More About Arloc Sherman

Arloc Sherman

Sherman is a Senior Researcher focusing on family income trends, income support policies, and the causes and consequences of poverty.

Full bio and recent public appearances | Research archive at CBPP.org


Long-Term Agenda Needed for Fighting Poverty

August 9, 2012 at 1:45 pm

I laid out some short-term steps earlier this week that we could take to lower poverty.  In this post, I take a look at what we should do over the longer term.

Four key points:

First, poverty was growing even before the Great Recession. Poverty rose during the economic expansion of 2001-2007, the first time on record that the official poverty rate was higher at the end of a recovery than before it.  This suggests that we can’t count on economic growth alone to lower poverty unless the growth is stronger than in the last recovery.

Second, the safety net matters. While the Great Recession pushed poverty upward, the safety net pushed back, so the actual increase in poverty — particularly when measured with a poverty rate that includes the value of tax credits, food stamps, and other non-cash benefits — was far smaller than it would have been.  We should continue some of the improvements made in the safety net during the recession, including improvements in the Earned Income Tax Credit (EITC) and Child Tax Credit, which together kept an estimated 1.6 million people out of poverty in 2010 and lessened the severity of poverty for nearly 13 million others (see chart).

Third, deficit-reduction plans can and should spare programs for the most vulnerable. Successful past deficit-reduction efforts protected key supports, such as food stamps, Medicaid, and tax credits for low-and moderate-income working families, and even included initiatives to reduce poverty.  Recently, a group of religious leaders from dozens of Christian denominations and organizations issued a statement of deficit-reduction principles; the leaders proposed safeguarding key low-income programs in a “circle of protection.”  In addition to the core low-income assistance programs, these leaders urged policymakers to protect longer-term investments such as Head Start and low-income education and training assistance.

Fourth, such anti-poverty and opportunity-promoting policies have benefits for the economy and society and help ensure that the future labor force can compete and adapt. Studies find that ensuring adequate income helps young children succeed in school and work and earn more later in life.  Moreover, even during a time of general deficit reduction, spending money on further improvements in education and training, from the pre-kindergarten years through college and job training, makes long-term economic sense.

Besides protecting current anti-poverty assistance, specific steps forward could include a focus on shifting from regressive tax deductions toward tax credits, including the creation of a new renters’ credit to help low- and moderate-income renters; expanding the EITC for low-income childless workers, who currently receive little other assistance; expanding support for early education; and improving Pell Grants, other post-secondary education assistance (such as permanently extending improvements in the American Opportunity Tax Credit), and proven job-training initiatives that prepare people for jobs for which the demand is increasing in the local economy. 

Modest progress in the private sector against poverty and inequality may be possible over the long term through steps like raising and indexing the minimum wage, and better enforcing wage and overtime rules.

Such steps would be just a beginning, but they would show that it’s possible to make progress against poverty — even as we reduce our deficit.

Fight Poverty, Protect the Safety Net

August 6, 2012 at 9:41 am

The official poverty rate was high (15.1 percent) in 2010, and when the Census Bureau releases new numbers for 2011 next month, that figure may climb still higher — due in part to declines in unemployment insurance payments, continuing layoffs by state and local governments, and the continuing sluggishness of the economy.  Policymakers can — and should — do more to address the problem.

The Great Recession showed how effective the safety net can be in combating poverty.  Alternative poverty measures that include the effect of tax credits and non-cash benefits show that poverty rose far less than it otherwise would have during the economic downturn, thanks to the safety net, which was enhanced by additional temporary initiatives that policymakers enacted as the economy contracted.  (Unfortunately, as I’ve explained, the official poverty measure doesn’t count a lot of the safety net.  That’s why official poverty rates have risen more than have alternative measures of poverty that are more comprehensive.)

In the recession, the safety net fought poverty in two ways:  (1) by directly supplementing incomes, it kept a substantial number of families out of poverty, and (2) by helping these consumers continue spending, it saved private-sector jobs.  The unemployment rate climbed steeply, but by less than it would have otherwise.  Poverty will likely rise, though, if policymakers cut the safety net deeply, as some have proposed.

