The rollbacks to social safety nets in H.R. 1 are just the latest effort in a 50-year campaign to shift financial risk from big institutions and monied interests onto ordinary households.
This post has been republished from Professor Patricia McCoy’s Substack. Her new book, “Sharing Risk: The Path to Economic Well-Being for All,” is available from The University of California Press.
Today, the typical family is worse off economically than it was in the 1960s, due to a concerted campaign by businesses and governments to dump their financial risks onto breadwinners and their families. This column examines how H.R. 1 continues that campaign while undermining some of the newer social safety nets established in recent years.
Some of my past columns have discussed how H.R. 1 (popularly known as the “One Big Beautiful Bill Act”) could affect the financial health of ordinary households. Now that that legislation has become law, it’s a good time to step back and ask how the law fits into the longer historical arc of what’s been happening to working families. These families have experienced a downward economic spiral compared to their parents and grandparents in the 1960s. What caused that, and how does H.R. 1 fit into this picture?
This downward trend started in the 1970s, when governments and businesses launched a relentless and successful campaign to shed financial risk and offload it onto individual households. This “Great Risk Shift” (a term coined by the Yale political scientist Jacob Hacker) played out on multiple levels and destabilized ordinary households financially. The thumbnail sketch that follows summarizes the fuller discussion in my new book Sharing Risk: The Path to Economic Well-Being for All.
One aspect of that risk shift caused wages to stall for most workers except those who were well-paid. Against the backdrop of globalization and the decline of unionization, service-sector jobs replaced better-paid factory positions. Blue-collar wages stalled, along with the federal minimum wage, which is stuck at $7.25 an hour and has not increased since 2009. Employers’ growing unwillingness to assure regular hours and full-time schedules put added downward pressure on wages. The advent of the gig economy, with its lack of employee protections, accelerated that trend. On top of all that, job security became increasingly tenuous and joblessness stints became longer on average.
Meanwhile, just when New Deal social safety nets were more needed than ever, they too came under attack. A prime example was unemployment insurance, which is supposed to provide a lifebuoy for layoffs and involuntary firings. Over time, the unemployment insurance system became riddled with holes, thanks to incessant lobbying by employers who resisted funding that system through taxes. As a result, fewer than 3 out of 10 jobless workers even received basic unemployment benefits in 2019, right before the Covid-19 pandemic.
This contraction in unemployment insurance is only one way in which employers flexed their muscles to erode safety nets for workers over time. Starting in the 1980s, employers also rushed to replace their defined-benefit pension plans—in which companies guaranteed a monthly pension check to retired workers—with defined-contribution plans such as 401(k)s, in which the financial risk falls principally on retirees. Defined-benefit plans, the gold standard among pensions, have now gone the way of the dinosaur, at least in the private sector. Tens of millions of additional workers have no workplace pension plans at all.
Elsewhere in the private sector, a further risk shift was ushered in by insurers. This occurred in the individual health insurance market, which serves individuals and families who do not have health coverage through government or work. First, this development reared its head in the market for health insurance for senior citizens, which private insurers increasingly denied or priced prohibitively starting in the 1950s. Eventually, older adults had such difficulty securing affordable coverage that Congress enacted Medicare in 1965 to provide health insurance for nearly everyone age 65 and up.
Medicare’s passage, however, did not solve similar gaps in the private individual market for people under age 65. In that part of the market, insurers excluded coverage for pre-existing conditions and sometimes denied coverage at all. Insurers further canceled individual policies or refused to renew them for poor health, claims history, or pre-existing conditions. In addition, preventive care was commonly excluded from coverage. This state of affairs persisted until 2014, when the Affordable Care Act (ACA) finally fully took effect.
In a one-two punch, the risk shift occurring in the private sector accompanied a similar risk shift by governments. One example involved cash welfare. Originally, public assistance supported poor single mothers to stay at home to care for their children. But in 1996, Congress curtailed it by conditioning welfare on work and placing a five-year lifetime cap on benefits.
Meanwhile, state governments engineered a risk shift of their own regarding paying for college. College has long been viewed as the doorway to social mobility and financial security for the working class. Throughout the 1980s, college degrees were eminently affordable because the states heavily subsidized public universities and colleges. (Case in point: the in-state first-year tuition for my law degree at U.C. Berkeley in 1980 was around $550—for the whole year). But starting in 1989, states slashed their higher education spending per student. State schools made up for those lost subsidies by sharply raising tuition, which scholarships failed to offset. With wage stagnation, something had to give, and students and their parents increasingly turned to student debt to pay for college – or opted out of college at all.
