For a certain breed of wonk and nerd, it's not the holiday season until some of CBPP's best graphs of the year are collected and briefly annotated. This year, Kathleen Bryant and I took a stab at picking some of the figures we thought were most important to document the economic and policy landscape facing economically vulnerable people.
One of the most important and positive trends of the last decade was the decline in share of Americans without health coverage due to the Affordable Care Act. Their numbers fell from about 45 million to 27 million, a gain in coverage for ~18 million people. But this year's release of the Census Bureau's health insurance data revealed a troubling reversal of this trend. In 2018 (the data lag one year), the uninsured rate increased for the first time since the ACA's passage. These findings illustrate the grave consequences of the Trump Administration's repeated attempts to undermine the ACA over the past several years.
One reason the reversal shown above is of such concern is that health coverage saves lives. Reviewing a recent academic study, Matt Broadus and Aviva Aron-Dine report that the ACA's Medicaid expansion prevents thousands of premature deaths each year and saved the lives of at least 19,200 adults aged 55 to 64 between 2014 and 2017. Matt and Aviva find that if all states had expanded Medicaid in 2017, the number of lives saved by full expansion would almost equal the number saved by seatbelts. Given such magnitudes, and considering that the federal government pays 90 percent of the costs of the expansion, these findings underscore the cruelty of remaining state resistance to the expansion.
The positive aspects of the current U.S. economy, such as our low unemployment rate, mask the fact that there's an affordability crisis for low- and middle-income housing, both purchased and rental. Alicia Mazarra's analysis shows one reason why: a large, persistent gap in the growth of incomes and rents of the median rental household. Federal rental assistance programs make a dent in the income-rent gap by helping 10 million people keep roofs over their heads – but these programs are woefully underfunded: only one in four eligible families get the rental vouchers to which they're entitled, a huge shortfall that could be ameliorated simply by adequately funding the voucher program.
The official poverty measure leaves out the impact of some of our most important anti-poverty programs, including the market value of SNAP and tax credits for working families. CBPP's Danilo Trisi and Matt Saenz showed that when we account for the full spate of anti-poverty programs (some of which are counted in the official measure), the national poverty rate falls by almost half, from 24 to about 13 percent. That amounts to 37 million people, including 7 million kids, lifted out of poverty. We can and should argue that 13 percent is still far too high in the world's richest economy, but claims that the safety net fails to cut poverty are demonstrably wrong.
As just noted, one of the programs that reduces poverty is the SNAP program. Most people reasonably think of SNAP as a consumption program; i.e., it raises recipient families' ability to meet their basic needs. But as the figure shows, it's also an investment program, with long term benefits for children in households that receive it. Because the national program was originally phased in state-by-state, researchers were able to compare adult outcomes of kids in SNAP households to those in households that did not receive nutritional assistance. SNAP receipt had long-term benefits, improving both health and educational outcomes.
The U.S. labor market creates a lot of jobs, which is, of course, a good thing. But too many of those jobs are of dubious quality. About half of working-age Black and Latino workers are in low-wage jobs (it's about a third for whites). That's one reason why CBPP's tax team touted the Working Families Tax Relief Act, an earnings subsidy for low- and moderate wage workers which builds on the EITC. The WFTRA "would improve the economic well-being of 46 million low- and moderate-income households with 114 million people." Along with higher minimum wages, it's a surefire way to improve the quality of lower-paid jobs.
As I argued in recent testimony before the House Budget Committee, the 2017 Trump tax cuts have broken a key linkage in advanced economies: that between a strengthening economy and more tax revenues flowing into the Treasury. The figure above shows that the average revenue flow as a share of GDP is about 17 percent, but in periods like the present, with low unemployment, that share rises to 18 percent. However, in 2019, it fell to 16.3 percent, about two percentage points of GDP, or over $400 billion, below where it should be.
Source: Goldman Sachs Research
Sticking with the Republican tax cuts, the package was sold as not only "paying for itself," an obviously false claim, but as a stimulus for business investment. The cuts were particularly generous to corporate shareholders and wealthy households, and trickle-down tax lore maintains, against decades of evidence, that such tax cuts will boost business investment. As the above chart shows, the opposite occurred: since the tax cuts were passed, investment in plants, equipment, and research have grown more slowly.
One of our more important papers from the past year was Chye-Ching Huang and Roderick Taylor's analysis of ways the federal tax code maintains racial inequality in income and wealth. Of course, the code does not explicitly target race or ethnicity but centuries of racist policies – such as the laws upholding slavery, the confiscation of Native American tribal lands, and the policies that racially segregated schools and neighborhoods – have so dramatically shaped today's income and wealth distributions that almost any federal tax policy change will inevitably raise or lower racial barriers and disparities. The gif illustrates the racial disparities that are the culmination of centuries of barriers that people of color have faced to accruing wealth.
And, with that, thanks for following these econo-musings, and seasonally-adjusted greetings to all