Jan. 31, 2013
Yesterday, the Corporation for Enterprise Development (CFED) released its annual Assets and Opportunity Scorecard, a key resource for asset building researchers and policymakers that documents data points that indicate the financial health of Americans, including asset poverty rates, household net worth, and the number of unbanked/underbanked households. One of the Scorecard’s most frequently quoted figures is the liquid asset poverty rate, which represents the the number of families who lack the savings needed in order to live at the poverty line for three months in the absence of income. We know that asset limits in safety net programs discourage saving, and that families who lack savings are subject to increased hardship in the event of an income loss. So what’s the relationship between liquid asset poverty and asset limits? Are administrative rules mandating that families subject themselves to liquid asset poverty and potentially increased hardship in order to maintain eligibility for safety net assistance? Let’s compare this year’s asset poverty data to what we know about the asset limits in safety net programs.
According to CFED’s estimates, the asset poverty level for a family of four in 2012 was $5,763. This is higher than the resource limits in the Supplemental Nutrition Assistance Program (SNAP/Food Stamps) in 14 states, and higher than the limits in the Temporary Assistance for Needy Families Program (TANF/cash welfare) in 44 states. In fact, this figure is more than double the median TANF asset limit of $2000, and over five times its lowest limit of $1000 in Washington, Texas, Rhode Island, Pennsylvania, Oklahoma, New Hampshire, Missouri, Indiana and Georgia. This means that TANF recipients in these states are barred from having enough in savings to live at the poverty level for even three weeks, let alone three months.
In the meantime, should these families encounter an unexpected expense such as a medical emergency or car breakdown, their savings will be wiped out entirely – and then some. For example, the cost of repairing a small automobile following a "fender bender" can be as high as $4000. A family receiving benefits who encounters this circumstance will not only have to drain their entire savings account, but will also likely go into significant debt, perhaps by taking out a payday loan, which triggers the debt treadmill and puts economic security increasingly out of reach.
We’ve written time and time again that asset limits require families to spend down their savings and remain financially vulnerable in order to receive short-term assistance, thus increasing the likelihood that they’ll need to access public benefits again in the future. CFED’s new data provide some numbers that support these claims and show just how deep within asset poverty many of these programs require families to be.Our safety net should be there to catch people who are falling and ideally help them to bounce back, not trap them one bad day away from total destitution. If we want to make a dent in the problem of widespread financial insecurity, reforming these counter-productive rules would be a good place to start. To read more about the success of recent asset limit reform efforts, check out our recent policy paper.