Friday, July 10, 2009

Poverty and the Safety Net

From CBPP:

The good news is that the safety net reduces poverty substantially and is more effective at reducing poverty than has generally been recognized. When both broad social insurance benefits such as Social Security and programs targeted on low-income people such as food stamps are considered, the safety net lifts tens of millions of people out of poverty. More specifically, in 2005 (the latest year for which comprehensive data are available), the safety net as a whole:

  • Cut the number of Americans living in poverty by nearly half (44 percent), lifting 31 million people above the poverty line.[1]
  • Reduced the severity of poverty for those who remain poor, increasing their average disposable income from 29 percent of the poverty line to 64 percent.
  • Helped protect Americans from the deepest extremes of poverty, cutting by 7.3 million — or more than three-quarters — the number of children living below half the poverty line. It also lifted 8.0 million children above three-quarters of the poverty line. (This analysis uses a poverty line equal to about $21,400 in 2005 for a couple with two children in a community with average housing costs, consistent with NAS recommendations.)
  • Was more effective at lifting children in less-deeply-poor families from just below the poverty line to above the poverty line than it had been a decade earlier. Among children whose non-benefit income was between 75 percent and 99 percent of the poverty line, public programs lifted 65 percent above the poverty line in 2005, up from 51 percent in 1995.

The bad news is that the safety net has weakened over the last decade for families with children that have the lowest incomes and are in greatest need of help due to joblessness or other crises. In 2005, the safety net as a whole:

  • Protected a smaller share of children from deep poverty than it used to. In 1995, the safety net lifted above half the poverty line 88 percent of children whose family incomes were lower than that before counting safety net benefits. By 2005, this percentage had declined to 76 percent. If the safety net had been as effective at keeping children out of deep poverty in 2005 as it was in 1995, there would have been 1.1 million very poor children in 2005; instead, there were 2.4 million.
  • Protected fewer jobless workers from deep poverty than it used to. Among very poor unemployed workers looking for work in any given week, the safety net lifted 60 percent above half of the poverty line in 2005, down from 70 percent of very poor unemployed workers in 1995. [2]

Since these data were collected, the economy has entered a major recession, and Congress enacted the American Recovery and Reinvestment Act, designed to boost economic growth and ameliorate the harshest impacts of the recession on struggling families. The recovery package included many provisions that strengthen the safety net, though in most cases the improvements are designed to be temporary. These include a temporary boost in food stamp benefits, temporary expansions in the Earned Income Tax Credit and the Child Tax Credit, new incentives for states to make their unemployment insurance systems more accessible to jobless workers, and new funding for states that see an increase in the number of families receiving basic cash assistance through TANF programs and states that expand short-term help and subsidized employment programs for poor families.

These provisions will soften the impact of the recession on the extent and depth of poverty. (A previous Center analysis projects that the expansions in the EITC, Child Tax Credit, and the new Making Work Pay tax credit will stop 1 million children from falling below the poverty line. [3]) When the recession abates, it will be important to measure precisely the impact of these temporary measures and consider what longer-lasting improvements should be made in the safety net.

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