A Deadly Poverty Trap: Asset Limits in the Time of the Coronavirus

A staff member pushes a patient in a wheelchair at  a New York City hospital, March 2020.

As the COVID-19 pandemic triggers unprecedented economic turmoil, lawmakers, economists, and advocates are renewing calls to eliminate asset tests in public assistance programs. These tests—which require applicants and beneficiaries to have resources below a certain threshold in order to qualify for benefits—trap people in a state of economic precarity and have been particularly harmful for people with disabilities, whose economic condition has generally declined since the 1970s.

Years of research show that asset limits are an impediment to saving and wealth-building, but most major public assistance programs continue to rely on them to determine eligibility. Alarmingly, this means that people who have participated in benefits programs lack the savings necessary to weather the financial storm triggered by COVID-19. This pandemic may increase legislative will, at least temporarily, to suspend asset tests for certain programs and raise the asset limits for Supplemental Security Income (SSI) recipients. However, it should not have taken a global pandemic to recognize that a system that bars low-income, mostly disabled, beneficiaries from saving would render them more acutely vulnerable during crises.

Asset limits undermine program beneficiaries’ ability to prepare for financial crises

Most major public assistance programs are means-tested, in that they restrict eligibility to people with incomes below a certain threshold—and apply stringent asset tests to ensure that beneficiaries’ resources do not exceed the limit set for that program. With unemployment spiking because of the coronavirus pandemic, these asset restrictions will prevent many newly unemployed people from obtaining the relief these benefits programs provide. There is great variability across states and programs, but generally, assets include liquid and nonliquid resources such as checking and savings accounts, stocks and bonds, and certain property, but not net worth in homes and cars under a certain value.

These limits are purportedly in place to ensure that only the neediest people receive benefits. In practice, however, they set up a perverse and counterintuitive incentive structure that compels people to spend down their monthly earnings or risk having their benefits cut. Put simply, benefits recipients are forced to compromise their long-term economic security by depleting their existing savings in order to attain the immediate and life-sustaining relief these benefits programs provide.

Furthermore, the variability across programs creates a bureaucratic quagmire that serves as a barrier to applying for and receiving needed assistance. Reviewing prospective and current beneficiaries’ reported assets is administratively burdensome and costly for both the states and the families that must compile this information.

And critically, the benefits that these programs provide are meager, preventing recipients from attaining long-term economic security through participation in the programs alone. For example, the SSI program provides modest monthly cash assistance to seniors and people with significant disabilities that preclude substantial gainful employment. In 2020, the maximum federal benefit for individuals is $783 a month, nearly three-quarters the federal poverty line. Therefore, the SSI benefit alone is insufficient to lift beneficiaries out of poverty but plays an essential role in keeping recipients from sinking into deep poverty.

However, the stringent asset limits associated with SSI undermine this potential benefit. To be eligible, applicants cannot have assets that exceed $2,000 for individuals and $3,000 for married couples. These limits have not been updated in 40 years, thus pushing beneficiaries deeper into poverty every year. Given the strict limits, not only are beneficiaries depleting their monthly earnings to maintain eligibility, but couples are also being penalized due to the substantially lower asset limit for married individuals. Because of this system, as the COVID-19 pandemic spreads, SSI recipients will not have any meaningful savings to draw on, leaving them especially vulnerable to homelessness and food insecurity.

Asset limits affect people with disabilities in myriad ways

The harms caused by asset limits are far-reaching, trapping disabled people and families, in particular, in precarious economic conditions and contributing to the disproportionately high poverty and unemployment rates they face. Therefore, when crises such as the current pandemic grip the country, these groups are among those hardest hit.

Yet asset limits also compound the oppression faced by people with disabilities in less direct ways. The use of these tests carries unintended consequences, such as those outlined below, that undermine the long-term financial security of people with disabilities and entrench ableism.

Financial exclusion

In 2017, slightly more than one-quarter—26 percent—of working-age people with disabilities lived in poverty, more than twice the rate of their nondisabled peers. Furthermore, a whopping 60.5 percent of households containing a person with a disability were considered “asset poor,” meaning they did not have enough resources to live at the federal poverty level for three months. In 2020, a family of four would need at least $6,550 to live at the federal poverty line for three months; yet this amount is higher than the asset limit set for the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF) in several states. There is evidence to show that people who receive means-tested public assistance are more likely to be asset poor than low-income people who are not enrolled. In fact, asset tests in public assistance programs are associated with a diminished likelihood of benefits recipients having even modest savings, as well as a greater likelihood of them being unbanked or underbanked—having a bank account but also using alternative financial services such as payday loans.

A study by the Urban Institute found that in states with relaxed asset limits for SNAP, participating low-income families were 5 percent more likely to have a bank account than they were in states with strict asset limits. For people with disabilities, this is critical. The most recent survey by the Federal Deposit Insurance Corporation shows that working-age people with disabilities are disproportionately more likely than their nondisabled peers to be unbanked or underbanked. Alarmingly, this has persisted for people with disabilities, while the percentage of unbanked or underbanked people is declining for other historically marginalized groups. This leaves individuals with disabilities more vulnerable to the economic fallout of COVID-19. The $1,200 cash assistance that the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act provides is a financial lifeline. But people who are unbanked will have to wait several weeks longer to receive this critical assistance.

