at the totality of the situation.”
Melissa and Jimmy weren’t sure what to do. Without SNAP they’d need to use their nest egg to feed their family, defeating the purpose of saving in the first place. Not only would they lose their savings, their monthly food budget would go from $400 on SNAP to $250. As she looked at the numbers, Melissa wasn't sure if she could feed six people on that. Though the family eats modestly on SNAP, there is room for some fresh fruits and vegetables and the occasional treat. Without SNAP, the only way they could get by is by cutting out fresh produce altogether. Melissa is reluctant to go this route: "I'm worried this kind of diet will jeopardize my kids' health," she said.
The alternative is to spend some of their savings so they can again qualify for SNAP. “It felt like a no-win situation,” Melissa said, “like we were being forced to choose between what is good for our family in the long term and what our kids need right now.” Survival in the short term and financial security in the long term seemed completely at odds.
Melissa and Jimmy's experience is not unique — according to Reid Cramner, a director with the New America Foundation's Asset Building Program — it is how American welfare works. The rules force "families to choose between a small emergency cushion and putting food on the table," he said in a recent statement for the New American Foundation. "We're forcing them to accept long-term poverty in exchange for short-term assistance."
Prior to 1996, federal social assistance programs like food stamps focused on providing long-term income support to poor Americans. “Essentially, people could be on welfare indefinitely,” Brooks said. “In this context (when the goal of the program is to provide income support), an asset test makes sense,” Brooks added, explaining that it reduces the likelihood that individuals with the resources to support themselves will claim government assistance.
However, the “Personal Responsibility and Work Opportunity Reconciliation Act,” signed by President Bill Clinton in August of 1996, marked a fundamental shift in the American approach to social welfare programs. “The goal of the welfare reform was to move families off government assistance,” Brooks said. “You couldn’t be on welfare forever anymore.”
But when the federal government made these sweeping changes to welfare, the assets test remained in place. The problem with assets tests, however, is that they are “contrary to the goal of getting people off welfare,” according to Brooks. “If a program has the explicit goal of moving people from dependency to self-sufficiency, people need to have an opportunity to build up a safety net before they transition off government assistance.”
The states’ role in welfare
Welfare is federally funded, but it is up to each state to determine how to administer the programs, including SNAP, Medicaid and Temporary Assistance for Needy Families. Shortly after welfare reform, some states recognized that assets tests didn’t make sense anymore. Since 1996, 35 states eliminated assets tests for SNAP benefits. Five states (Nebraska, Pennsylvania, Texas, Michigan and Idaho) increased the amount of assets beneficiaries can hold from $2,000 to between $5,000 and $25,000. Ten states (including Utah, Wyoming, Virginia and Alaska) use the federal government’s $2,000 assets threshold.
Moving off dependence on government benefits is difficult everywhere, but the challenges are especially formidable in states with strict assets limits. In many circumstances it means that families, like Jimmy and Melissa, are getting pushed out of the nest before they can fly. "These programs are supposed to help people transition out of poverty," said Martha Wunderli, state director of the Utah IDA Network, a program of Fair Credit Foundation that helps low-income, working Utahns build assets and move out of poverty. “Building assets is a big part of getting out of poverty ... and it is not fair to remove benefits that help them get out of poverty before they are ready."
Some states are reluctant to change their policies due to fears people will abuse the system. Brooks notes several states reinstituted assets tests after allegations of lotto winners and wealthy elderly retirees receiving benefits were made public by the press.
Brooks recommends that instead of re-instituting assets tests, governments change the rules about what counts as income. “The situation with the lottery winners could have been avoided if state law considered their winnings income, not assets,” Brooks said.
But not everyone agrees. Some conservative lawmakers want to hold all states to the federal assets limit. For example, Rep. Paul Ryan (R-Wis.) and Rep. Frank Lucas (R-Okla.) would like to add a condition to the Farm Bill that would force states to adhere to the federal government's assets test. This could result in millions of people losing benefits, Brooks said, adding that supporters of this policy consider it a way to decrease fraud.
Weeks away from delivering her fifth child, Melissa isn't in a position where she can work. Even after the baby comes she's unsure about whether she will be able to work. The couple's eldest daughter has a rare chromosomal abnormality, which requires extensive medical care and behavioral therapies. Someone needs to be there to take her to these appointments and communicate with the doctors and therapists about her progress. She'd love to take on some part-time work from home, but it will be some time before she's in a position to do that.
Jimmy is looking for better-paying jobs, too. He'd like to apply for the police force in their city, but at this point, his fitness level isn't where it needs to be to meet the requirements. He's working on it, but it will be a few months before he can apply for the police force and several more before he would start working — assuming he gets hired.
As they look at the numbers and their current situation, Jimmy and Melissa feel they don't have much of a choice but to spend some of the money they saved so they can again qualify for SNAP benefits. They would prefer the security and potential for leaving welfare that the savings represented, but as Jimmy puts it, ”When you have kids, you have to put the needs of your family before your pride.”
In an earlier version of this article Ms. Wunderli was inaccurately identified as the state director of the Fair Credit Foundation in Utah. Ms. Wunderli is the state director of the Utah IDA Network. We regret this error.