Hearings to examine the burden of federal benefits cliffs on small businesses and workers.

Over the past fifty years, the national poverty rate has barely moved, and Iowa is no exception. For far too many small businesses and their employees, federal bureaucracy stands in the way of economic opportunity. Today, I am excited to convene this committee to discuss the important issue of federal benefits cliffs, and their impact on America's job creators. These cliffs occur when a small business increase in income leads to a significant decrease in federal welfare benefits. Benefits cliffs create a paradox where the federal government, in effect, penalizes workers and leaves them worse off for pursuing higher income. It's clear that there isn't a one size fits all solution. The reality is, despite over eighty federal programs and a trillion taxpayer dollars spent annually, the federal government often fails to address the barriers to self-sufficiency faced by those living in poverty. To make matters worse, the complex interactions of dozens of different programs create unintended cliffs and inhibit upward mobility. As a result, for many Iowans and Americans, country struggling to make ends meet, taking one step forward often means taking two steps back. With misguided incentives, workers are encouraged to put off promotions, turn down full-time work, and decline overtime opportunities to maintain eligibility for federal welfare programs. Benefits cliffs also create significant workforce challenges for small businesses seeking to grow their operations. Small business employers hoping to reward top talent are instead faced with the reality that due to misguided federal policies rewarding hard workers may actually harm their employees financially. A recent Ohio Chamber of Commerce survey found that one in five businesses experienced personnel issues due to workers' concerns about losing public assistance. I want to give you one brief example of the cliff effect. Years ago, while serving in the Iowa State Senate, I visited an assisted living center in my district at the time in Lenox, Iowa. I had the opportunity to visit with a young woman and single mom, likely in her twenties, who was employed by the assisted living home. She began working at the facility as a certified nursing assistant, and quickly excelled. She was a hard worker. and it was clear that the residents all adored her, which led to a point where the assisted living home offered her a supervisory role with more responsibility. The promotion, the mother explained, would be a really tremendous opportunity. However, for those receiving government assistance and having an extra mouth to feed, as she did, the decision can be a bit trickier since a higher income level may put them over the threshold for certain government assistance. This young woman, she went home, she calculated what her pay increase would be, along with the government assistance, that she would lose. And what she figured out that would if she took the promotion, she would lose about two hundred dollars a month. That two hundred dollars a month could have gone towards rent, a car, uh food or for food for her family and there are lot of basic needs in Iowa at that time that could have been met with that two hundred dollars. She was on a really tight income and she was already working with challenging numbers. To her credit, and I really appreciate this young woman, to her credit, she chose to take the promotion knowing that she would lose that two hundred dollars. a month. It wasn't an easy decision, but she knew if she did not take that prom- promotion, she would never, ever get ahead of where she was at that time for her and her child. However, for many, that decision might be much more costly and too risky. Today, I am a proud cosponsor of Senator Husted's Upward Mobility Act. The Upward Mobility Act recognizes what most Americans understand. The best solutions often don't come from Washington. The legislation creates a pilot authority for five states to combine funding from ten federal anti-poverty programs including SNAP and TANF, into one single flexible funding stream to eliminate benefits cliffs while remaining deficit neutral. This flexible funding stream will encourage states to create a smooth, gradual decrease in overall benefits as income increases, ensuring incentives remain for work and economic opportunity. Hardworking folks shouldn't be punished for doing what is right, for themselves and their families. By empowering states, upward mobility act will reduce government imposed barriers to financial independence and streamline the administration of federal welfare programs, while taking measures to protect against fraud. I know that small business owners across our nation are committed to bettering the lives and future career prospects of their employees. The values of hard work and self-sufficiency have defined who we are as a nation. By ending benefits cliffs through common sense solutions, we can ensure that workers across America are rewarded with increased opportunity on the merits of their labor. And right on time, I will now recognize our ranking member, Marky, for his comments.

