Trump Wants to Update Poverty Thresholds. It Could Affect Food Stamps and Medicaid Benefits

May 14, 2019by Paul Krawzak
U.S. President Donald Trump walks on the South Lawn while departing the White House April 26, 2019 in Washington, D.C. (Olivier Douliery/Abaca Press/TNS)

WASHINGTON — The White House Budget Office is considering its first update to inflation adjustment guidelines for poverty thresholds since 1978, with potential consequences for benefit programs serving low-income households.

The initiative is part of a re-evaluation of six inflation indexes used to track the impact on consumers of rising or falling prices. One of the indexes is used to adjust poverty thresholds, which underlie the calculation of eligibility for a number of benefit programs including Medicaid, food stamps and school lunches and breakfasts for poor children.

The Office of Management and Budget, which has provided guidance to agencies on the current measurement that hasn’t changed in four decades, wants to consider whether updates are warranted.

The OMB isn’t deciding on any particular course of action; for now, it’s a simple two-page notice in the Federal Register, published last Tuesday, open for public comment through June 21. But as the agency said, changes to the poverty thresholds, “including how they are updated for inflation over time, may affect eligibility for programs that use the poverty guidelines.”

The Department of Health and Human Services develops poverty guidelines based on poverty thresholds. Under updated poverty guidelines for 2019, the poverty line stands at $12,490 for a single person and $25,750 for a family of four. Multiples of the poverty guidelines are used to determine eligibility for certain programs; for instance eligibility for the Supplemental Nutrition Assistance Program, formerly known as food stamps, runs up to 130 percent of the poverty line. Medicaid eligibility goes up to 138 percent of poverty, while health insurance exchange subsidies go up to 400 percent.

If official price indexes grew more slowly, then both benefit payments and caseloads would also grow more slowly, saving money over time. According to rough calculations based on Congressional Budget Office data, moving to what’s known as a “chained” Consumer Price Index would cut baseline spending on mandatory programs by $203 billion over a decade. Most of that is Social Security, which wouldn’t be affected unless Congress changed a 1972 law, but some $35 billion in cuts could fall on means-tested programs for lower-income households.

Chained CPI factors in consumer substitution in its measurement — if the price of pork rises faster, consumers may buy chicken instead, therefore keeping inflation slightly lower for the entire basket of goods. Advocates of chained CPI say it’s a more accurate calculation and better reflects consumer realities.

“I welcome this,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget. Goldwein said not having an accurate understanding of how price changes realistically affect consumers “leads us to have a misperception of the needs of the economy and the policies that are necessary.”

Moving to a government-wide chained CPI has been a staple of past deficit-reduction efforts, including policies pushed by Goldwein’s group. President Barack Obama proposed switching to chained CPI in his fiscal 2014 budget request, but dropped it the following year after a liberal outcry.

The Center on Budget and Policy Priorities criticized the OMB initiative, saying it would weaken public assistance programs and increase hardship especially for people who “work hard but are paid low wages.”

In a recent report, CBO said the chained index has grown an average of 0.25 percentage points more slowly per year since 2001 than the traditional CPI measure. The agency said using chained CPI “would reduce federal spending, and savings would grow each year as the effects of the change compounded.”

One of the objections to chained CPI is that it may not accurately capture the effect of inflation on retirees who typically spend more of their income on health care, where costs rise faster than inflation. But others argue it is difficult to measure the impact of rising health care prices on consumer well-being, since higher prices may also reflect improvements in medical care.

While the OMB doesn’t suggest the use of any particular price index, the agency’s notice specifically notes chained CPI is among the options they are looking at. And the OMB notes Congress has already dictated the use of chained CPI for tax bracket thresholds and tax credits, which means over time households will be paying more in tax or receiving smaller refunds, generating more revenue.

