Introduction

Need-tested benefits programs provide financial or other forms of assistance to or on behalf of families and individuals based on their economic need. Before the COVID-19 pandemic and its economic fallout, an estimated one-third of all persons in the United States, about 111 million individuals, benefitted from at least one of the selected, major need-tested programs discussed in this report.

The pandemic has highlighted the financial insecurity faced by some individuals and families. For some, the insecurity is related to the economic impact of the pandemic; for others, financial insecurity preceded the pandemic. The economic impact of the pandemic prompted a number of temporary changes to augment certain government programs that provide economic assistance to households, including unemployment insurance and some need-tested programs. Under current law, most of these policy changes will expire.

This report examines need-tested programs as they operated prior to the pandemic. This provides a picture of how need-tested programs would operate once the temporary measures expire and should the economy continue to recover. It is based on income and employment from 2017,¹ the eighth full year of an economic expansion, with an unemployment rate that averaged 4.4%. In contrast, the unemployment rate for 2020 averaged 8.1% and the Congressional Budget Office (CBO) forecasts that the unemployment rate for 2021 will be 5.7%.²

Programs Examined in This Report

The major need-tested programs examined in this report are government programs that condition their benefits on financial need, and two refundable tax credits in the federal income tax code that are targeted to low-income taxpayers. The report distinguishes these programs from social insurance programs, such as Social Security, Medicare, and Unemployment Compensation. Those social insurance programs primarily base eligibility for their benefits on past work and an event (e.g., old age, unemployment) that interrupts or ends working careers rather than low income or assets. Need-tested programs generally take into account income from cash-based social insurance programs, and social insurance benefits often raise incomes so that their beneficiaries are financially ineligible for need-tested benefits.

The selected, major need-tested programs (or groups of programs) discussed in this report represent a subset of all need-tested programs.³ They were selected for inclusion largely on the basis of available data. The programs are the following:

• Medicaid and the State Children's Health Insurance Programs (CHIP) provide grants to states to help them finance the delivery of medical services as well as long-term care services and supports. Medicaid provides health coverage to a diverse low-income population, including children, pregnant women, adults, individuals with disabilities, and people aged 65 and older. Historically, Medicaid eligibility generally has been limited to low-income children, pregnant women, parents of dependent children, individuals aged 65 and older, and individuals with disabilities. However, since 2014 states have had the option to cover nonelderly adults with income up to 133% of the federal poverty level (FPL) under the Affordable Care Act (ACA) Medicaid expansion. In FY2017, Medicaid enrollment for children, nonexpansion adults, and expansion adults comprised 77% of Medicaid enrollment, but 46% of total benefits. Individuals with disabilities and those aged 65 and older represented 23% of Medicaid enrollment, but 54% of Medicaid spending. State CHIP allows states to provide health care coverage to low-income children and pregnant women without other health insurance who have incomes above Medicaid's eligibility thresholds.
• The Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) provides low-income families with an in-kind income supplement to enable them to purchase a minimal cost, nutritious diet. SNAP is available to all low-income households regardless of their demographic composition, though benefits for able-bodied adults without dependents and who are not working are time-limited. SNAP benefits are uniform nationwide for families of a given size except in Alaska, Hawaii, and the participating territories.⁴
• Housing assistance programs support below-market rent for low-income households through subsidized apartments (public housing, project-based Section 8 rental assistance) and rental vouchers (Section 8 Housing Choice voucher program). These programs are funded annually through discretionary appropriations, are 100% federally funded, and are administered by local public housing authorities and private property owners under contract with the federal government.
• The Earned Income Tax Credit (EITC) provides an earnings supplement for low-wage earners, with the size of the credit dependent on family type and earnings. The bulk of EITC dollars have historically been delivered through tax refund payments and go to families with children.
• The Additional Child Tax Credit (ACTC) represents the refundable portion of this tax credit. It assists eligible parents of children who have earned income above a certain threshold but whose tax liability is too small to fully benefit from the regular nonrefundable child tax credit. It is delivered to families through refund payments when they file their taxes.
• Supplemental Security Income (SSI) provides a federally funded cash income floor for low-income persons or couples who are aged 65 and older, blind, or disabled. Federal SSI benefits are based on uniform nationwide eligibility and benefit rules, and they are paid with federal funds. States may supplement SSI with their own funds.
• Temporary Assistance for Needy Families (TANF) provides monthly cash assistance to low-income families with children whose incomes are below state-determined eligibility thresholds. Benefits are financed from the TANF block grant to the states and associated state funds. States also determine benefit amounts. (TANF may also be used to provide other types of services, such as child care or training services, but for the purposes of this report, TANF receipt and benefit amounts are limited to the monthly cash assistance caseload.)
• Child Care and Development Fund (CCDF) provides grants to states to help subsidize child care for low-income parents and caretakers of children who are either working or in training. The subsidies are generally provided in the form of vouchers so that parents have a choice of child care providers and settings.

