Stimulus kept millions out of poverty, liberal group’s study saysBy Zachary Roth
The stimulus bill of 2009 was intended primarily to get the economy going again. But according to a recent study by the progressive Center on Budget and Policy Priorities, it had another major benefit: keeping millions of Americans out of poverty. That finding comes just as Congress considers cutting many of the spending programs at issue.
Consider this: In 2008, the number of Americans living in poverty rose by 1.7 million, to nearly 47.5 million, according to census data. You'd have expected that number to keep rising in 2009, as unemployment kept going up, and many Americans lost their homes to foreclosure. But in fact, it held steady.
Why? According to the study released this month, it was thanks to the American Recovery and Reinvestment Act, better known as the stimulus bill. The center found that the bill kept more than 4.5 million people out of poverty in 2009.
How? In addition to funding infrastructure projects, the stimulus bill also bolstered existing government programs that support struggling Americans, and created new ones. It did so because, as we've written, putting more money in the hands of poor people has a greater stimulative effect on the economy, since they have little choice but to spend the money quickly, rather than save it.
Here's how the study breaks down those programs and their effect on poverty:
• Extensions and expansions of unemployment benefits kept 1.3 million people out poverty.
• Improvements in the Child Tax Credit and Earned Income Tax Credit kept 1.5 million out of poverty.
• The Making Work Pay tax credit kept nearly 1 million people out of poverty.
• Increases to the SNAP program (formerly known as food stamps) kept 700,000 people out of poverty.
"These findings indicate that the Recovery Act is one of the single most effective pieces of legislation at preventing poverty to be enacted in decades," the report's author says.
The author continues: "It is difficult to think of a single piece of legislation since the Social Security Act of 1935 that kept more people above the poverty line in 2009 through direct assistance to households than the Recovery Act."
The study comes at a key moment. Already, some portions of the stimulus bill have been reduced. The tax cut deal made last month between President Obama and House Republicans will mean jobless benefits are worth $25 a week less than under the stimulus, according to a New York Times editorial. That doesn't sound like much, but it could push an estimated 175,000 people a week into poverty, the editorial says.
And that may be just the start. GOP leaders have said they plan additional deep cuts to government spending next month. (They originally pledged to trim a whopping $100 billion but have since backed off that figure.) They've offered few specifics on where the cuts will come from -- but it's all but certain that they'll be targeting other social programs created or bolstered in the stimulus bill for cuts.
Such moves could stunt the still-weak recovery, as many observers have pointed out. But it looks like steeper spending cuts also could drive millions more Americans into poverty, too.
The Stimulus Reduced Poverty
The Non-Profit Quarterly
The jury may still be out on the impact of the American Recovery and Reinvestment Act on creating jobs and reviving the economy, but a new study by the Center for Budget and Policy Priorities makes a different point about the value of the federal stimulus program. ARRA kept "millions of Americans out of poverty," according to CBPP.
CBPP says that the stimulus prevent 4.5 million people from joining the ranks of the poor by putting resources into existing government programs and by capitalizing new ones to help poor people in the midst of a ghastly recession. Through programs such as the extension of unemployment benefits, improvements in the child tax credit and the Earned Income Tax Credit, increases in food stamps, and the creation of the Making Work Pay tax credit, the stimulus put money directly into the hands or pocketbooks of Americans facing economic challenges.
According to the CBPP, the funds from these programs were spent quickly because poor people had "little choice but to spend the money quickly," and therefore had a greater stimulative effect on the economy than other mechanisms such as slow-spending infrastructure investments or tax incentives for corporations. CBPP's powerful conclusion was, "The Recovery Act is one of the single most effective pieces of legislation at preventing poverty to be enacted in decades . . . It is difficult to think of a single piece of legislation since the Social Security Act of 1935 that kept more people above the poverty line in 2009 through direct assistance to households."
CBPP might have further added the various housing, weatherization, employment, and health programs that the stimulus program funded – delivered largely by nonprofits –that provided crucial safety net program supports that supplemented and bolstered the income transfers lauded in the CBPP study.
With the 112th Congress, there are a number of new legislators committed to broad and deep cutbacks in social safety net spending, ostensibly to staunch the growth of a burgeoning federal budget deficit, in some cases motivated more by animus against programs that they see as undermining individual responsibility. Whatever the impetus, the result of such cuts could be a reversal of the CBPP findings, driving families into the poverty conditions that the Recovery Act had helped them avoid.