Uh, thank you, Madam Chair, and um just uh for everyone's notice here, the the leadership uh does not recognize um the importance of the small business committee hearings, and they schedule roll calls on the floor of the um of the uh senate, which requires our attendance. There may be more today, um but it helps me to get my ten thousand steps, okay, just running back and forth. So there is a public health benefit that comes from it. Um thank you Madam Chair, today's hearing is about public programs and how best to support economic mobility. Uh, but MAGA Republicans have shown they aren't interested in addressing benefit cliffs. In fact, they have been callously pushing people over a cliff. It's been a year since Trump and Republicans forced through their big, ugly bill. And since then, not only has national Medicaid coverage been put at risk for eight million small business owners and their workers, but it is likely that as many as one point five million hungry children have lost their supplemental nutrition assistance program or SNAP benefits. One million, five hundred thousand children in less than one year. In Massachusetts alone, fifty thousand hungry children have lost their SNAP benefits because of harmful restrictions, in the big ugly bill uh amounting to fifteen percent fewer children in Massachusetts receiving nutrition assistance. Again, that's just in less than one year. That's food for children. In addition to taking food away from children and families, Trump's big ugly bill is forcing hundreds of rural hospitals to close around the country. It is forcing millions of people to lose their health care, and it is stealing billions of dollars in nutrition benefits from children all to pay for Trump's billionaire tax cuts uh of the twenty two million people who saw the affordable care act subsidies uh go away on December thirty first of last year ten million of those twenty two million people in America are rather small business owners or people who work at small businesses that's a dramatic spike in health care costs for those individuals and businesses and when the MAGA republicans talk about innovating our safety net programs our ears should perk up. Because to them, innovation really means providing fewer resources at the federal level, and forcing states that are already stretched thin to cover the cost. That is not innovation, that is obliteration. Trump said it himself, saying it is not possible, this is him a month ago. Trump said it is not possible for the federal government to fund Medicaid, Medicare, and Childcare And that the states should take care of those programs. Well, if the states had that money in the first place, they would have done it. That's why there is a program called Medicare and Medicaid, and why we need child care across the country. Instead, he said the federal government should focus on one thing, military spending, and he wants to increase that budget to one point five trillion dollars. He said he said it all out loud. And Trump is putting his month, month where uh his money where our money where his mouth is with that billion, a trillion and a half dollar military uh spending request. And rather than spending public benefits and reducing costs, this administration would choose to spend more than a trillion dollars on a bureaucracy to carry out illegal wars abroad, that make it more expensive to live at home. Gas prices up, food prices up, health care costs up, Medicaid slash education slashed, okay, we can see what the formula looks like. And it's clearly not the more than one point five million American children going hungry because of snap cuts. It's clearly not the eight million small businesses and their workers losing out on health care coverage. And it is clearly not the families at home whose pockets have a trump sized hole in it. While Republican slash public programs Americans are being crushed, by Trump's tariff taxes, paying more to pump, spending their hard-earned money on skyrocketing health care, grocery and electricity costs. Meanwhile, Republicans led by the self-dealer-in-chief, Donald Trump, uh give uh uh grifting the government for their billionaire buddies. The president and his MAGA lawyers are lining their pockets using preferential contracting schemes, pardons, payouts to people who attack the police. He wants a one point eight billion dollar fund, cash for criminals program, he wants a cash for criminals program so he can pay off the Oath Keepers, the Proud Boys, the Insurrectionists. It's cash for criminals, one point eight billion while he's slashing food stamps. He's slashing Medicaid. That's just absolutely it's just abominable. Uh, so he's running the Justice Department like it's a nineteen twenties gangster movie. He continues to bulldoze the law. To secure money for his vanity projects, his gilded White House ballroom, his self-glorifying Mussolini inspired arch next to the Arlington National Ceremo uh, cemetery. Today we're gonna hear Republicans claim that they want to improve public benefit programs, but when you look closely you will see how their policies erode the social safety net, so that their mega donors have more money to buy another yacht, acquire another co- country estate. It is clear that Trump and his loyalists have a different agenda, one that steals from the poor, and gives to the rich, Robin Hood in reverse, but I believe that Congress's number one priority should be to make sure that every American gets what they need for their family and I look for forward to hearing from our witnesses here today. Thank you, Madam Chair.

Thank you, Ranking Member Markey. And again, I want to extend a very warm welcome to all of our witnesses today. I'm thankful that you took time out of your busy schedules to join us here in in the committee. And we will now go ahead to witness introductions. And first we have Mister Jeremiah Tierhark from Hark from Urbandale Iowa and Mister Tierhark has uh is the CEO and founder of WebSpec a regional web software and marketing firm he is a partner at the Iowa Sign Company, president of the Iowa Fireworks Company and owner of Tierhark Properties. He also serves as the affiliate chair

Thank you, Madam Chair, and I wanna introduce uh an Ohioan, uh, Mr. Jack Schron. Thank you, Madam Chair, and I wanna introduce uh an Ohio and uh Mr. Jack Schron. Uh Jack is the president of Juergens Incorporated, a family-owned precision manufacturing firm founded in nineteen forty-two. He represents a multi-generational leadership within the company and and which produces uh work holding equipment and precision components used in industry such as aerospace, defense and industrial manufacturing. I've visited Mister Schron's facility on several occasions, and under his leadership the company has become a driving force behind efforts to position Northeast Ohio as a national hub for advanced manufacturing, emphasizing on emphasizing that long-term growth depends on skills training, and a huge advocate for skills training education and an inclusive workforce. And uh, Mister Juergens uh has invested heavily in developing talent from launching a widely used truly new training f- uh platform to fu- to funding employee upskilling apprenticeships and programs for students including all the including those with special needs and individuals seeking second chance employment. The company also reflects these values in its operations from redeveloping major industrial site into a modern headquarters and maintaining a strong commitment to employee advancement and retention at its core Juergens combines high-tech manufacturing capabilities with a broader mission, expanding opportunity, strengthening regional economy and building a more inclusive pipeline into well-paying careers and and um Uh he also uh has been active in local public service working uh being elected to the Cuyahoga County Council where he focused on economic development, workforce training and job training issues, and has served as an Army Reserve Lieutenant Colonel in both his business and civic roles. He has been a prominent advocate for strengthening skilled manufacturing in the workforce pipeline in Ohio and I'm proud to have him here testifying on ways we can end the benefit cliff. Jack, great to have you today.

