Improving Information for Social Policy Decisions -- The Uses of Microsimulation Modeling: Volume II, Technical Papers (1991)

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DATABASES FOR MICROSIMULATION: A COMPARISON OF THE MARCH CPS AND SIPP 14 available evidence on the overall effects of these problems on estimates of the population participating in one or more of the major income support programs. A primary goal of the assessment is to provide information that will help answer the question of whether— and when—it would be desirable, based on considerations of data quality and adequacy (leaving aside questions of costs and feasibility), to rewrite the existing income-support program models (or build new models) to use SIPP instead of CPS as the primary source of data input. (See Doyle and Beebout [1990]; Doyle, Citro, and Cohen [1987]; and Doyle et al. [1987], for detailed assessments of feasibility considerations in using SIPP to model the food stamp program.) A second goal is to describe the division of labor between the Census Bureau and the modelers in the work that is currently done to correct various data problems. This description raises the question of whether the current allocation is optimal. A needed extension of the analysis, which is only hinted at in this chapter, is to consider ways to develop an integrated database for modeling tax programs together with income support programs. The question becomes whether such a database, which requires good data on the entire range of the income distribution, is best built on the SIPP or the March CPS. The analysis in this chapter draws heavily on Survey of Income and Program Participation: Quality Profile (Jabine, King, and Petroni, 1990), which assesses sources of error in the SIPP, includes a number of comparisons with the March CPS, and contains a long list of useful references. Additional information about the SIPP is contained in a report of the Committee on National Statistics (1989), while technical documents of the Bureau of the Census (1988, 1990) provide additional information about the March CPS. DATA NEEDS FOR MODELING INCOME SUPPORT PROGRAMS Programs to provide cash and in-kind benefits for income maintenance in the United States are of a bewildering variety and complexity. Three major programs are Aid to Families with Dependent Children, supplemental security income, and food stamps. AFDC is a program to provide benefits to families with children in which there is a single parent with insufficient income or two parents with insufficient income because of disability or unemployment of the principal earner. The program is financed by a combination of state and federal funds. SSI is a federally financed program to provide benefits to low-income elderly and disabled adults. Food stamps is another federally financed program that provides coupons that can be redeemed for food purchases by low-income households. Other programs of assistance to the low-income population include Medicaid; subsidized housing; a program to reimburse heating bills; the Women's, Infants', and Children's supplemental feeding program (WIC); school lunch and breakfast programs; and general assistance programs. (The latter programs, 

DATABASES FOR MICROSIMULATION: A COMPARISON OF THE MARCH CPS AND SIPP 15 which are financed by the states, are designed to provide limited support to people not covered in other programs.) Another set of social insurance programs provide income support, but under entirely different financing mechanisms and rationales. These programs, which include social security payments to survivors and disabled workers, unemployment insurance benefits, and workers' compensation, are financed through employment- related taxes rather than general taxes and do not impose a means test for eligibility (although benefits typically vary as a function of prior earnings). Social insurance programs are geared to provide either temporary income assistance to people who lose their jobs while they search for other employment (in the case of unemployment insurance) or long-term assistance to workers who become disabled or to workers' survivors. Social insurance programs often intersect with “welfare” programs: for example, families in which the principal earner exhausts his or her unemployment insurance benefits may become eligible for AFDC and food stamps. Finally, the federal government has been giving more and more attention to linking cash support programs with other kinds of programs to encourage attachment to the labor force and to reinforce family responsibilities. For example, the 1988 Family Support Act mandated job training and employment programs for AFDC recipients, provided for transitional Medicaid and day care benefits for recipients who seek employment, and strengthened the Child Support Enforcement Program for obtaining income support from noncustodial parents. The data requirements for modeling the three major income support programs considered in this chapter— AFDC, SSI, and food stamps—are extensive and varied (see U.S. House of Representatives [1990] for descriptions of the program regulations). In brief, they include eight factors: • Monthly data The AFDC and food stamp programs have monthly accounting periods: that is, they look only at an applicant's circumstances in the previous month to determine eligibility and benefits. SSI has a 6-month accounting period. Ideally, all data needed to simulate processing an application—income, assets, family composition, etc.—should be available on a monthly basis. • Data on household and family composition that are sufficiently detailed to permit identifying the eligible unit Needed information for this determination includes the income, age, and disability status of each household member, relationships among household members, and other characteristics (for example, whether a woman is pregnant with her first child and hence possibly eligible for AFDC and food stamps). Each of the programs has different criteria for which members of the household or family—as these entities are usually defined in censuses and surveys—comprise the eligible unit. Frequently the eligible unit for AFDC 

DATABASES FOR MICROSIMULATION: A COMPARISON OF THE MARCH CPS AND SIPP 16 and SSI is smaller than a household or family. For example, an AFDC unit in a three-generation household could exclude the grandparents, a stepparent, and other adults such as siblings of the parent, unless any of these people were determined to be caretakers who were “essential to the well-being of a recipient.” The food stamp program has more inclusive eligibility rules, but some recipient units are still smaller than a household. For example, workers on strike, undocumented aliens, and people who refuse to comply with the work registration requirement are ineligible. Also, elderly individuals and couples who prepare their own meals can form a food stamp household separate from other household members, so long as total income for the latter is below 165 percent of the poverty level. • Detailed data on sources and amounts of income All three programs set limits on income from other sources in determining eligibility and benefits, and not all income is counted in making the determination. For example, the food stamp program does not count earnings of students under 18, loans, or nonrecurring lump-sum payments. • Information on allowable deductions from income All three programs allow applicants to exclude certain kinds of expenses from their gross income. For example, the food stamp program excludes a percentage of earnings, dependent care expenses up to a set limit, out-of-pocket medical expenditures above a set minimum, and some portion of shelter costs. The program also allows a standard deduction. The AFDC program has similar exclusions for earned income and child care costs and also permits deductions for some portion of child support payments, but it does not exclude medical or shelter expenses. • Information on asset holdings All three programs have asset as well as income tests for determining eligibility. The AFDC program limits asset holdings to $1,000 or a lesser amount set by the state. The only assets that are excepted are the primary residence; one automobile, with equity value up to a specified limit (or lesser amount set by the state); one burial plot and one funeral agreement up to a specified limit for each member of the assistance unit; property that the family is making a good-faith effort to sell; and, at state option, essentials such as clothes and furniture. The food stamp program limits asset holdings to $1,500 or less ($3,000 or less for a two-or-more-person household including an elderly member). The only assets that are excepted are the principal home and adjacent land, some household goods, and vehicles with value up to a specified limit needed to produce income or transport disabled household members. Finally, the SSI program as of 1989 limited asset holdings to $2,000 for single individuals and $3,000 for married couples, with countable assets including stocks, bonds, cash, personal effects in excess of $1,500, and other nonhousing assets. Each year, the SSI asset limits are increased by 50 percent of the rate of increase in the consumer price index. • Sufficient sample size to support modeling fine-grained changes to