Commentary: It's a bad time to rely on the social safety net

Yahoo

4 days ago

Whether Americans want it or not, President Trump and his fellow Republicans are making historic cuts to the nation's safety net programs. It's the biggest test in decades of whether the 'nanny state' really is bloated, as critics insist, or is too essential to get rid of.
The experiment will inflict pain on millions.
The huge tax bill Trump recently signed contains numerous provisions that will remake the economy by favoring certain industries and classes of workers over others, stimulating spending for a while — and adding at least $4 trillion to the national debt. The two political parties and their supporters will dicker for months over whether the tax cuts help ordinary workers or favor the wealthy too much.
Read more: What is the US debt ceiling, and how does it impact you?
There's been less focus on various ways the tax law and other actions by the Trump administration will dismantle social welfare, yet those changes could end up more consequential than the tax cuts. Federally funded healthcare and food aid are both set to undergo the biggest cuts in the history of those programs. The changes will come in spurts, and it won't always be apparent that federal policy is to blame. The end result, however, will be a sharp reversal of modern trends, with the nation's social safety net shrinking rather than expanding.
The number of Americans lacking health insurance is set to rise by 16 million through 2034. Cuts to food aid will hit another 16 million or so. Some Americans, susceptible to both, will endure an unfortunate double whammy. While these are deliberate policy options chosen by Trump and his fellow Republicans, they'll hit Democratic, Republican, and Independent voters more or less the same.
The biggest changes come from the tax law. To offset trillions in lost revenue from keeping tax rates low and enacting new tax cuts, Congress made major changes to Medicaid, the health program for the poor, that will ultimately result in lower coverage rates. The law makes it harder for adults to qualify for coverage, for instance, and to keep coverage once they qualify. The Congressional Budget Office estimates all these changes combined will reduce the number of people covered by Medicaid by 7.8 million by 2034.
Other changes in the law will make it harder to qualify for coverage under the Affordable Care Act, at the same time the Trump administration is making its own administrative changes to the ACA and dialing back coverage even more. The Republican-controlled Congress is also likely to let a set of temporary healthcare subsidies expire this year, making ACA policies more expensive for some 4 million people, in some cases prohibitively so. All these changes combined would lower ACA coverage by 8.2 million, according to the CBO.
That would add 16 million Americans to the uninsured rolls, raising the uninsured rate from a near-record low of 7.9% now to 9.2% in 2028. KFF forecasts that the uninsured rate would jump the most in Florida, Georgia, Mississippi, Louisiana, and Texas — which all have Republican governors. In Florida, as one example, nearly 1 million people are likely to lose coverage.
Healthcare cuts in the tax-cut law will reduce government spending by about $1 trillion during the next 10 years. The reduction in food aid will be small by comparison, trimming $114 billion over a decade. But that will still have widespread effects. The Urban Institute estimates that around 5.3 million families will lose food assistance worth at least $25 per month. At about three people per family, that's 16 million mouths getting a little less. There's never been a cutback of that magnitude in food aid.Some conservatives argue that welfare programs have gotten out of hand, making some cutbacks necessary. They've long lobbied for work requirements, tighter eligibility standards, and other measures to ensure that aid programs are not abused and are limited to those who need them most.
Yet even some Republicans balked at the cuts Trump was pushing for in the tax bill. Two Republican senators voted against the bill because of Medicaid cuts. Republican Sen. Lisa Murkowski voted for the bill, but only after negotiating special exemptions on some Medicaid cuts for her own state.
One particular concern for some Republican legislators is the fate of rural hospitals reliant on Medicaid funds to keep their doors open. More rural hospitals have closed than opened during the last 10 years, and many remain unprofitable. The final tax bill included a $50 billion rural hospital fund to offset losses from Medicaid cutbacks. But that probably isn't enough, which means Congress may have to provide more money for these care centers or face voter wrath.
Ordinary Americans will notice these changes piecemeal.
Some will face higher premiums when they try to renew a policy under the ACA this year or next. In some cases, the cost could jump so much that coverage will become unaffordable. Medicaid enrollees will notice new paperwork requirements to prove they have a job or otherwise qualify. There will be more frequent check-ins and people who can't keep up with the red tape will lose coverage. Some rural hospitals will inevitably close, while others will cut back or eliminate services such as mental health or disability care. There will be more paperwork and tougher cutoff points to qualify for food aid, as well.
Voters will have their say. In 2018, they revolted against a new Republican tax cut law by giving Democrats control of the House of Representatives in a 'blue wave' election. And that law included no major benefit cuts, just tax breaks voters thought favored the wealthy over everybody else.
Are Americans more prepared for austerity now?
There's no reason to think so. High inflation of the past few years has hammered purchasing power and affordability remains a top voter concern. If Republicans cutting the safety net know something the rest of us don't, maybe they should start explaining.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
Click here for political news related to business and money policies that will shape tomorrow's stock prices.