Thank you, Senator Husted. Um, next I will introduce Doctor Angela Reschede. She is a senior fellow and the Rose Scholar in Opportunity and Mobility Studies at the American Enterprise Institute in Washington, DC. Doctor Reschede studies poverty and the effects of federal safety net programs, and has written extensively on the impact of federal benefits cliffs in SNAP, TANF and other federal welfare programs. She earned her PHD in public policy from the New School, Milano, and MPA from Northern Illinois University and a bachelor's degree from the University of Wisconsin, Whitewater. Thank you for being here today, and I now recognize ranking member Marky to introduce his witness.

Uh, thank you, Madam Chair. Nick Gwynn. He's a senior fellow at the Center for Budget and Policy Priorities in Washington, where he focuses on Cross-cutting Policy and Budget Issues and on Income Security Issues. He has over twenty-five years of experience working on Capitol Hill, including for the House Ways and Means Committee. And on that committee he served as the Staff Director for the subcommittee that has jurisdiction over a variety of income security programs, including unemployment insurance and the temporary assistance for needy families program. Thank you, Mister Glyn Glyn, and thanks, all the rest of our witnesses.

Thank you, Ranking Member Markey, and briefly I'll take a moment to describe the lighting system to our witnesses. There are three lights in front of you. Green means go, yellow means uh you're running out of time, and the red light means wrap it up, your five minutes has expired, so please conclude your remarks. And I ask unanimous consent that the witnesses' full statements be included in the record and without objection, so ordered. As your written testimony has been made part of the record, the committee asks that you limit your oral remarks to five minutes. And with that, Mister Tierhark, you are recognized for five minutes for your testimony.

Chair Ernst, Ranking Member Markey, and members of the committee, Senator Husted, thanks so much for having me here today. My name is Jeremiah Tierhark. I am the founder of and owner of WebSpec. We specialize in web design, software development, and marketing services. Uh, we work with companies and organizations of all sizes. We work uh with clients in every county of our home state of Iowa and across the country. My entrepreneurial journey began at five years old. I'm a fourth generation Iowa farm kid. I was looking for a way to earn money for a Nintendo. Uh, grew up on the farm, I had some pumpkin seeds, planted some pumpkins, sold them on the side of the road, and got that Nintendo. In uh high school, I was very interested in going to college, needed a way for pa- to pay for it, first member of my family to l- to go to a four year school. Um, I was able to participate in a summer scholarship program from the Herbert Hoover Presidential Library and started web spec through that program. What began as a way to cover tuition eventually grew into a company that today employs nearly fifty people. Along the way I started additional businesses, including Iowa Sign Company, Iowa Fireworks Company, and a property business offering commercial and residential rentals. Over the last twenty-five years, I've had the privilege of hiring, promoting, and mentoring employees at every stage of their career. Those experiences have really shown me that there's great opportunity in this country, but there's also some barriers that can unintentionally stand in the way of advancement. In our own business over the years, I've directly seen employees advance in their career to suddenly experience an income cliff that results in removal or disqualification of benefits. Employees trying to grow their families have left the workforce trying to navigate the high cost of child care, available assistance, and increased medical premiums. Through the property business, I've worked with tenants who receive food, utility, or housing assistance, but were effectively penalized for working full-time. When someone loses benefits due to an income cliff, it creates a lose-lose situation that simply just doesn't make common sense. I recently served as the chair of the Urbandale Chamber of Commerce, and I currently serve as the affiliate chair for the Greater Des Moines Partnership. I work with twenty-five area chambers and their member businesses across our region. Through those roles, I hear directly from employers and employees across central Iowa. A local child care business shared the story of an employee who received additional income. It triggered the loss of food, housing, and her child care assistance. So instead of feeling rewarded for working harder, she f- now found herself in a situation where she was trying to reverse the raise, reverse the benefits because what she lost outweighed the increase in wages. Another employee reduced work hours even though they were willing to work full-time because that additional income would have left them financially worse off. For employees, it creates fear and uncertainty, for employers it really creates frustration. One of our current employees, uh previously she worked as a direct service worker, and she focused on helping Iowa residents apply and maintain federal benefits for food, utility, rent, and child care assistance. She described that she would work with families and even an increase of a few dollars could trigger the loss or disqualify them from those critical benefits. These benefits are often a last resort to avoid homelessness, hunger, or financial crisis. There's great sense of pride and purpose in being able to provide for oneself, or your family, so receiving assistance from the government can be a sensitive topic as an employee. Many times the employee does not directly share what the problem is, or the reason why they've declined the promotion or position. It's difficult to make a good long-term decision when it creates a short-term financial gap. When multiple programs are involved, each with different qualifications, the decision is even more complicated. When benefits end abruptly, the system is difficult to understand, people become fearful of advancement, and distrustful of the system itself. Small business owners want to create jobs.