Instead, the President and Congress should consider a set of actions in the near term that could keep millions of families from falling into poverty both by providing needed income support and by strengthening the recovery, which would generate more job opportunities and income:

  • Extend recent improvements in working-family tax credits (the Earned Income Tax Credit and the Child Tax Credit) that reward and encourage work for moderate and low-income families and individuals, and continue temporary extended unemployment assistance for long-term unemployed workers until the unemployment rate falls further.
  • Stem the losses of government jobs, and temporarily shore up state and local spending on needed services such as schools, health care, and fire departments.
  • Work to fund more jobs, such as for needed infrastructure, as my colleague Jared Bernstein has suggested, or to renew and expand the much-applauded subsidized employment initiative through the Temporary Assistance for Needy Families program that expired in September 2010.  Policymakers could adopt such initiatives as part of a larger balanced deficit-reduction plan that spurs the economy in the short term and provides needed deficit-reduction in the mid-term and long-term.

The Federal Reserve can help, too, by pursuing more aggressive policies to push the economy toward full employment.

We can do more to fight poverty in the long term, as well.  I’ll take a closer look at some of those policies in a later post.

Poverty Rate Would Nearly Double Without the Safety Net

July 30, 2012 at 4:43 pm

As Georgetown University’s Peter Edelman explained in yesterday’s New York Times, the serious hurdles that this nation faces in ending poverty shouldn’t obscure our real achievements in this area over recent decades.  He cites a CBPP estimate that poverty would be nearly double what it is now if not for programs like the Earned Income Tax Credit and SNAP (formerly food stamps).

Here are the specifics, as we outlined them last fall:

[S]ix recession-fighting initiatives enacted in 2009 and 2010 kept nearly 7 million people out of poverty in 2010 — under an alternative measure of poverty that takes into account the impact of government benefit programs and taxes. . . .

[I]f the government safety net as a whole — these temporary initiatives (all were featured in the 2009 Recovery Act) plus safety-net policies already in place when the recession hit — hadn’t existed in 2010, the poverty rate would have been 28.6 percent, nearly twice the actual 15.5 percent (see graph).


This shows the powerful anti-poverty impact of policies ranging from tax credits like the Earned Income Tax Credit and Child Tax Credit to unemployment insuranceSNAP (food stamps)Social SecuritySupplemental Security Income, veterans’ benefits, housing assistance, and others.

Official Poverty Measure Ignores Key Improvements in the Safety Net Since the 1960s

July 26, 2012 at 5:20 pm

A recent Associated Press article suggested that when the Census Bureau releases its poverty figures for 2011 this fall, the official poverty rate could reach its highest point since 1965.  In a narrow sense, that’s possible.  Although private-sector employment improved in 2011, the improvement was weak, and other factors that affect the poverty rate (such as government employment, the amount of unemployment assistance provided to jobless families, and real average weekly wages) fell.

But even if the comparison to 1965 proves technically true, it will be misleading.  The AP story itself explains why:  The official poverty rate is based on families’ pre-tax, cash income.  It ignores all non-cash benefits (such as SNAP, formerly called food stamps) and working-family tax credits such as the Earned Income Tax Credit (EITC) and Child Tax Credit.

In other words, the official measure ignores the very parts of the safety net that have expanded substantially over the past half century — and that have reduced the reality of poverty, even if the improvement doesn’t show up in the official poverty figures.  The federal government enacted food stamps as a national program in 1973, for example, and created the EITC and Child Tax Credit in 1975 and 1997, respectively.

Consider just one example of the very real, positive effects of the non-cash safety net:  the creation of food stamps has helped eliminate the widespread child malnutrition across parts of the South and Appalachia that shocked the nation in the late 1960s.

Meanwhile, the role of cash assistance in fighting poverty has dwindled, due to large cuts in cash-aid benefit levels (in inflation-adjusted terms) since the 1970s, the conversion of federal cash public assistance to poor families into a block grant whose funding level has been frozen for 16 years without adjustment for inflation or (in recent years) steep increases in unemployment, and many states’ elimination since the 1980s of much or all cash assistance for poor non-elderly adults who aren’t raising children.