Table 1 summarizes selected characteristics across each program. As the table shows, these programs provide varied benefits, ranging from monthly or annual lump sum cash benefits to noncash benefits that fully finance or partially subsidize costs of specific goods or services (e.g., medical care, food, housing, child care). Each program limits eligibility to those meeting a need test based on income or other resources (e.g., assets), but actual income limits vary widely across programs. The programs tend to set income limits using different metrics (e.g., relationship of income to the federal poverty level or to a state's or local area's median income) and complex program rules (e.g., income limits for tax benefits may vary by filing status). In some cases, income limits may vary by state or locality (e.g., for Medicaid/CHIP, TANF). Funding can play a significant role in how widely program benefits are received. Programs with open-ended mandatory spending (e.g., SNAP, tax credits) are typically able to serve all who are eligible and want to participate, whereas programs with discretionary or capped mandatory spending (e.g., housing, CCDF) may or may not have sufficient funding to serve all who are eligible and want to participate.

Need-tested benefits are often limited to families with children, persons aged 65 or older, or individuals with a disability. Many of the programs that target benefits to families with children also require that the families have workers. The refundable tax credits, the EITC and the ACTC (before the ACTC's temporary expansion to nonearners for 2021), require earnings and hence work to qualify for benefits. CCDF child care subsidies are generally limited to children who are in families where a parent or other legal guardian is either working or in training.

In addition, program rules or other laws often restrict eligibility for need-tested benefits in other ways. For instance, noncitizen eligibility for need-tested benefits is often restricted.⁵ Some programs also restrict benefits for those with past criminal convictions.

The data in this report provide a national picture of need-tested benefits receipt. However, these programs—except the federal income tax benefits—are at least partially administered and often have their eligibility and benefits determined by states or localities. Therefore, the picture in any given state might differ from the national picture.

Data Used in This Analysis

The information in this report is based on income as reported by the U.S. Census Bureau for 2017. It was the eighth full year of economic growth following the 2007 to 2009 recession, with a relatively low unemployment rate averaging 4.4% per month.

The estimates in this report are based on the 2018 U.S. Census Bureau's Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS), augmented by computer simulations from the Transfer Income Model 3 (TRIM3) microsimulation model. The ASEC is a survey of households in the 50 states and the District of Columbia; it excludes persons in the territories as well as those who are institutionalized. The TRIM3 microsimulation model is funded primarily by the Department of Health and Human Services (HHS) and maintained at the Urban Institute.

TRIM3 is used to address the under-reporting of benefits receipt by respondents to the ASEC. It also provides estimates of tax liabilities. However, readers should note that models like TRIM3 may not perfectly correct for the inaccurate information sometimes reported in survey data. For example, receipt of refundable tax credits is underestimated even when using the TRIM3 model. Thus, this report's estimates of how many individuals receive these tax credits– and hence receive at least one benefit—are underestimated.