Mm.

Workers want to advance. Our policies should promote both. No worker should be worse off because they accepted a raise, a promotion, additional hours, or a better opportunity. A system that provides both oversight and the ability for states to streamline these multiple programs to transition citizens out of benefits as their income and careers progress will truly be an advancement that lifts the American workforce. One of the proudest moments in the life of a small business, including mine, is creating that first job. One of the proudest moments for an employee is earning a promotion, a raise, or a new opportunity. Our policies should encourage both. Let's modernize this system, let's make it better, not harder, for Americans to work, advance, and achieve their version of the American dream. Thank you for the opportunity to testify today. I look forward to any questions you might have.

Thank you for your testimony. Mister Gwyn, you are now recognized for five minutes.

Thank you, Chair Ernst, Ranking Member Markey, members of the committee. My name is Nick Gwyn. I am a senior fellow at the Center on Budget and Policy Priorities. I appreciate this opportunity to highlight the importance of protecting people from benefit cliffs which cause an abrupt loss of critical assistance when earnings rise slightly.

Can you move the microphone over, please?

Yes. Is that better?

I would like to raise five points. First, additional resources are needed to provide a more gradual down ramp in assistance, rather than an abrupt drop as earnings rise. This is a good investment for working families. Replacing cliffs with gradual phase outs without providing these resources would instead mean cutting assistance from families whose earnings are lower than those hitting the cliff. Taking this approach means less help for working families for things like food, housing, and health care. This is the basic math of benefit cliffs. We should pr- we should not pretend we can ease cliffs without providing more resources or accepting more hardship and poverty. Second, many basic needs programs already phase out benefits slowly as earnings increase. For example, SNAP disregards twenty percent of participants' earned income and then benefits gradually decline as income rises, although states can make certain choices impacting this phase out. But working families can face significant cliffs. We see this happen with child care assistance. And last year's expiration of the premium tax credit enhancements increased health care coverage for some workers, including those working for small businesses. Third, any effort to improve down ramps should start with a commitment to avoid policy changes that worsen benefit cliffs. One very concerning example, the Trump administration is considering eliminate states' long-standing flexibility to raise SNAP income and asset limits so that households with a modest gain in earnings or savings don't lose substantial SNAP benefits. Forty-six states have adopted this policy, known as broad-based categorical eligibility. eliminating it would take away food assistance from six million people, most of them in working families. Fourth, as we discussed people losing assistance to benefit cliffs, we must also recognize that millions of people are now losing essential food and health assistance because of the massive cuts in last year's budget reconciliation law H R one. One example, three point five million people have lost help the high cost of groceries, many of whom are children, as a result of the snap cuts in that law. And finally, policymakers should avoid undermining the very programs that struggling working families depend on in the name of addressing benefit cliffs. This is the reality of block grants, which are less accountable, less responsive, and less sustainable over time than entitlement programs like Medicaid and SNAP, or even discretionary programs with special specific purposes like rental assistance. The Upward Mobility Act is limited to five states over five years, but otherwise it would act like a block grant for a variety of basic needs programs, including SNAP and housing assistance. Converting these programs into a single block grant would eliminate key protections that ensure people get the benefits for which they are eligible, including fair processes for determining eligibility, and providing timely and providing benefits on a timely basis. as well as broader safeguards related to the allocation and use of program funding. And while giving states flexibility to innovate can be valuable, block grants permit, and sometimes even encourage, states to use that flexibility to redirect funding away from the core purposes for which it was approved. For example, states spend less than one-fourth of their temporary assistance for needy families or ten of block grants, on basic cash assistance for families with children, a decline of sixty-eight percent from the program's first year. Block grants also do not grow when the need for assistance increases during recessions or other circumstances. This starkly contrasts with entitled programs like SNAP, which expand immediately to address rising need. Further, because block grants are often used in diffuse ways, it is difficult to assess their impact, making them vulnerable to being cut. For example, TANF has lost half of its real value since its creation, and the social services block grant has lost eighty percent. This dramatic erosion in funding means less assistance is going to people in need. In conclusion, efforts to minimize benefit cliffs can be beneficial, but they depend largely on increased investments and must not come at the cost of undermining the assistance that working families depend on to help them meet their basic needs. Thank you.

Thank you, Mr. Gwyn. Now we will hear from Mr. Schron. You are recognized for five minutes.