Over the past half century, then, corporations and governments thrust increased financial risk onto individual households, which suppressed their incomes and increased their expenses. On the income side, most workers’ pay stalled over that period after adjusting for inflation. Employees also experienced growing income volatility and joblessness. Meanwhile, social safety nets designed to replace lost income when people could not work came under attack. Private pensions (for those lucky enough to have them) also became less secure as employers scrapped their defined benefit pension plans and replaced them with defined contribution plans. Doing so relieved employers of responsibility for funding traditional pensions and dumped it on their employees, who now became responsible for saving enough and investing wisely.
Just as household incomes were going flat and fluctuating more, some major categories of household costs were going up. Families had to cover more out-of-pocket medical expenses themselves as their health coverage contracted or disappeared. In the event of catastrophic illness, the cost burden on patients and their families could capsize them financially. Meanwhile, one escape hatch for beating wage stagnation—a bachelor’s degree—increasingly became financially out of reach as states ended tuition subsidies and public universities and colleges ratcheted up tuitions. While college students could finance their degrees with student loans, they were left with a new problem: becoming overloaded with debt.
Some Major Progress Nonetheless
This vast risk shift posed grave concern, but it was not monolithic. Post New Deal, starting in the 1960s and up through the Biden Administration, state and federal governments have succeeded in instituting programs to relieve the financial risk on households from time to time.
One group of initiatives has focused on raising the income of low-wage workers. 21 states raised their state minimum wages as of January 1 this year, while 13 of those states raised their minimum wage to $15 an hour or higher by 2026. Meanwhile, Congress rolled out the Earned Income Tax Credit in 1975 to supplement many workers’ income through a tax credit that reduces their federal tax liability dollar for dollar. The companion Child Tax Credit, which Congress first approved in 1997, provides eligible working parents with tax credits for every eligible child under age 17. These tax credit programs proved so popular that Congress has expanded them 15 times since 1984.
A second series of reforms expanded access to health insurance. The first phase came in 1965, when Congress created Medicare, covering most U.S. residents age 65 and up. That same year, Congress also authorized Medicaid, which provides free or nearly free health insurance to eligible indigent households, including impoverished senior citizens and poor with disabilities. While these enactments were major achievements, they did not fix other problems in health insurance for the rest of households under age 65. Congress did not address those gaps until the landmark Affordable Care Act, passed in 2010, which transformed the individual market into one that was governmentally sponsored. Private insurers who sell individual policies in today’s market operate under strict federal rules requiring easy eligibility, improved coverage, and cost controls. The ACA also expanded Medicaid eligibility to near-poor residents and required large employers to offer health insurance at work.
Finally, the Obama and Biden Administrations took piecemeal steps to make student loan repayments more manageable, after delinquencies and defaults soared following the 2008 financial crisis. The biggest change involved expanding income-driven repayment (IDR) programs for borrowers who had difficulty making the standard ten-year repayment schedule for federal student loans. IDR plans usually lower monthly payments by limiting those payments to a percentage (usually 10% or 15%) of a borrower’s discretionary income. In addition, IDR plans stretch repayment over 20 or 25 years while offering loan forgiveness for any remaining balance at the end of that term. President Biden also sought widescale student debt cancellation through agency action, but the Supreme Court struck down that plan due to lack of congressional approval.
H.R. 1, a/k/a The Great Risk Shift 2.0
This month’s passage of H.R. 1 threatens to undo much of that progress and is the biggest measure to dismantle social safety nets in years. It will have such a devastating effect, in fact, that it’s fair to call H.R. 1 “the Great Risk Shift 2.0.”
The Great Risk Shift 2.0 was engineered by Republicans in Congress, and it benefits the wealthiest members of society at the poorest’s expense. The Congressional Budget Office (CBO)—which is respected for being nonpartisan—documented H.R. 1’s harm to lower-wage households in its recent analysis of the law’s distributional effect. CBO spelled out this damage in unmistakable terms: “resources would decrease for households toward the bottom of the income distribution, whereas resources would increase for households in the middle and top of the income distribution.” Households in the bottom 10% according to income would lose about $1,600 a year on average. In contrast, households in the top 10% would keep an extra $12,000 a year on average, principally due to reductions in their taxes. On July 8, soon after H.R. 1’s passage, the Penn-Wharton Budget Model reported similar effects.