The 2017 tax overhaul which mandated that change was estimated to save $134 billion over 10 years, according to the Joint Committee on Taxation; about $19 billion of that would be cut from payments to households too poor to owe income tax. That’s why the OMB notice causes anxiety on the part of advocates for social programs, who’ve already witnessed the Trump administration try to take aim at programs like Medicaid and food stamps through rulemaking processes.

If OMB were to replace the current inflation measure with chained CPI, trimming $35 billion over a decade would mean a roughly 0.5 percent cut from affected programs, based on the CBO’s analysis.

That may not seem like a large cut in a universe of programs projected to spend more than $7 trillion over the next 10 years. But the cuts would impact programs that serve lower-income Americans such as Medicaid, prescription drug benefit subsidies under Medicare, tax credits to pay for health care premiums under the 2010 health care law, the Supplemental Nutrition Assistance Program and child nutrition programs.

While it seems the White House could make the switch to chained CPI by updating its 1978 directive, changing the benefit calculation for Social Security would need to be changed in the statute. That’s a much tougher lift, though if the change goes through and there’s no apparent dramatic impact to other benefit programs, it could become more enticing as the Social Security Trust Fund veers toward insolvency in the 2030s.

———

©2019 CQ-Roll Call, Inc., All Rights Reserved

Visit CQ Roll Call at www.rollcall.com

Distributed by Tribune Content Agency, LLC.

In The News

CBS News, National Press Club Celebrate a Century of Radio Broadcasting
Media
CBS News, National Press Club Celebrate a Century of Radio Broadcasting
June 1, 2020
by Dan McCue

WASHINGTON - Radio, it has been said, is both the most intimate of all media and part of the fabric of the American experience. Whether it was through "Make Believe Ballroom" or presenting harrowing tales from the front lines during times of war or thrilling us... Read More

Restaurant Rich Charleston Offers Clues to Post-Pandemic Future of Industry
Business
Restaurant Rich Charleston Offers Clues to Post-Pandemic Future of Industry
June 1, 2020
by Dan McCue

CHARLESTON, S.C. - It wasn't exactly a typical Friday night in what could arguably be described as the "foodie district" of Charleston, South Carolina. But it was something of a barometer of how restaurants are fighting to come back from the coronavirus outbreak. Up and down... Read More

D.C. Drops Speed Limit to 20 MPH On Local Roads to Combat Reckless Driving
Cities
D.C. Drops Speed Limit to 20 MPH On Local Roads to Combat Reckless Driving
June 1, 2020
by Gaspard Le Dem

WASHINGTON - District of Columbia Mayor Muriel Bowser announced on Friday that the default speed limit on local D.C. roads will be lowered from 25 to 20 mph. The decision to lower the speed limit was prompted by an uptick in speeding on D.C. roads during... Read More

Bucolic Southern City Erupts In Aftermath of George Floyd Killing
In The News
Bucolic Southern City Erupts In Aftermath of George Floyd Killing
June 1, 2020
by Dan McCue

CHARLESTON, S.C. - A day of peaceful protests in one of the South's most bucolic cities turned violent Saturday night as angry crowds smashed storefronts, battled police and engaged in clashes with business owners trying to protect their property. The daytime protest, which drew several thousand... Read More

Protests Hammer US Cities Struggling to Recover After Lockdown
In The News
Protests Hammer US Cities Struggling to Recover After Lockdown

The reopening of America was always going to be fraught, with competing fears of new virus outbreaks and economic meltdown. Now cities across the nation, from New York to Chicago and Los Angeles, are reeling from unrest that could worsen both. Violence erupted in dozens of... Read More

SpaceX Docks at the International Space Station With Two NASA Astronauts for the First Time
Space
SpaceX Docks at the International Space Station With Two NASA Astronauts for the First Time

ORLANDO, Fla. — SpaceX’s Crew Dragon capsule eased its way to the International Space Station on Sunday morning, autonomously docking and marking the first time an American commercial capsule with humans aboard performed the feat. The docking, which concluded shortly before 10:30 a.m. EDT, came at... Read More

Straight From The Well
scroll top