Uh, thank you, uh, the chair and, uh, ranking member and members of the committee. Uh, I appreciate the opportunity to speak here today on behalf of the Benefits Cliff. Uh, my name is Jack Schron. I am the president of Juergens Incorporated. We're located in Cleveland, Ohio. Uh, I represent, uh, eighty-four years of manufacturing right here at Juergens and, uh, I represent the, uh, the business as we move forward to manufacture. uh things like work holding, uh various industries to include aerospace, defense, entertainment, and uh the manufacturing of precise electronic screwdrivers. The universal problem uh faced by most manufacturers today is the skills labor shortage. Juergens is facing the same exact problem. We cannot find the trained and experienced workforce. The alternative is to hire people with low or no skills, train them, using our money uh to make sure they learn the skills because the lack of skills in the workforce is something that we need to start as we develop new teammates. Sometimes they start with no training at lower salaries during the training period. It is our desire to accelerate the pay as quickly as the new teammate can learn these new skills. This is where the benefits cliff can actually impact the individual. As the individual learns and their pay increases through incremental steps their public social benefits are being put in jeopardy. We can see this with our health care benefits as they cross over cuz employees come in directly uh to our human resources and ask for a change to our very lucrative uh positive health care as they switch over. However, human resources is not aware of the benefits like SNAP and child care as it impacts their increases unless they happen to mention it. We do know that some of our employees have said to uh Human Resources they wanted to examine what effect their pay increase is going to have on them, with their benefits. Juergens encouraged growth. We pushed to increase uh pay based on skills learning uh so people can know when Juergens is then making them a career and a career direction. We want to eliminate somebody from being put in a position of having to elect growth. and pay increases versus risking their social benefits. It would seem a better approach would be that pay transitions upward, um, that the social benefits should be transitioning. Instead of going downward, they should ha- follow the same pattern, uh, as what happens with the payroll. There should not be a cliff that causes this loss. As skills are learned, pay does not go straight up. Pay goes incrementally in steps. For the individual, it would seem that this benefit should actually be the same concept and not be a cliff. You should not be punished just to get a dollar or fifty cents more increase uh in wage. In Ohio someone is actually better off being paid fifteen dollars an hour and receiving their full SNAP and child care support than actually getting an increase to paid up to eighteen dollars when the cliff actually is at its worst impact for in Ohio. This problem continues in Ohio until about a break even of around twenty-two dollars an hour. Focusing not on the benefits cliff, but looking at the bigger social uh picture, it would seem that we're better off to transition from receiving the social benefits allowing and have someone stand on their own as they grow. This transition means that the individual can now take pride in themselves as they engage in the community. Whatever they can do, whatever we can do to help, this transition uh should be beneficial to everyone. Juergens uh had a similar result. uh, as we have led a program for second chance individuals, individuals that entered the manufacturing workforce following the return from society their self-worth we have placed over five hundred individuals working in manufacturing with a recidivism of less than one percent. This similarity of self-worth of individuals seeing that their pay is going up, incremental steps, I think is powerful. Like our changes in second chance, In manufacturing, so too should we change the the benefit cliff to transitioning the social benefits and someday people will be fully able to support themselves without. The individual and the family we believe will win. The community wins, just as we happened with our social benefits on the second chance. The business community wins, society benefits wins, and the social benefits should change from the cliff formulary to a transitional benefit program. Thank you.

Thank you. And next we'll recognize Doctor Rashidi. You are recognized for five minutes.