Increased criminalization and surveillance

The U.S. criminal legal system has grown increasingly entangled with the administration of public assistance programs. Following the welfare reform policies of the 1990s, states began collecting more invasive biometric data and information from applicants, beneficiaries, and their families. These data are often shared with law enforcement, expanding the reach of the carceral system and forcing applicants and beneficiaries to forgo most expectations of privacy in order to retain eligibility. Critically, law enforcement is not simply engaged in passive surveillance, but rather actively using it as a tool to punish people who have evaded the reach of the criminal legal system. For instance, people who have outstanding warrants or have violated the terms of their parole risk having their benefits cut. Additionally, the latest COVID-19 response package bars people who have fallen behind on child support payments from receiving the $1,200 stimulus check meant to provide immediate economic relief.

In 2019, the Trump administration proposed monitoring the social media use of recipients of Social Security benefits in order to identify fraud. While this proposal was ultimately dropped, it reflects a disturbing reality for benefits recipients: Even though fraud is incredibly rare, presumptive criminality is attached to those who apply for and depend on benefits. This web of criminalization and surveillance ensnares people with disabilities, who are overrepresented in the carceral system and more likely to have criminal records or receive a mental illness adjudication, further undermining their economic security.

This is especially critical now, since prisons and jails accelerate the spread of infectious diseases such as COVID-19. People who are incarcerated cannot practice physical distancing and lack access to adequate health care, sanitation, and other critical supports. Once released, formerly incarcerated people face intense economic and political disenfranchisement, leaving them without a safety net. As a result, people with records and those currently incarcerated—a disproportionate number of whom are disabled—will be especially vulnerable to infection, death, and economic hardship due to COVID-19.

Asset limits compound this marginalization. By trapping beneficiaries in economically precarious positions, they often leave people with few legal options for meeting their needs. This poverty trap, coupled with the punitive administration of public assistance programs, accelerates criminalization and surveillance at a time when people involved in the carceral system are already at extreme risk.

Devaluation of disabled people’s lives and labor

The ableist myth of self-sufficiency undergirds the stated rationale for asset limits to restrict eligibility. A quick scan of public assistance program websites underscores how ubiquitous this myth is. For instance, the U.S. Department Health and Human Services’ landing page for TANF states that one of the program’s core goals is “to end the dependency of needy parents on government benefits by promoting job preparation, work, and marriage.” This framing positions autonomy as normative and valuable, and “dependency” as harmful and deviant. For disabled people, such framing carries real-life consequences. It stigmatizes people with disabilities as lazy, deceitful, or unworthy for seeking out the support needed to navigate environments that are inaccessible and ableist. Furthermore, the denigration of “dependency” as a moral failing has historically been used to marginalize people of color, women, and, especially, those at the intersection of these two identities.

This valuation of economic self-sufficiency has resulted in a system that pushes disabled people further into the financial margins. Many disabled people cannot work or create without risking their eligibility by surpassing the asset limits that programs have in place. And when disabled beneficiaries can work, they are more likely to be working gig jobs or even in sheltered workshops that pay subminimum wages. This devaluation of disabled people’s labor ties their worth to their perceived or actual economic output and renders disabled bodies disposable. This politics of disposability is epitomized by the recent spate of eugenicist proposals to ration treatment for COVID-19.

Conclusion

Asset limits trap beneficiaries in poverty and have cascading effects on the economic and social well-being of all people with disabilities. As another recession looms, it is critical that Congress act quickly to implement long-overdue structural changes to public assistance programs. The recently introduced Allowing Steady Savings by Eliminating Tests (ASSET) Act would eliminate asset limits for SNAP, TANF, and the Low-Income Housing Energy Assistance Program (LIHEAP). Moreover, it would raise the asset limits associated with SSI from $2,000 for individuals and $3,000 for couples to $10,000 and $20,000, respectively, eliminating the marriage penalty. Crucially, it would also index the new limits to inflation.

Additionally, the Achieving a Better Life Experience (ABLE) Act—which allows people with disabilities to open tax-advantaged savings accounts without affecting their eligibility for certain means-tested programs—should be expanded. Under current law, only people with an onset of disability prior to turning 26 are eligible. This age restriction should be eliminated so that all people with disabilities can receive the benefits they deserve.

Even absent congressional action, states have considerable latitude to raise or eliminate asset tests for SNAP and TANF. Several states and the District of Columbia have already done so by using “broad-based categorical eligibility” for SNAP, which gives states the flexibility to lift or eliminate SNAP asset limits—flexibility that the Trump administration has sought to eliminate—by automatically enrolling applicants based on their eligibility to receive benefits from other specified means-tested programs. States that have yet to eliminate these asset limits should act quickly. As the COVID-19 pandemic further destabilizes the economy, it is more necessary than ever to ensure that all people, including those with disabilities, have the resources necessary to weather this crisis.

Azza Altiraifi is a research and advocacy manager for the Disability Justice Initiative at the Center for American Progress.

The author would like to thank s.e. smith for their guidance, Rejane Frederick for her fact-checking assistance, and Lily Roberts, Jaboa Lake, Areeba Haider, Rebecca Cokley, Ed Chung, Connor Maxwell, Maura Calsyn, Robin Bleiweis, Shilpa Phadke, and CAP’s Editorial team for their contributions.

To find the latest CAP resources on the coronavirus, visit our coronavirus resource page.