The Trump budget wants to take a hatchet to social programs. Obama had a better way.

For a “Socialist” President, Obama Sure Reduced Reliance on Social Programs

For a “Socialist” President, Obama Sure Reduced Reliance on Social Programs

Moneybox
A blog about business and economics.
May 30 2017 6:24 PM

For a “Socialist” President, Obama Sure Reduced Reliance on Social Programs

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Danke, Obama.

Getty Images

With its proposed budget, the Trump administration wants to take a hatchet to programs that support people in poverty, like Medicaid and Social Security Disability Insurance. The fact that spending on these programs has risen steadily throughout this economic expansion has vexed policymakers. Structural forces that are seemingly immune to the broader progress of the economy are rendering more Americans unable to work or pay for their own health care.

But in some instances, economic growth—more jobs, more wages—is a powerful tool for reducing spending on anti-poverty programs. That’s especially true for the countercyclical programs that kick in during downturns and then fade away when economic times are better. To a significant degree, the chugging expansion—about to enter its 95th month—is helping to limit the budget pressures associated with countercyclical entitlements like unemployment benefits and food stamps. Indeed, the expansion engineered by the Obama administration and the Federal Reserve, under the direction of Ben Bernanke and then Janet Yellen, has helped cut more than $100 billion annually from social welfare spending.

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Let’s take food stamps first. There’s no question that the Supplemental Nutrition Assistance Program has soared. In 2006, there were 28 million recipients and the cost of the program was $30.2 billion. Demand exploded during the Great Recession, as millions of people were thrown out of work and the Obama administration expanded eligibility. The result: Participation grew to 40 million (at a cost of $64.7 billion) in fiscal year 2010, and peaked at 47.6 million participants in 2013, when the program cost $76 billion. That’s a fair chunk of change, though remember that every penny of food stamps is cycled directly into the domestic economy.

But for each of the past four fiscal years, both the number of users and the costs of SNAP has fallen. In fiscal 2016, the number of participants had fallen 3.5 million from the peak, while the cost of the program, at $66.65 billion, was off 12 percent from the 2013 peak. The declines are accelerating. In February 2017, there were 42.2 million recipients, off about 5 percent from the year before; the amount spent on the program was likewise off about 5 percent from the year before. It’s likely that SNAP spending this year will be below the level of 2010.

In recent years, the numbers surrounding unemployment insurance have charted a similar roller-coaster path. In 2008 and 2009, as millions of people were fired, the number of people filing continuing claims for unemployment benefits soared, from about 3 million in May 2008 to a peak of 6.5 million in May 2009. Once the economy started growing, in the summer of 2009, the number of continuing claims came off the boil. Week after week, month after month, the number of continuing claims has fallen—in April it pierced the 2 million level. In other words, the number of people collecting unemployment insurance benefits has fallen by nearly 70 percent in the past eight years.

Not surprisingly, the amounts paid out in unemployment benefits have shriveled, from $144 billion in fiscal 2010 to a mere $32 billion in fiscal 2016. That’s a decline of 77 percent, representing savings of $112 billion annually. So far this fiscal year, spending on unemployment benefits is off another 4 percent.

The Obama economy, such as it was, reduced federal spending on social welfare by a far larger amount than the Republican Congress and the Trump administration will be able to do via harsh and draconian budget cuts. Everyone at once now: Thanks, Obama.