The essential role of social insurance in the United States and policies for reform

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In 2021, The Hamilton Project took a deep dive into social insurance in the United States. Our synthesis analysis shows that social insurance plays a vital role for workers and families – both in times of crisis, as witnessed by the pandemic and the ensuing economic recession, and in normal economic times. The social insurance system also helps cushion the economy when growth falters, supporting the purchasing power of consumers when income growth is weak.

To help policymakers as they move from immediate aid to long-term economic reconstruction, we explore the role of social insurance and highlight reform proposals that would bring vital and lasting improvements. to the American social insurance system.

What is social insurance?

As the Hamilton Project document defines, the social insurance system consists of a set of government programs that either provide short-term economic security or provide services and benefits to improve long-term economic opportunities. The authors of the framework document divide social insurance into five categories: (1) education and workforce development, (2) health coverage, (3) income support, (4) nutrition and (5) housing. In fiscal 2019, the federal government spent $ 2.7 trillion (about 13% of the country’s GDP) on social insurance programs. As the figure below illustrates, the most important programs are income support – which includes Social Security – and health care programs.

Social insurance programs are available to eligible beneficiaries in a variety of ways, including cash (such as tax refund checks), vouchers, insurance, or the provision of a particular good or service (such as a tax refund). food box or rental accommodation in a social housing project). To learn more about how the government determines eligibility and provides benefits for these programs, please see the scoping document here.

Social insurance has been shown to dramatically reduce poverty rates in the United States, especially among children and the elderly. In 2019, social insurance programs reduced the poverty rate in half – as measured under the Grounded Supplementary Poverty Measure (MPS) – by 22% before some program benefits are counted at 11%. However, inequalities in the United States remain very high, especially compared to other advanced OECD countries. The United States is not only among the countries with the greatest inequalities before taxes and program benefits; it is also the country with the greatest inequality after taking these policies into account.

Proposals to improve social insurance in the United States

Over the past few years, The Hamilton Project has commissioned a number of innovative and pragmatic policy proposals to improve social insurance programs. Various proposals aim to strengthen the system in areas where it is weak or has worrying gaps, to improve the targeting of different supports or to make programs more effective. Other proposals allow the system to better reach the most vulnerable families and individuals both in times of economic downturn and more stable economic times. The Hamilton project’s proposals also aim to make the system more responsive to increases in needs that occur during recessions, so that the system can better support both households and the economy during these times.

Workforce Development and Education

Despite strong evidence for investing in early childhood education and the expansion of head start programs over the past decade, these programs are still not widely accessible. Before the pandemic, only 36% of eligible children aged three to five and 11% of eligible children under three had access to Head Start or Early Head Start. A recent proposal commissioned by the Hamilton Project by Elizabeth Davis and Aaron Sojourner proposes strategies to expand access to affordable, high-quality early childhood education and care by stimulating competition among childcare providers. eligible child care. The proposal would cover the costs of local child care providers to make them more affordable and accessible to low-income families.

Additionally, investments in workforce development can help retrain today’s workforce for the post-pandemic economy. A 2018 proposal from David Neumark would create a federally funded place-based jobs program that would allow local partnerships to provide subsidized jobs in underfunded communities. Other proposals include an article by Richard Arum and Mitchell Stevens titled Twin Proposals for the Future of Learning, Opportunity, and Work and an article by Harry Holzer describing a more coherent and effective workforce development system in States. -United.

Health

The United States is primarily based on a mixed health care delivery system where most people are covered by either public insurance or employer sponsored insurance, but millions of people are still left behind and are not insured. The federal government operates four main health insurance programs: Medicare, Medicaid, CHIP, and Premium Tax Credits (which reduce the cost of insurance purchased through the Medicare Markets Act. affordable care).

In a proposal from Project Hamilton 2019, Matthew Fiedler, Jason Furman and Wilson Powell III show that Medicaid and CHIP could be improved by automatically increasing the federal share of Medicaid costs during economic downturns to help states absorb “shocks”. tax ”associated with temporary enrollment increases. In addition, The Hamilton Project released three proposals to extend paid leave, including a 2021 proposal by Tanya Byker and Elena Patel titled “A Proposal for a Federal Paid Parental and Medical Leave Program”.

Income support

Income support programs are used to reduce poverty and hardship and help people cope with events such as old age, disability, job loss and child rearing. These programs include Social Security, Unemployment Insurance, Child Tax Credit, Earned Income Tax Credit and Temporary Assistance to Needy Families, which provide support through direct payments in cash, refundable tax credits or tax reductions.

The pandemic and the economic recession that followed highlighted the shortcomings of one program in particular: the unemployment insurance system required dramatic federal action to effectively help millions of unemployed people. In a recent Project Hamilton policy proposal, Arindrajit Dube outlines a comprehensive plan to address many of the shortcomings of the UI system through a completely federal UI system overhaul. A 2019 proposal by Gabriel Chodorow-Reich and John Coglianese also proposes policy reforms to make UI a more effective automatic stabilizer in times of economic downturn. also proposes policy reforms to make unemployment insurance a more effective automatic stabilizer in times of economic downturn.

Nutrition

The COVID-19 pandemic has led to a sharp increase in the number of food insecure households. However, temporary expansions of government nutrition programs such as SNAP, WIC, and infant nutrition programs have provided resources for households and individuals to better support adequate and healthy diets during the recession. For example, the creation of a new temporary food assistance program, the Pandemic Electronic Benefits Transfer Program, has helped millions of families with children put food on the table during the pandemic.

Since SNAP is one of the most effective programs to grow rapidly and provide valuable benefits during economic downturns, the proposals allow the program to expand further at the onset of economic downturns and continue to provide high benefits. during the downturns would enhance the effectiveness of the program as an automatic stabilizer program. A proposal by Diane Schanzenbach and Hilary Hoynes in 2019 highlights ways to link the benefits of SNAP during recessions to automatic economic triggers. Other proposals, including a 2013 article by Diane Schanzenbach and a 2016 article by James Ziliak, would change the way the Thrifty Food plan, which the USDA uses to determine SNAP benefit levels, is calculated so that SNAP can better meet the nutritional needs of participants.

Shelter

A range of housing assistance programs help make housing more affordable for renters and landlords, such as the Housing Choice Voucher, which provides grants that lower the cost of renting a home of a family’s choice. , as well as housing rental assistance. However, the existing funding for these programs is woefully insufficient to support low- and moderate-income renters, and access to these programs is limited, with long waiting lists in many areas. Only 25 percent of people whose incomes are low enough to qualify for federal rent assistance receive such assistance.

In a recent Project Hamilton proposal, authors Robert Collinson, Ingrid Gould and Ellen Benjamin Keys propose policies to strengthen the housing safety net during recessions by adding automatic stabilizers to major federal housing programs. This would help tenants and landlords stay in their homes during downturns and encourage continued construction and renovation of affordable housing.

Conclusion

The social insurance system in the United States, implemented by federal, state and local government agencies, offers protection against what President Franklin Delano Roosevelt has called the vicissitudes of life: disability, loss of income in old age, dismissal and other setbacks. The social insurance system also provides support to help people meet basic needs and acquire the skills and services they need to enter and succeed in the labor market. To learn more about the social insurance system, as well as proposals for improving it, read the full scoping document here.


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