Recovery Act Keeps 4.5 Million People Out of Poverty

Saturday, February 12, 2011 at 1:01 AM by

The federal Recovery Act kept 4.5 million people out of poverty, according to a recent Center on Budget and Policy Priorities (CBPP) analysis of Census Bureau figures.

Back in September, the Census Bureau released figures showing that according to the official measure of poverty, the poverty rate increased from 13.2 percent in 2008 to 14.3 percent in 2009. The Wisconsin Budget Project blog post on that topic is here.

The official poverty measure paints a somewhat incomplete picture, since it doesn’t include tax credits or non-cash assistance when determining whether an individual falls below the poverty line. This means the official measure may have somewhat overstated the percent of people in poverty, since the measure did not take into account the assistance many struggling families received through provisions in the Recovery Act.

CBPP’s report highlights recently-released poverty figures from the Census Bureau that rely on alternative measures of poverty. These alternative measures include tax credits as well as non-cash benefits and therefore give a more complete picture of the change in poverty status between 2008 and 2009.

The analysis showed that when the more complete alternative measures were used, there was no increase in the poverty rate between 2008 and 2009. “Under almost all of these alternative measures, the safety net as a whole, including the Recovery Act expansions, prevented any rise in poverty in 2009, despite the deep recession and very high unemployment,” according to CBPP.

CBPP found that Recovery Act expansions to the safety net kept more than 4.5 million people out of poverty in 2009, including:

  • 1.3 million people through enhanced federal unemployment benefits;
  • 1.5 million people through expansions of the Child Tax Credit and Earned Income Tax Credit;
  • nearly 1 million people through the Making Work Pay tax credit; and
  • 700,000 people through an increase in benefit levels for food stamps, as shown in the chart below.

The Great Recession has created severe hardships for millions of families, especially low-income families. However, the Recovery Act managed to mitigate some of the negative effects and achieved the remarkable feat of keeping the alternative poverty measure from increasing in 2009.

Tamarine Cornelius

Categories: Blog, EITC, federal issues, food stamps, poverty, Recovery Act, refundable tax credits, unemployment benefits | Comments Off on Recovery Act Keeps 4.5 Million People Out of Poverty

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