Thank you, Chairwoman Ernst, Ranking Member, Senator H- Senator Hustead, other members, for the opportunity to testify this afternoon. Again, my name is Angela Rashidi. I'm a senior fellow in poverty studies at the American Enterprise Institute. Uh, over the past two years, I have led a working group of policy experts and researchers focused on identifying policy solutions to benefit cliffs. As we've already heard, benefit cliffs broadly refer to situations where households receive government benefits, and even a small increase in hours, uh, pay, or even assets can trigger an abrupt loss in assistance. Because of these dynamics, some workers choose to work less. This limits their upward mobility and it negatively affects the employers who rely on them. I want to cover three key points. First, benefit cliffs still exist despite individual program rules that appear to phase out benefits as participant income rises, such as SNAP. Second, the problem of benefit cliffs compound when families receive multiple benefits, which is the most common situation among low-income families. And third, research shows that the potential of hitting a benefit cliff affects people's behavior, including an unwillingness to accept higher paying jobs for fear of losing benefits. The question really is why why does this happen? Safety net programs in the US are generally designed to phase out assistance as income rises. However, when the rules do not properly properly align, this creates a cliff, discouraging work and and affecting upward mobility. Ideally, benefits should phase out, slowly and to zero as income rises, while still targeting those most in need. However, in reality, most programs do not align their rules. This dynamic does encourage participants to reduce their work effort. And this is a fixable problem. Importantly, even when individual program phase-out rates are aligned with income exit points receiving multiple benefits creates a stacking effect, and increases the employment disincentive. Researchers have reviewed program rule rules in various states and simulated what happens to benefit amounts in actual scenarios as income rises. In many situations, participants can stand to lose sixty to a hundred percent of new earnings due to a loss in benefits. In fact, in some states, a single mother with two kids would need to increase her earnings from thirty thousand dollars a year to a hundred percent of her earnings. to sixty thousand dollars a year in order to completely overcome her loss when she receives a typical package of benefits. Research shows that these benefit cliffs do change behavior. The Department of Health and Human Services conducted a survey of low in low wage workers in two thousand twenty four. They found that more than one third of respondents said that they would not accept a higher paying job if they faced a sixty nine percent marginal tax rate or higher. That is, if they lost sixty-nine percent of their additional earnings to benefit losses, they would turn down a pay raise. The Sutherland Institute in Utah conducted a representative survey and found similar results. Nearly thirty percent of past Safety Net participants that they surveyed said that they had previously decided not to look for a new job not to accept a raise, or a promotion because they believed it would make their family financially worse off. There are several possible administrative and legislative reforms to address benefit cliffs. States can use discretion they already have to alter program rules, or Congress can let legislate individual program changes. Cross-program administrative reforms are also possible with authority from Congress to coordinate rules acro across programs. Additionally, in the spirit of allowing states to be laboratories of reform, Congress can legislate pilot programs that allow flexibility at the state level to address benefit cliffs. Your colleague, Senator Hustead of Ohio, has introduced the Upward Mobility Act, which offers an innovative way to pilot test the consolidation of federal safety net programs to address benefit cliffs. Low-income working individuals deserve a safety net that helps them escape poverty rather than traps them in government dependency and stagnation. Employers across the country also deserve a flexible labor market free from government disincentives to work. To achieve these ideals, our safety net programs need reform to eliminate benefit cliffs. Thank you, and I look forward to answering your questions.

Thank you again to all of our witnesses, and I now recognize myself for five minutes for questions. And, Mr. Tierhark, we'll start with you. Um, small businesses across Iowa tell me that they are struggling to fill various jobs within their organizations. Yet many workers worry about taking additional hours, whether they accept a promotion or even getting a raise, could cause them to lose benefits. What challenges do these cliffs pose for employees, and what types of opportunities do they often forgo because of those types of cliffs?

Thank you.

for the question. So, as an employee, you're trying to evaluate a, something that might be really good for your long-term career, but if you're trying to make rent or buy food or maybe your child's support didn't come in, or s- or whatever issue you might have, it's really difficult if you're being put in that position where you're just trying to get to the next day. Um, I, I can even think of stories that, um, tenants, they're, they're waiting for their, might be their paycheck or benefits, or over the course of time if something got held up or delayed or something else didn't come through they're trying to figure out how they're gonna buy food to feed themselves or their family or make rent or make utility payments so i think it's just really difficult to think about what things could be in the future if you're just trying to get to that next day and if you mmm have experienced or heard of other people that have experienced issues before you don't really know what all the acronyms of all these programs mean you just know you're trying to maybe you did get some benefits and you don't wanna lose them, so you don't wanna put yourself in a position where you have no time to submit a new pay stub to make sure that you still qualify for the benefits. So I think it puts the employees in a really difficult spot. The employers don't necessarily know all the acronyms or the different programs either. We're just trying to ma- do the best job we can for the employees.

Yeah, absolutely, and I think Mister Schron had uh mentioned that as well, that oftentimes folks in HR, they may not know what those programs might be that employees are are on. So, yeah, thank you for that. Doctor Rashidi, your testimony describes how the impact of benefits cliffs often compounds for households that receive multiple federal benefits. What impact would streamlining multiple benefit programs into a single funding stream have on creating pathways to um other economic opportunity?

That's a great question. So if you think about some of our major programs like just the earning from tax credit and child tax credit alone, along with earnings, they phase out at a reasonable rate and it would not create a cliff effect. But when you start adding separate programs like SNAP, uh and even child care assistance that might phase out or even phase out at higher rates, it starts compounding. So rather than a twenty percent phase out, it becomes a forty percent phase out. And with multiple benefits, it could go up to even eighty percent. So what really needs to happen is rather than running separate programs, programs with separate rules. We need to combine those programs and have a very predictable uh benefit schedule that can phase out at a reasonable rate and can phase out to zero. So these families are facing reasonable, effective marginal tax rates and not facing benefit cliffs.

OK, thank you for that. And, mister Sean, I I really do share your concerns uh that benefits cliffs create that those short-term setbacks. uh for motivated workers who are seeking to improve their economic conditions. What is the impact for you as an entrepreneur and as an employer when workers are second guessing their promotion or their additional overtime because of the benefits cliffs?

I I think one of the problems on that uh is that you don't really know what's going on in the mind of the individual. I think that that sometimes is is behind the scenes and uh it uh it can affect morale, it can affect uh uh things that you don't really an anticipate because it's not a discussion that human resources has with the individual.

Mm-hmm.