For further information on the data and methods used in this report, see CRS Report R46824, Need-Tested Benefits: Technical Companion to Selected CRS Reports on Need-Tested Benefits Receipt by Families and Individuals.

Need-Tested Benefits Receipt

Before the economic impact of the COVID-19 pandemic, an estimated one in three persons received benefits from at least one of the major need-tested programs examined in this report. This totals to an estimated 111 million individuals. This share of the population, and number of people, is based on income data for 2017.

Figure 1 shows the estimated number of persons benefitting from each of the need-tested benefits examined in this report. It reveals that some benefits are comparatively widely received, while others aid smaller populations. Medicaid/CHIP assistance reached the largest number of people (77 million). This number excludes Medicaid recipients who have their long-term care services and supports financed in an institutional setting. In addition to Medicaid/CHIP, the programs that benefit a comparatively large number of individuals are SNAP and the two refundable tax credits (the ACTC and the EITC).

In contrast, fewer people are recipients of housing assistance, SSI, TANF cash, and child care subsidies. A comparatively large share of the population is eligible for housing assistance, but the number of housing units that are subsidized is limited by funding and thus there are waiting lists that ration housing assistance. SSI eligibility is limited to the needy persons who are aged 65 and older, or have a disability (including blindness). While TANF has limited funding, federal and required state contributions for TANF were theoretically sufficient in 2017 to assist all eligible families.⁶ However, about one-quarter of those eligible for TANF received assistance. TANF is not an entitlement to individuals and state work requirements (including those for applicants) and other restrictions can function as costs to participation (e.g., a person's time and attention). Potential recipients might decide that the TANF cash benefit is not large enough to merit applying for given these requirements. CCDF funding is limited and many states or sub-state areas maintain waiting lists of those eligible for child care as well.

The benefits that reached the greatest number of people were either noncash medical and food assistance, or refundable tax credits that provide their benefits once a year through federal income tax refunds. The population receiving ongoing (mostly monthly) cash assistance from SSI and TANF was small compared to the number receiving the major noncash benefits or refundable tax credits.

Figure 1. Estimated Number of Persons Receiving Benefits from Selected Major Need-Tested Programs at Any Time During a Year Based on 2017 Income Data

Source: CRS, based on data from the U.S. Census Bureau's ASEC to the CPS and the TRIM3 microsimulation model, primarily funded by HHS and maintained at the Urban Institute. Medicaid/State Children's Health Insurance Program (CHIP) enrollment estimates were developed by CRS and include only noninstitutionalized enrollees (excludes enrollees residing in nursing homes). Notes: CHIP=State Children's Health Insurance Program; SNAP=Supplemental Nutrition Assistance Program; ACTC=Additional Child Tax Credit; EITC=Earned Income Tax Credit; SSI=Supplemental Security Income; TANF=Temporary Assistance for Needy Families; and CCDF=Child Care and Development Fund. Recipients are people receiving benefits at any time during the year. For the refundable tax credits, this represents tax credits earned during the year. Recipient counts for tax credits represent the tax filer, spouse, and dependents of the tax filer. For subsidized child care, the number of people represents children who received subsidized care at any time during the year. For other programs, the number of people represents the individuals in units defined for the program for which needs and resources are measured and benefits are provided.

Need-Tested Benefit Receipt by Pre-assistance Income

All the programs discussed in this report restrict eligibility to those who meet a test of low income. Some programs also require that individual and family assets (e.g., bank accounts, automobiles) be valued below a certain dollar value to qualify for benefits. The financial eligibility thresholds vary among the programs, as noted in Table 1. Some are expressed as a multiple of the FPL. However, not all major need-tested programs measure income limits as a multiple of the FPL. For instance, income limits for housing programs and the CCDF are typically set, respectively, at a percentage of local area or state median income.

