Thursday, December 17, 2009

Stimulus brings 6 million out of poverty: CBPP

The Center on Budget and Policy Priorities has released a new study that examines the impact that the American Recovery and Reinvestment Act has had on poor people in America.

The report from the CBPP claims that the economic stimulus has kept 6 million Americans out of poverty, and has reduced the severity of poverty for 33 million more. The results are projections made by the think tank, and they say they are conservative projections.

From the CBPP, we take this summary of the results for our snippet. The center also provides a state by state table of results.

While the recession is expected to drive states’ poverty rates up for 2009, new analysis based on Census data shows that the American Recovery and Reinvestment Act of 2009 (ARRA) is keeping large numbers of Americans out of poverty in states across the country. In addition to boosting economic activity and preserving or creating jobs, the recovery act is softening the recession’s impact on poverty by directly lifting family incomes.

The Center’s analysis, which covers 36 states and the District of Columbia, examines the effect on poverty of seven ARRA provisions: the expansion of three tax credits for working families, two provisions that strengthen unemployment insurance assistance, a provision that boosts food stamp benefits, and a one-time payment for retirees, veterans, and people with disabilities.[1] Nationally, these provisions are keeping more than 6 million Americans out of poverty and reducing the severity of poverty for 33 million more. (These figures include both people whom ARRA has lifted out of poverty and people whom ARRA has kept from falling into poverty.)

These estimates are conservative. The seven provisions examined cover only about one-fourth of the recovery act’s total spending. The remainder of the act contains an array of provisions that also have an effect on poverty either through direct job creation or through increased spending (on areas such as education, health care, and housing) that leads to more consumer demand in the economy, which in turn preserves or creates jobs. The Congressional Budget Office has estimated that the legislation as a whole had increased employment by 600,000 to 1.6 million jobs as of September 2009 and is expected to boost employment by 900,000 to 2.3 million jobs by the fourth quarter of this year.[2]

Moreover, this analysis does not capture the full anti-poverty impact of the seven provisions it examines. It considers the provisions’ direct effects on the incomes of the families that receive added income or benefits as a result of these provisions, but not the provisions’ additional effects on the economy and private-sector employment. For example, increased jobless benefits or food stamps preserve private-sector jobs in a recession by enabling consumers to continue purchasing goods and services they otherwise could not have afforded. That additional spending, in turn, ripples through the economy, helping stores and companies to stay in business and avoid steeper layoffs and reductions in work hours, and thereby averts larger increases in poverty.

Congress designed the recovery act to reach a wide spectrum of low-, moderate-, and middle-income Americans. Policymakers took care to include provisions that provide assistance to low-income families, not only because they stand the greatest risk of hardship during downturns but also because of evidence that they are the most likely to spend quickly whatever money they receive, thereby pumping more money back into the economy in a timely manner.

Our analysis considers seven of the act’s temporary provisions, totaling $205 billion over five years:

* a new Making Work Pay tax credit of up to $400 for workers ($800 for a couple) earning up to $95,000 ($190,000 for a couple);
* an expanded Child Tax Credit for lower-income working families with children;
* an expanded Earned Income Tax Credit, including increased tax-credit benefits for a working family with three or more children and for married families to lessen the marriage penalty the EITC can otherwise impose;
* additional weeks of emergency unemployment compensation benefits (paid after a worker’s 26 weeks of regular state unemployment benefits expire);
* an additional $25 per week for unemployed workers to supplement their unemployment benefits;
* a $250 one-time payment to elderly people and people with disabilities who receive Social Security, SSI, or veterans’ benefits; and
* an increase in food stamp benefit levels.

The study is likely to be a very controversial one, with people on all sides of the political spectrum making comments, negative on the right, positive on the left. We do wonder how many will point out that these numbers are only temporary. As soon as the stimulus money runs out, these people will fall back into poverty, unless jobs replace the stimulus funds.

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