They keep it kind of quiet, they keep it uh secretive uh in that uh if if that is going to affect them, they don't bring it forward. The only time we see it is when they bring in the health insurance because they know they're making a an actual transition. Uh and so it's it's really disappointing.

Mm-hmm.

Uh I really think that that as uh uh as as doctor reshidri has talked about we need to get this fixed with a solution so that that the invisible aspect of uh of the business is not hampering the individual from making a go forward or the business itself from wanting to promote somebody uh going forward. We we should do whatever we can to make that so it's it's not something that's worrying them and bothering them to bring it forward uh out there.

Yeah. No, I I thank you very much for that. And next I'll turn to ranking member Markey for his five minutes of questions.

Yes, thank you, Madam Chair, so much. Mister Gwynn, during the State of the Union and many times since, President Trump has bragged that he lifted millions of Americans off of SNAP. The Secretary of Agriculture said recently that families losing SNAP benefits are closer to realizing the American dream. And meanwhile, a survey last month by the New York Federal Reserve found that, quote, " a remarkable increase in food insecurity has unfolded." The cost of food is rising sharply because of the president's illegal war in Iran, the cost of groceries last month rose faster than any other time in the past four years, and personal savings last month reached a four-year low. This gets people gotta pay in cash for all these higher prices. The truth is obvious, people are being lifted up the economic ladder, they are being kicked down the economic um ladder, and they're going hungry on those steps down the economic ladder. So, Mister Gwyn, did the big ugly bill, H R one, and their enormous cuts in Snap and Medicaid do anything to lift people up? the economic ladder.

Thank you, Senator Markey. So, um, as I think you know, the cuts in H R one to food assistance under SNAP and health care coverage under both Medicaid and the ACA were the largest in history. And when we think about those cuts, um, we think about the people who, um, need that assistance, and obviously there are people who are disabled, there are people who are elderly, there are people who have lost jobs, who are looking for new employment, but there's a big group of people who are working, who depend on both Medicaid and SNAP. Uh, we have roughly fifteen million workers who live in a household where someone receives SNAP. Uh, one third of all people enrolled in Medicaid are connected to small businesses. Uh, half the adults under age sixty-five are enrolled in the ACA are employed by a small business or they're a small business owner. So these are critical work supports that we are talking about that were cut significantly in H R one. And we've already begun to see the effects. We've seen three and a half million people lose their snap benefits. This is during a period in which unemployment did not go down. Certainly, prices for food have not gone down. These are people who are losing benefits because of the changes that are occurring under H R one. So as you say, that's not a recipe for helping people up the economic ladder. Um, it is in fact reducing critical supports for many people, including working families.

Yeah, so thank you. So, as you know, this is not the first time that Republicans have proposed turning federal safety net programs like SNAP into block grants. Uh, block granting benefits is unfortunately a code word for slowly killing federal benefits programs. It's avoiding congressional responsibility for making sure federal dollars are being used for their intended purposes. And in the case of SNAP, you know, testimony states that block granting could mean money Congress intended for food might be used for other purposes. So, Mister Gwyn, could you describe what the impact would be on recipients of public benefit programs of the programs that turned into block grants?

Yes, thank you. I I think the effects would grow over time. Um, but they would be basically two-fold. Fewer people would get assistance, and for those who do get assistance they would get less. When we think about block grants, there's basically a built-in incentive for states to reduce assistance. If they increase assistance, they have to worry that they're going to go past their federal allotment of funds, um, and may have to make it up with state dollars. If they reduce assistance, um they might have additional dollars they can use in different places, in to cover other shortfalls in the state budget. At the same time as my written testimony highlighted, the the federal history of funding block grants is not good. Over time block grants lose value in real terms, across the board, there are very few exceptions. And so if you have a combined effect of states having an incentive to move money out of the block grant and you have the federal government providing less in real terms to that block grant, ultimately that just means less money, less funding, less resources for low income people in need.

Yeah. So the federal government says, " Oh, we'll block grant the money to you, we'll we'll cut the amount of money we're giving you, cuz we're gonna save money at the federal level, we'll cut it, then we'll give it to you in a block grant, and then you can, you as a state, you can loot the money if you want for purposes other than that which you had originally historically been intended for food or for health care." uh especially for poor children in our country. So it's a formula that we're seeing over and over and over again, and uh they're just uh asking us to believe that um that history is not gonna be repeated uh in the future. Thank you Madam Chair.

Yes, I'll recognize Senator Husted now for five minutes of questions.

