The safety net you didn't know existed

As the budget battle to cut entitlements heats up, some argue that raising the retirement age will force the poor to subsidize the rich because the rich live longer.

The “safety net” is a term often used as a catch-all to refer to government programs and policies that help provide people with economic security. And how much we should spend on those programs is these days the subject of much debate. But that debate is complicated by the fact that not everyone agrees on what programs and policies actually fall into the “safety net” category. Some of the most obvious safety net programs are things like unemployment insurance, temporary assistance to needy families (often called Welfare), Medicaid and Medicare.

But there’s a wider array of less obvious programs that should also be considered part of the government safety net, argues political scientist Suzanne Mettler, a professor at Cornell and author of “The Submerged State: How Invisible Government Policies Undermine American Democracy.” Mettler says usually when people think of the safety net they think of policies that come in the form of checks (like TANF) or non-cash benefits (like Food Stamps and subsidized healthcare). “But they don’t think about the policies that have a more hidden design,” she says. “They can come through the tax code or through benefits from private employers that are subsidized through government.”

 

 

 

Let’s take the second category first—employer health care and retirement benefits, which have been tax-free for decades, as a policy that encourages employers to provide health insurance for their workers. “If our employers gave us the same amount of money they put in to these benefits in to our paychecks” instead, Mettler says, “we’d be paying income taxes on it.” Since we don’t have to pay those taxes, we’re effectively getting a little extra money in our pockets, and a little more economic stability.

The home mortgage interest deduction is a good illustration of a safety net program “hidden” in the tax code, Mettler says. “We could have a housing policy in the United States where everyone got a check every month to help them pay their mortgage,” she says. “But instead we channel it through the tax code and we simply allow people to pay less. From an accounting perspective, it’s the same thing.”

But from a political perspective, it’s a very different thing, argues Mettler. To create these sorts of “submerged” safety nets lawmakers don’t need to raise taxes. And people who use them rarely think of themselves as reliant on a government program. Of course, not everyone agrees with Mettler’s framing. “I receive emails from some people saying ‘How can you call these provisions in the tax code government social benefits? This is simply government taking less of my money,’” she says.

To answer those critics, Mettler points again to the case of the home mortgage interest deduction. “If you own a home you’re getting this benefit of reduced taxes from government," shje says. "If you’re paying the same amount as a renter every month for your housing, you don’t get any benefit from the government.”

Like food stamps or housing subsidies, a mortgage interest deduction is government “helping people out to do particular things.” And this is not a perspective limited to one side of the political spectrum. While Democrats are more likely invoke Mettler’s research, Richard Burkhauser, an economist with the conservative American Enterprise Institute says it makes sense to see something like the mortgage interest deduction as a safety net program. It “helps people buy houses at the expense of people who rent and don’t have houses,” Burkhauser says.

Mettler and Burkhauser both point out that often, these sorts of “hidden” safety net programs benefit people with higher incomes, rather than the poor. For example, in the case of those mortgage interest deductions, Burkhauser says “because middle income people and higher income people own more houses than lower income people, it clearly moves money in the opposite direction” from the more visible safety net programs we think of.

“Nearly all Americans at some point in their lives will benefit from a government social program—most of us will benefit from several of them,” Mettler says. “And most of us also pay taxes—payroll taxes and at some point income taxes.” So, in her eyes “We’re all makers and takers. That’s simply being part of a political community and part of American Society.”

About the author

Krissy Clark is the senior reporter for Marketplace’s Wealth & Poverty Desk.

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