As Recovery Act Expires, More Could Slide Into Poverty
Did the Recovery Act reduce the number of people living in poverty during the recession? That’s a natural question to ask, but unfortunately, traditional measures of poverty aren’t of much use in providing an answer. That’s because the official poverty measure doesn’t take into account tax credits, food stamps, or other important forms of Recovery Act assistance that gave a boost to families struggling to lift themselves out of poverty.
Researchers in Wisconsin have pioneered an alternative measure, called the Wisconsin Poverty Measure, which takes a broader look at a family’s resources and paints a more complete picture of a family’s poverty status. The Wisconsin Poverty Measure – which we’ve highlighted in our blog here and here has garnered national attention, most recently in a August 8 post by Brookings called “Better Data, Better Outcomes: How Public Policy is Helping Poor Children.”
Using the Wisconsin Poverty Measure, researchers have shown that there was no increase in child poverty between 2008 and 2009. In comparison, the official measure showed an increase of four percentage points between those two years.
Tax credits alone reduced child poverty in Wisconsin by nearly a third, according to the Brookings post, when poverty was gauged using the more inclusive measure. Food stamps reduced child poverty by another 15%. Both federal tax credits and food stamp assistance were expanded by the Recovery Act.
Unfortunately, some of the measures that have been so effective at reducing poverty over the course of the recession (as measured by the alternative measures) will be subject to significant cuts or are slated to expire. The state’s Earned Income Tax Credit, for example, which helps working families with children lift themselves out of poverty, was slashed by $56 million over the 2011-13 biennium. And expanded federal tax credits are scheduled to end next year.
Broader measures of poverty show that assistance programs, and Recovery Act expansions of those programs, played a critical role in shielding state residents from the worst effects of the recession. But as the Recovery Act’s enhancements of federal tax credits and food assistance come to an end, and Wisconsin also reduces tax credits for working low-income families, there is a great deal of uncertainty about how struggling families will fare in the near future.