Sep 4, 2018 - Economy & Business

The middle class gets almost half of U.S. safety-net payments

U.S. entitlement spending is increasingly going to the middle class, according to newly released data by the Congressional Budget Office.

Data: Congressional Budget Office; Chart: Chris Canipe/Axios
Data: Congressional Budget Office; Chart: Chris Canipe/Axios

Why it matters: As wages have remained stagnant, more people can't afford middle-class basics, and income inequality grows, the middle class is increasingly relying on the federal safety net, according to the new report by Brookings Institutions' Future of the Middle Class Initiative. "It is a mistake, now, to think of welfare as something just for the poor," Richard Reeves, the report's author tells Axios.

The trend is most clearly seen in the second and middle income quintiles, where the average household income was $31,087 and $54,041 in 2014, according to the Tax Policy Center.

  • One of every $7 spent on social program benefits went to families in the middle quintile of the income distribution in 2014.

Federal safety net money is also making up a greater share of lower-middle class incomes, according to the report. Meaning that not only is more money going to the middle class, some middle class families depend on it more.

One key finding: Health care is a big driver. Medicaid expansion has made more lower-middle income Americans eligible for the program, and now less than half of Medicaid spending goes to the lowest quintile.

  • Medicaid spending on elderly households (65 years or older) has tripled since 1979, and around 60% of it went to the elderly in the middle class in 2014, the study found.
  • Increased subsidies for the Affordable Care Act has also contributed to the overall trend.
  • There has also been notable growth in the share of Supplemental Nutrition Assistance Program (SNAP) benefits that have gone to those lower-middle income quintiles, according to the report.

Go deeper: With Richard Reeve's full report.

Note: The welfare spending data include Medicaid and the Children’s Health Insurance Program, Supplemental Nutrition Assistance Program, Supplemental Security Income, housing assistance programs, subsidies for Medicare Part D, Temporary Assistance for Needy Families, child nutrition programs, the Affordable Care Act's cost-sharing reduction payments, state and local assistance programs and the Low Income Home Energy Assistance Program.

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