Growing Pains: How Benefit Cliffs Can Derail Government Support
From Spotlight on Poverty and Opportunity
President Joseph R. Biden late last month introduced the American Families Plan (AFP), his second major public investment proposal since assuming office. The AFP follows the passage of the American Rescue Plan Act (ARPA), both of which address more than relief for pandemic-era losses. The AFP and ARPA together act as a legislative tour de force, working to bolster existing public benefits in the United States and curb economic inequality that has long plagued the country. Early projections suggest that the ARPA will reduce poverty by one-third and child poverty by one-half. The AFP is positioned to continue this trend.
The ARPA in particular takes steps to remedy steep benefit cliffs in publicly-funded health insurance that, if left unaddressed, could cause low-income families to lose some or all of their essential public benefits due to a small increase in income, including wage increases from an earned promotion or an annual raise. This “cliff effect” disproportionately impacts Black and Hispanic families and often traps families in poverty instead of lifting them out of it.
To fully support moving families out of poverty, policy leaders and legislation must go one step further to untangle and eliminate benefit cliffs that stall economic mobility.