Medicaid and CHIP benefits are often available at income levels above the poverty thresholds. States are required to cover children under Medicaid who are at or below 133% of the FPL. States may cover children at higher income levels, and CHIP coverage kicks in for children in families above the income threshold for regular Medicaid. The refundable tax credits are tied to earnings, and provide benefits to families above the poverty line as well. Some programs may also reduce benefits at a modest, rather than rapid, rate as participants' earnings increase to avoid discouraging work, resulting in some benefits going to families above the poverty line even when programs primarily target families below the poverty line.

Figure 2 shows the share and number of individuals who received at least one need-tested benefit by poverty status. The poverty status of persons is determined by their pre-assistance income—income before the receipt of need-tested benefits—relative to their family's poverty threshold. For this analysis, it uses income and need concepts of the research Supplemental Poverty Measure (SPM), a measure developed for research purposes that can be used to assess the effects of benefits receipt on poverty.⁷ The figure shows that 83% of persons who lived in families with pre-assistance income below the poverty threshold received at least one of the need-tested benefits discussed in this report. That percentage drops to 52% for those with incomes between 100% and 199% of the poverty threshold, 21% for those with incomes between 200% and 299% of the threshold, and 6% for those with incomes of 300% or more of the threshold. Families receiving benefits with pre-assistance income at 300% or more of the poverty threshold might receive benefits for only a few months during the year in which they were needy, or they may be families with special circumstances (e.g., nonparent relative caregivers of children they are not financially responsible for).

The figure also shows that while those with pre-assistance incomes below the poverty threshold had the highest rate of need-tested benefit receipt, they comprised less than half of all those who received benefits.

Figure 2. Need-Tested Benefits Receipt, by Pre-assistance Income Poverty Status Based on 2017 Income Data; Poverty Status Determined Using the Supplemental Poverty Measure (SPM)

Source: CRS, based on data from the U.S. Census Bureau's ASEC to the CPS and the TRIM3 microsimulation model, primarily funded by HHS and maintained at the Urban Institute. Medicaid/State Children's Health Insurance Program (CHIP) enrollment estimates were developed by CRS and include only noninstitutionalized enrollees (excludes enrollees residing in nursing homes). Notes: Percentages calculated based on unrounded numbers. Recipients are people receiving benefits at any time during the year for at least one the programs: Medicaid/State Children's Health Insurance Program (CHIP), Supplemental Nutrition Assistance Program (SNAP), the Earned Income Tax Credit (EITC), the Additional Child Tax Credit (ACTC), housing assistance, cash from Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), or Child Care and Development Fund (CCDF) child care subsidies. For the refundable tax credits, this represents tax credits earned during the year. Recipient counts for tax credits represent the tax filer, spouse, and dependents of the tax filer. For subsidized child care, the number of people represents children who received subsidized care at any time during the year. For other programs, the number of people represents the individuals in units defined for the program for which needs and resources are measured and benefits are provided.

As discussed previously, some programs are more targeted than others toward the lowest income groups. This can result from either statutory eligibility rules or how programs ration aid among eligible individuals and families. Figure 3 shows the percentage of those receiving benefits from each of the eight programs who had pre-assistance incomes below the poverty threshold. The programs that had the highest share of their benefits going to families with pre-assistance incomes below the poverty line were SNAP, housing assistance, SSI, TANF, and child care. Except for SNAP, these were also the programs that benefitted comparatively fewer individuals (Figure 1). In comparison, more than half of ACTC (the refundable portion of the child tax credit) recipients had incomes above the poverty threshold. For Medicaid/CHIP and the EITC, about half of all persons receiving benefits had incomes below the poverty threshold.