Thank you. Madam Chair, I appreciate uh appreciate the the hearing on this topic, this I'm very passionate about this particular topic. In Ohio this is probably the most bipartisan issue I know because uh over my time in public service I have heard social services agencies tell me please do something to eliminate the benefit cliff. I've heard businesses say to me please do something to eliminate the benefit cliff. I I go back on this issue all the way to welfare reform under Bill Clinton when we were trying to do something on this at the local level and we kept running into the fact well if somebody wants to to get ahead and work more hours or get a raise they lose more benefits than they gain in in uh earnings and so they fall off the benefit cliff and they don't wanna work more and they can't work more and and um I get to the state level and we wanna improve our workforce and we wanna help people get ahead and we want we want you know literally upward mobility for people And they say, " No, you know, we c- we can't do that cuz the federal programs don't give us the flexibility to solve this problem." For the individual who would like to work more but literally can't afford to work more because they they lose more in benefits than they gain in pay. And then finally with employers, many many employers say, " Hey, I wanted to hire somebody full-time," or " I wanted to to give them a raise, but they wouldn't take it because of the benefit cliff." And so that's what inspired me to take the appointment to the US Senate so that I could work on this issue because at the state level and the local level, across this country, people who wanna solve the problem can't because the federal government for fifty years has created a trap for people who would like to have upward mobility. Uh, and I would just say that Americans are the most generous people on earth. Our public assistance programs are Failing them though by trapping them in this generational cycle of poverty and the benefits cliff is the decades old problem that I've seen firsthand that would give people a path to financial stability and and a chance to join the middle class and I'll give you an example of how it works. We I prepared my team prepared uh something for every individual to show how the a member of this committee to show how the benefit cliff works in their in their particular state. Uh, in Dayton, Ohio, where I spent a good portion of my life, if you earn, if you're a single parent with two children, you earn thirty-three thousand dollars a year, you may be receiving assistance for food, housing, child care costs. If that individual accepted a one thousand dollar raise they would lose over forty-six hundred dollars in aid by earning more. And and they would uh receive essentially a f- you know, a four thousand dollar pay cut by earning a thousand dollars more and a single parent who is living in at the edge can't afford to take that risk because they they don't have the stability that they need to take the risk of trying to g to move forward and um, so they make a logical choice, they make a logical economic choice by foregoing um that uh opportunity. I also I feel compelled to share another example that I found so insidious, when I was at a career center. You know how we say we want more students to to to get skills in welding or construction trades or these cuz there's a lot of jobs out there and they can, they don't have to go to college, they can earn these skills in high school working and earn and learning at the same time. But a a a a principal told me that um that the students at their high school, this it was in a poor rural area, they said they can't take jobs while they're in high school. Because their younger brother and sister might lose their benefits and so, this individual who we want to graduate from high school career ready, can't do that and can't earn while they're in high school because we created this trap with the benefits cliff for their family. And so that's why I introduced the Upward Mobility Act, to try to solve that problem, uh, to give people a shot at the American dream, by not being trapped in this generational cycle of poverty. And and so I'm greatly appreciate the opportunity to uh have this conversation today, and for all the witnesses coming and here and uh I have uh some questions if you would permit me a little more uh just a moment here, I know we have our colleague coming in so we'll do that, but let me just let me just start um um with Mister Sean and I'll just say this, have you had have you ch- you talk to businesses all the time? How many businesses tell you the story about the fact that they have somebody that won't take a raise, won't take a job, won't take full-time pay because of the benefits cliff?

It, all of the small businesses have this same struggle because it's a balancing of having to find a trained workforce and they're investing in that training and they start at a at a level which the person is is learning their skills and as they move on up all of a sudden, they got cut off because of that and it's it it's it's a real shame because what a disincentive for you to learn and to grow if you all of a sudden have learned and grown and get uh uh on that upward mobility track of getting more pay, and then only to find out that it you cross over a benefits cliff. And so you threw out a a rhetorical question, uh please fix the benefits cliff.

Hey, great, I went over my line, but I'm not. Translator, thank you.

No, thank you, Senator Husted, and Senator Hirono, you are recognized for five minutes.

Just in time.

Just in time.

So, Mr. Gwynne, uh, when calculating proposals that would make significant changes to federal programs that provide families with access to things like affordable health care, child care subsidies, and nutrition assistance, it is important that we look at the context in which proposals are being considered.

Mm-hmm.

And we should acknowledge that within the last year, Republicans have passed a law that reduced funding for Medicaid by nearly one trillion dollars and for nutrition assistance by almost a hundred and ninety billion dollars they also divided or diverted funding that could have otherwise been used for public schools to to create the first ever nationwide. voucher system that that basically just supports private schools. So at a cost of estimated about five hundred billion in diverted taxpayer money. In addition they have alleged widespread fraud in child care programs despite little evidence but um uh this generally is this this kind of fraud only uh happens in blue states. So uh there are they are now alleging fraud and Medicaid programs using inaccurate and cherry-picked numbers to justify additional cuts in, once again, blue states. And Republicans do not believe in the programs and will do whatever they can uh to undermine them. So we should be skeptical as far as I'm concerned of their motives in proposals like this. So um Mister Guent, can you tell us how the the one big beautiful bill which I call the big ugly bill and their failure the failure to extend the a c a premium tax credits could worsen benefit cliffs for families and then your view with this failure to extend the a c a premium tax credits help families that sounds like a rhetorical question go ahead