In 1965, cash programs that are included in the official poverty measure — Unemployment Insurance, Aid to Families with Dependent Children (since converted into Temporary Assistance for Needy Families), Supplemental Security Income for the low-income elderly and people with disabilities, and state and local general assistance programs — comprised more than 90 percent of the benefits provided by major federal income-support programs for low-income and jobless Americans.  By 2010, they accounted for only a little more than half of the benefits.

In other words, the official measure of poverty counts various means-tested cash assistance programs that have shrunk markedly in real per capita terms, while ignoring key forms of “non-cash” assistance that have expanded substantially.  The result is that using the official poverty measure to compare today’s poverty rate to that of decades ago yields a distorted picture that obscures more than it illuminates.

Indeed, the part of the safety net that the official poverty measure doesn’t count can matter more than the part that does.  That was true throughout the recent recession, during which the non-cash safety net kept millions of Americans out of poverty.

In 2010, the cash assistance programs counted in the official figures kept nearly 13 million non-elderly people above the poverty line, according to the official poverty measure.  But if non-cash benefits and refundable tax credits had been included as income, they would have lifted even more non-elderly people — about 14 million — above the official poverty line that year.  (The number is even higher if one uses a modernized poverty line and makes other changes in poverty measurement recommended by the National Academy of Sciences, as many experts prefer.)

The poverty situation today is very serious, and the deep recession, the slow and uneven recovery, and declines in various government services and assistance have made it worse.  But as we consider how to reduce the number of poor families, it’s important that we not be distracted by comparisons that may lead us astray because they fail to account for the large anti-poverty effects of major parts of the safety net. 

2009 Recovery Act Strikingly Effective at Keeping People Out of Poverty

May 31, 2012 at 11:13 am

We are presenting evidence today at the Department of Health and Human Services’ annual Welfare Research and Evaluation Conference that, when it comes to keeping people out of poverty, the 2009 Recovery Act was probably the most effective piece of legislation since the 1935 Social Security Act.  As we first described in a paper last November, six temporary stimulus initiatives that President Obama and Congress enacted in 2009 and 2010 kept 6.9 million Americans out of poverty in 2010.

The six provisions — three new or expanded tax credits, two unemployment insurance enhancements, and a SNAP (food stamp) benefit expansion — were originally in the Recovery Act, though President Obama and Congress later extended or expanded some of them.

The government’s official poverty measure counts only cash income.  So, to see how these measures affected poverty, we used an alternative poverty measure that also considers the effect of government benefit programs like SNAP and tax credits.  Most experts prefer this broader measure, which adopts recommendations of the National Academy of Sciences.

People Kept Above the Poverty Line by Selected=

Specifically, we found that:

  • Expansions in the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) kept 1.6 million people out of poverty.
  • The Making Work Pay tax credit, which expired at the end of 2010, kept another 1.5 million people out of poverty.
  • Expansions in the duration and level of unemployment insurance benefits kept 3.4 million people out of poverty.
  • Expansions in SNAP benefits kept 1 million people out of poverty.

(These figures total more than 6.9 million in part because some people were kept above the poverty line by more than one program but, in the total, we counted each person only once.)

As the chart shows, existing policies to promote family income also kept millions of additional Americans out of poverty in 2010.  For example, the basic SNAP program — not counting the benefit expansions — kept another 3.4 million people out of poverty in 2010.

Moreover, these are just the initial effects of government assistance on recipient households.  They don’t show the ripple effect across the economy as government assistance allowed struggling consumers to continue to buy goods and services — one way the Recovery Act helped keep millions of people employed, as my colleague Michael Leachman notes here.  Our poverty estimates are conservative because they leave out the anti-poverty effect of these jobs.

To be sure, these figures don’t mean that government assistance staved off all, or even most, recession-related hardship.  They don’t factor in, for instance, the families that endured foreclosures on their homes.

Still, these figures show that government assistance kept millions of Americans above the poverty line while the economy was suffering its sharpest deterioration in decades.  That is no small accomplishment.