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Cyclicality of the U.S. Safety Net: Evidence from the 2000s and Implications for the COVID-19 Crisis

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  • Marianne P. Bitler
  • Hilary W. Hoynes
  • John Iselin

Abstract

In this paper, we explore the cyclicality of the U.S. safety net over the 2000s through the economic peak in February 2020 before the onset of the COVID-19 crisis. We compare the effects of means-tested programs with those of social insurance programs, separately and combined. We find, on a per capita basis, Unemployment Insurance (UI) is by far the most cyclical, particularly when fully funded federal extensions are included. A 1-percentage-point increase in the unemployment rate leads to a 17 percent increase in monthly real UI spending. Overall, the social insurance programs provide an additional $31 (2019$) in per capita real spending for each percentage point increase in the annual unemployment rate, while the means-tested programs provide a statistically insignificant $8.50 per capita for each percentage point increase in unemployment. The means-tested programs without SSI provide a significant $12 for each percentage point increase in the unemployment rate. Thus, the parts of the means-tested safety net that can respond quickly are also providing modest countercyclical stabilization. We conclude by speculating what this means for the current response to COVID-19.

Suggested Citation

  • Marianne P. Bitler & Hilary W. Hoynes & John Iselin, 2020. "Cyclicality of the U.S. Safety Net: Evidence from the 2000s and Implications for the COVID-19 Crisis," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 759-780, September.
    • Handle: RePEc:ntj:journl:v:73:y:2020:i:3:p:759-780
    DOI: 10.17310/ntj.2020.3.06
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    Cited by:

    1. Tracy Gordon & Lucy Dadayan & Kim Rueben, 2020. "State and Local Government Finances in the COVID-19 Era," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 733-758, September.
    2. Michihito Ando & Masato Furuichi, 2022. "The association of COVID-19 employment shocks with suicide and safety net use: An early-stage investigation," PLOS ONE, Public Library of Science, vol. 17(3), pages 1-26, March.
    3. Marianne Bitler & Jason Cook & Danea Horn & Nathan Seegert, 2022. "Incomplete program take-up during a crisis: evidence from the COVID-19 shock in one U.S. state," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(6), pages 1373-1394, December.
    4. Erik Hembre, 2023. "Examining SNAP and TANF caseload trends, responsiveness, and policies during the COVID‐19 pandemic," Contemporary Economic Policy, Western Economic Association International, vol. 41(2), pages 262-281, April.
    5. Marta Lachowska & Wayne Vroman & Stephen A. Woodbury, 2020. "Experience Rating and the Dynamics of Financing Unemployment Insurance," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 673-698, September.

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