As cities, counties, and school districts across Mississippi cut employment to balance budgets, another economic whammy is about to wallop local communities.
Since the economic collapse in 2008, more and more citizens have come to rely on “safety net” programs to get by. Those who lost jobs began drawing unemployment. Those and others qualified for the Supplemental Nutrition Assistance Program (food stamps), Women-Infants-Children (WIC), and other programs to feed themselves and their families. Others qualified for Medicaid to get medical care. Still others qualified for Supplemental Social Security (SSI) and Temporary Assistance to Needy Families (TANF). Many for the first time participated in Earned Income Tax Credit benefits.
Besides providing needed benefits to those hit by the Great Recession, these safety net programs brought money into local communities, money needed to keep local economies functioning.
Bureau of Economic Analysis (BEA) data shows that from 2007 to 2010, transfer payments from governments to individuals in Mississippi jumped 30% while net earned income fell 13% and income from interest, dividends, and rents fell 11%. (BEA has not published details for 2011, but total transfer payments increased another 20% for Mississippi.)
In 2010, transfer payments made up 26% of total personal income in Mississippi, but in poorer, rural counties like Noxubee and Kemper, transfer payments were 40% of the total.
The biggest increase in safety net expenditures, as you might expect, came from unemployment compensation, up a whopping 290%. Food stamp payments leaped 90%. Earned income tax credits, WIC, and other income maintenance programs jumped 55%. TANF expenditures increased 28%; Medicaid 30%; and SSI 18%.
Early next year, if not sooner, funding for these programs will begin to decrease. For the past year the House and Senate have been squabbling over extended unemployment benefits and food stamps. The budget “sequestration” act passed by our gridlocked, dysfunctional Congress will implement serious cuts for all these safety net programs effective in January. Any last minute deal to avoid sequestration will include safety net cuts too.
Such cuts will result in less money coming into Mississippi communities, particularly poorer, rural communities. Less money in circulation in local economies causes local businesses to struggle, bankruptcies to increase, and sparks lay-offs and other economic disruptions.
The remedy to this plight is an economic rebound that puts people back to work. So far, that hasn’t happened in Mississippi, which just entered a new recessionary phase. Average total employment this year is still below the 2007 level and the unemployment rate remains high at 9.1%. In 33 of our 82 counties the unemployment rate remains over 12%.
Until an economic rebound occurs, wise congressional leaders would phase-in cuts to safety net programs. Since none of those appear to be in charge, wise local leaders should prepare for tough times.