Catherine Rampell: Now might be exactly the worst time to cut Medicaid and food stamps

It’s never a great time to purge millions of Americans from critical safety-net services. But if we are indeed barreling toward recession, as many economists predict, now is an especially bad time.

It would mean more Americans are denied medical and food assistance precisely when they need it most – and that any coming downturn could be particularly vicious and long.

Republicans desperately want to cut taxes, with the largest benefits going to higher-income households and businesses. This will be expensive, adding $5 trillion to deficits, the Joint Committee on Taxation projects. GOP lawmakers plan to (partly) pay for this cost by slashing the social safety net. Medicaid and food stamps in particular would absorb enormous cuts.

This combination – top-heavy tax cuts financed by low-income benefit cuts – would add up to possibly the largest single transfer of wealth from poor to rich in U.S. history, according to back-of-the-envelope numbers from Bobby Kogan, a former Senate budget staffer and researcher at the Center for American Progress.

For example, an estimated 8.6 million additional Americans would become uninsured as a result of Republicans’ proposed changes to Medicaid alone. That tally swells to 13.7 million if several other GOP policies are included, per estimates from the Congressional Budget Office leaked by House Democrats. (The CBO said it has publicly released only an estimate of the bill’s deficit effects, not these other numbers included in Democrats’ news release.)

This all seems pretty bad, no? Now consider what else is happening in the economy.

The risks of recession have surged in recent months because of other parts of the GOP agenda. Trump’s universal trade wars in particular have led to unprecedented levels of U.S. policy uncertainty – even worse than during the COVID-19 pandemic and the 2008 financial crisis.

And while markets rallied Monday on news of a 90-day partial rollback of tariffs on China, even tariffs of “only” 30% on Chinese goods are pretty catastrophic. An additional 30% cost increase is bigger than the average markups that gigantic retailers such as Walmart or Target place on their own goods, much of which come from China.

Many smaller U.S. firms are working with much thinner margins and simply cannot absorb those costs. At least not without passing some of them along to consumers, who will in turn respond to these higher prices by buying less.

Indeed, much of the media coverage of the economic damage wrought by Trump’s tariffs has focused on how much they will raise consumer prices. The current tariff regime (accounting for the latest China developments) will cost the average household more than $2,000 annually, the Yale Budget Lab reports.

There’s been somewhat less public appreciation, though, for what the trade wars mean for American workers. The same Yale report estimates that current tariff levels will cost half a million jobs by the end of this year, relative to employment levels without the trade wars. That’s because tariffs and countertariffs jeopardize positions at retailers, manufacturers (such as those that import materials from abroad), ports, trucking and logistics companies, and many other industries.

Normally, when people lose their jobs or some of their income, they’re more likely to become eligible for and enroll in safety-net programs such as Medicaid and food stamps while they get back on their feet. These programs are not only compassionate on an individual level; they also help automatically stabilize the overall economy and pull it out of a downturn.

That’s because mass hardship can become self-perpetuating, as laid-off workers cut back on spending and other economic activity, leading to even more layoffs. But safety-net programs swoop in and automatically boost sagging aggregate demand, effectively stimulating the economy and helping it recover faster.

This legislation, however, would add more bureaucratic roadblocks to enrollment in critical benefit programs (sound familiar?) while narrowing eligibility requirements. So we might be facing a perfect storm: an economy teetering on the edge of recession, but without the usual mechanisms kicking in to curb the pain and spur recovery. In fact, program enrollment might be falling just as people lose jobs, depending on when the cuts take effect. That means more pain in the near term – and a more protracted recession.

And to be clear, the trade wars are hardly the only government-policy-imposed risk the economy faces.

U.S. DOGE Service layoffs are working their way through the economy (and the courts). Those will have ripple effects far beyond Washington or even the public sector, thanks to contractor layoffs and newly jobless civil servants cutting back spending. Plummeting international tourism, caused by resentment of Trump’s belligerent foreign policies as well as high-profile mistreatment of foreign visitors, will also hurt hospitality industries and workers. The freezing of federal research grants will crimp the medical industry and its employees. And so on.

Taking health care and food away from the poor to help the rich always comes off as pretty heartless. It is especially so when you’re threatening to take away livelihoods, too.