Figure 3. Number of People Receiving Selected Need-Tested Benefits and Percentage of Recipients with Pre-assistance Incomes Below the Poverty Threshold Based on 2017 Income Data; Poverty Determined Using the Supplemental Poverty Measure (SPM)

Source: CRS, based on data from the U.S. Census Bureau's ASEC to the CPS and the TRIM3 microsimulation model, primarily funded by HHS and maintained at the Urban Institute. Medicaid/State Children's Health Insurance Program (CHIP) enrollment estimates were developed by CRS and include only noninstitutionalized enrollees (excludes enrollees residing in nursing homes). Notes: CHIP=State Children's Health Insurance Program; SNAP=Supplemental Nutrition Assistance Program; ACTC=Additional Child Tax Credit; EITC=Earned Income Tax Credit; SSI=Supplemental Security Income; TANF=Temporary Assistance for Needy Families; and CCDF=Child Care and Development Fund. Percentages calculated based on unrounded numbers. Recipients are people receiving benefits at any time during the year. For the refundable tax credits, this represents tax credits earned during the year. Recipient counts for tax credits represent the tax filer, spouse, and dependents of the tax filer. For subsidized child care, the number of people represents children who received subsidized care at any time during the year. For other programs, it represents the individuals in units defined for the program for which needs and resources are measured and benefits are provided.

Need-Tested Benefits by Family Category, Age, and Disability Status

In addition to tests of financial need, many need-tested programs also restrict eligibility to persons of a certain age, of a certain disability status, or in a certain type of family. Cash assistance from SSI is restricted to needy persons who are aged 65 and older or disabled (including blindness). Cash assistance from TANF is limited to families with children. Of the benefits discussed in this report, CHIP, the ACTC, TANF, and CCDF are generally targeted to families with children.

Needy individuals and couples who are neither aged 65 and older nor disabled nor have children are often ineligible for benefits or might receive them under more restrictive circumstances. Medicaid coverage for this group is provided at state options. Additionally, SNAP restricts benefits for people aged 18 to 49 who do not have children and are not disabled to those either working or participating in an employment program for at least 20 hours per week. EITC for childless workers is provided only at lower earnings levels and in smaller amounts. Such individuals are ineligible for ongoing cash assistance from SSI or TANF.

This report classifies individuals into the following groups:

• children (individuals under the age of 18),
• adults (of any age or disability status) in families with children, and
• adults in families without children who are
• aged 18 to 64 and have a work-limiting disability,⁸
• aged 18 to 64 and do not have a work-limiting disability, or
• aged 65 and older.

Figure 4 shows receipt of benefits from any of the need-tested programs discussed in this report by family category, age, and whether an individual in a family without a child had a disability. It shows the rate of receipt in each category in the context of the broader population within that category. For the purposes of this figure, the broader population represents all the individuals in each of these groups (not the number of eligible individuals within the group).

Individuals with severe work disabilities without children had the highest rate of benefit receipt among the five groups (65%). However, this group is also the smallest in terms of number of people. The largest group in terms of population is nondisabled adults under age 65 without children under age 18. Of the persons in this group, 19% received need-tested benefits.

Individuals aged 65 and older without children had the lowest rate of receipt of need-tested benefits (14%). Most persons aged 65 and older do receive government benefits, but in the form of Social Security and Medicare social insurance rather than need-tested aid. Additionally, the population aged 65 and older and individuals with disabilities captured here exclude those who receive care in institutionalized settings (e.g., nursing homes, institutions for mental disease, institutions for individuals with developmental disabilities). Medicaid finances a large share of expenditures for long-term services and supports, and those provided in institutionalized settings are not captured in either the population or Medicaid enrollment statistics in this report.

Figure 4 also shows that many of the recipients of need-tested aid are in families with children—they are either the children themselves or adults in families with children. These two groups have a high rate of need-tested benefits receipt, with more than half of all children (57%) being a recipient of benefits. Together, 76 million children and adults in families with children received a need-tested benefit, representing 68% of all persons receiving need-tested aid.