H.R. 1 accomplishes this by sabotaging some of the biggest advances in safety net protections in recent times. It does so with a layer cake of provisions that make millions of families worse off. I can think of at least 4. First, the law tightens Medicaid eligibility by imposing new red tape in the form of work certification requirements. Second, Congress slashed the premium subsidies for health insurance under the Affordable Care Act when it refused to extend them. Third, H.R. 1 cancelled the most manageable income-driven repayment programs for federal student borrowers. Finally, H.R. 1 stiffened work documentation requirements for SNAP food stamp benefits and made other detrimental changes to that program designed to make food assistance less generous.
Although CBO and Penn-Wharton emphasize that poorer families will suffer the most, Republicans cannot blithely assume that the middle class is immune from adverse effects from their recent congressional actions. Some of the coming changes will slam middle-income and upper-middle-income families as well. Exhibit A is the Republicans’ decision to let the enhanced premium tax credits for Obamacare individual health insurance lapse at the end of this year. These tax credits, which subsidize premiums for Obamacare policies, extend so far up the income spectrum that 92% of Obamacare policyholders receive them. That adds up to 22 million people whose health coverage premiums will skyrocket overnight.
Similarly, the replacement of most income-driven repayment programs with two plans with stricter terms will hit federal student borrowers hard, including some in the middle class on up. That’s a real blow because almost half of federal student borrowers whose repayment periods have started are not repaying their loans and are in dire need of more manageable payment plans, according to the latest federal data. Under H.R. 1’s new “Repayment Assistance Program” (RAP), borrowers making less than $30,000 or more than $80,000 a year can expect their student loan payments to rise, according to the Urban Institute. The Urban Institute further concluded that “[b]orrowers with high debt from graduate school and low or middle incomes will see a large increase in the share of their debts they are required to repay because the RAP extends the loan forgiveness point from 20 or 25 years to 30 years.” This will negatively affect student borrowers across the income spectrum, both low and high.
These effects have not been lost on the American public. This weekend, in fact, the Wall Street Journal came out with a new poll reporting that 52% of those polled oppose H.R. 1. “At least half of poll respondents said the legislation would harm poor people, the working class, Social Security beneficiaries, the U.S. economy, Medicaid recipients, nutrition-assistance recipients and the federal budget deficit.” That’s a very long list. And almost 70% of those asked “said the law would help the wealthy . . .”
As this shows, H.R. 1 already has garnered public mistrust, and that’s before its changes have even kicked in. Once they do, query the cumulative toll on voters and their family members as those changes take effect, one by one. Let me wrap up by laying out the timeline of those changes and the number of people who might possibly be affected:
· Sometime in 2025: SNAP food stamp work certification requirements could apply as soon as this year. Approximately 41 million SNAP recipients would either have to meet those requirements or prove they qualify for an exemption. A large majority of them (possibly three-fourths) will also be affected by Medicaid rollbacks.
· January 1, 2026: Enhanced premium tax credits for Obamacare health policies will end for more than 22 million people. When that happens, their net premiums will jump by 75% on average overnight. A good number of those people will cancel coverage because they no longer can afford it. 4.2 million of them will become uninsured by 2034 as a result, according to CBO. Separately, over 500,000 people who currently receive subsidized premiums for Obamacare are also on SNAP and could lose those benefits as well.
· Sometime in 2026: The U.S. Department of Education announced that it plans to roll out the new RAP repayment plan sometime in 2026, which will increase monthly minimum payments for many distressed student borrowers. When that happens, 17 million borrowers who owe but are not currently paying their federal student loans will face new and possibly less favorable payment options under H.R. 1’s provisions.
· November 3, 2026: The mid-year federal elections take place.
· December 31, 2026: The new Medicaid work verification requirements will take effect, affecting 71 million Medicaid participants, based on this year’s enrollment rates.
This post has been republished from Professor Patricia McCoy’s Substack. Her new book, “Sharing Risk: The Path to Economic Well-Being for All,” is available from The University of California Press.
BC Law: Impact 