Figure 4. Receipt of Need-Tested Assistance: Individuals by Family Category, Age, and Disability Status Based on 2017 Income Data

Source: CRS, based on data from the U.S. Census Bureau's ASEC to the CPS and the TRIM3 microsimulation model, primarily funded by HHS and maintained at the Urban Institute. Medicaid/CHIP enrollment estimates were developed by CRS and include only noninstitutionalized enrollees (excludes enrollees residing in nursing homes). Notes: Adults in families with children may be of any age (18 or older) or disability status. Percentages calculated based on unrounded numbers. Categories are mutually exclusive. Recipients are people receiving benefits at any time during the year for at least one the programs: Medicaid/State Children's Health Insurance Program (CHIP), Supplemental Nutrition Assistance Program (SNAP), the Earned Income Tax Credit (EITC), the Additional Child Tax Credit (ACTC), housing assistance, cash from Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), or Child Care and Development Fund (CCDF) child care subsidies. For the refundable tax credits, this represents tax credits earned during the year. Recipient counts for tax credits represent the tax filer, spouse, and dependents of the tax filer. For subsidized child care, the number of people represents children who received subsidized care at any time during the year. For other programs, the number of people represents the individuals in units defined for the program for which needs and resources are measured and benefits are provided.

Need-Tested Benefits by Work Status

Most persons other than those aged 65 and older or individuals with a work disability were in a family with an adult worker—either they worked themselves or another adult (e.g., spouse, adult child, grandparent) in the family worked. The work test used in this analysis is any work during the year. While this includes families where there is only weak attachment to the workforce, it does differentiate between those families where the withdrawal from the workforce is total and those where there is some work activity.

Most need-tested benefit recipients are in families with an adult worker: in 2017, of the 111 million recipients of need-tested benefits, 91 million (81%) were in such families (Figure 5).

Figure 5. Receipt of Need-Tested Assistance: Individuals by Whether or Not a Family Had an Adult Worker Based on 2017 Income Data

Source: CRS, based on data from the U.S. Census Bureau's ASEC to the CPS and the TRIM3 microsimulation model, primarily funded by HHS and maintained at the Urban Institute. Medicaid/CHIP enrollment estimates were developed by CRS and include only noninstitutionalized enrollees (excludes enrollees residing in nursing homes). Notes: Percentages calculated based on unrounded numbers. Totals may not sum due to rounding. Recipients are people receiving benefits at any time during the year for at least one the programs: Medicaid/State Children's Health Insurance Program (CHIP), Supplemental Nutrition Assistance Program (SNAP), the Earned Income Tax Credit (EITC), the Additional Child Tax Credit (ACTC), housing assistance, cash from Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), or Child Care and Development Fund (CCDF) child care subsidies. For the refundable tax credits, this represents tax credits earned during the year. Recipient counts for tax credits represent the tax filer, spouse, and dependents of the tax filer. For subsidized child care, the number of people represents children who received subsidized care at any time during the year. For other programs, the number of people represents the individuals in units defined for the program for which needs and resources are measured and benefits are provided.

Figure 6 shows that the high rate of need-tested benefit receipt among families with workers is attributable primarily to the large share of recipients in families with children. The figure shows that most families with children had an adult worker, and most families with children receiving need-tested benefits had an adult worker (31 million out of 34 million). Only among individuals aged 65 and older with no children or those aged 18 to 64 with a work-limiting disability and no children were the majority of people overall—and of people receiving need-tested benefits—in families without an adult worker.

Figure 6. Receipt of Need-Tested Assistance: Individuals by Family Category, Age, and Disability Status and Whether or Not a Family Had an Adult Worker Based on 2017 Income Data

Source: CRS, based on data from the U.S. Census Bureau's ASEC to the CPS and the TRIM3 microsimulation model, primarily funded by HHS and maintained at the Urban Institute. Medicaid/CHIP enrollment estimates were developed by CRS and include only noninstitutionalized enrollees (excludes enrollees residing in nursing homes). Notes: Adults in families with children may be of any age (18 or older) and disability status. Percentages calculated based on unrounded numbers. Categories are not mutually exclusive. Recipients are people receiving benefits at any time during the year for at least one the programs: Medicaid/State Children's Health Insurance Program (CHIP), Supplemental Nutrition Assistance Program (SNAP), the Earned Income Tax Credit (EITC), the Additional Child Tax Credit (ACTC), housing assistance, cash from Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), or Child Care and Development Fund (CCDF) child care subsidies. For the refundable tax credits, this represents tax credits earned during the year. Recipient counts for tax credits represent the tax filer, spouse, and dependents of the tax filer. For subsidized child care, the number of people represents children who received subsidized care at any time during the year. For other programs, the number of people represents the individuals in units defined for the program for which needs and resources are measured and benefits are provided.

Conclusion

Need-tested aid is often thought of in the context of families and individuals not engaged in work. For two populations, individuals aged 65 and older and individuals with work-limiting disabilities, aid is often provided to those in families without a worker. For individuals aged 65 and older, social insurance benefits such as Social Security and Medicare are received more often than need-tested aid and help them achieve their standard of living. (Note that the analysis in this report does not capture need-tested benefits provided to those in nursing homes, which means that it likely underestimates benefits receipt and benefit amounts among individuals age 65 and older.) Few adults aged 18 to 64 without disabilities living in families without children receive need-tested aid compared to those in families with children or adults with disabilities.

For families with children, need-tested aid is commonly received by families with an adult worker. This is the cumulative result of policy changes to aid needy families with children made since the mid-1980s. It is also the result of the high work rates among adults in families with children observed before the COVID-19 pandemic. Most of the need-tested program expansions since the mid-1980s—the expansion of the EITC, the enactment of the child tax credit (and the ACTC) and its expansions, Medicaid expansions covering children based on their poverty status rather than their family's receipt of cash assistance, and the establishment of federal child care subsidies—were all put in place to supplement parents' earnings and benefits from work, and some were explicitly designed to encourage parents to work. The Personal Responsibility and Work Opportunity Act of 1996 (P.L. 104-193) ended the entitlement to monthly cash assistance for needy families with children and replaced that program with a broad-purpose block grant (TANF) that helps fund monthly cash assistance to fewer families than were provided benefits in the early and mid-1990s under the predecessor entitlement programs, as states shifted block grant funds to other activities.¹⁰

Before the pandemic, the bulk of need-tested aid was provided either in the form of noncash benefits (e.g., Medicaid/CHIP, SNAP), or refundable tax credits that were received in a lump-sum form once a year. Housing assistance and child care subsidies were received by comparatively fewer persons than the other benefits. Monthly cash benefits—which can be used to pay rent and other bills—were received by relatively few families with children before the pandemic. In 2017, the 4 million people who received TANF assistance at some point in the year represented one-quarter of all individuals who met eligibility requirements.

For 2020 and 2021, years when work was limited by the pandemic and economic insecurities faced by some households were highlighted, Congress enacted policies to increase food aid (SNAP), provide additional rental assistance, and appropriate additional funding for child care. It also enacted policies to inject cash into households, including providing most households with "stimulus checks" and (for 2021) altering the child tax credit to make it available to nonearners and to periodically advance a portion of the expected credit amount during the last six months of the year.

Under current law, many pandemic-related policies will expire by the end of 2021. Thus, policies would generally revert back to those that were in place before the pandemic, providing the bulk of aid to families with children in the form of noncash benefits or refundable tax credits provided once a year.

President Biden's "American Families Plan" would extend some of the policies enacted in response to the economic impact of the pandemic into the post-pandemic period. In particular, the proposal to continue periodic cash payments of the child tax credit would bring to the fore the policy tradeoff between economic security for those working irregularly or not working, versus conditioning benefits on work and earnings and thus providing incentives to work and labor force participation.

The President's plan would also expand some of the existing work-based policies, such as child care assistance. Thus, it would retain some of the character of pre-pandemic, need-based aid by further expanding earnings supplements to families with children. This may raise questions about how much is spent to supplement earnings and whether there are alternatives (e.g., wage and labor market policies) that could be pursued to reduce reliance on need-tested benefits more broadly.