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


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.

After Welfare Reform, the Poorest Families Had More Trouble Paying Bills

May 22, 2012 at 2:38 pm

We have noted evidence of a disturbing trend:  growth in the number and percentage of Americans living on less than $2 a day — a type of extreme poverty that, until now, has been associated only with poor nations.

The University of Michigan’s Luke Shaefer, one of the authors of the study that broke the news, has more to report.  He and the University of Chicago’s Marci Ybarra, his co-author, find signs of growing material hardship among families whose incomes fall below half of the poverty line.

The new study, which looked at households with children from 1992 through 2005, notes a widening gap in well-being among low-income families after the national welfare overhaul of the mid-1990s.  The authors found:

[S]uggestive evidence that material hardship — in the form of difficulty meeting essential household expenses, and falling behind on utilities costs — has generally increased among the deeply poor but has remained roughly the same for the middle group (50-99 percent of poverty), and decreased among the near poor (100-150 percent of poverty).

Not surprisingly, these hardships appear to be sensitive to business cycles.  Hardship rates among the deeply poor improved, for example, from 1992 to 1995, when the economy was growing.  But they worsened sharply from 2003 to 2005 — perhaps due to delayed effects of the 2001 recession compounded by the weakened safety net, the authors suggest.

Shaefer and Ybarra say their findings support their hypothesis that “the well-being of the deeply poor decreased substantially following the first economic slowdown after the 1990s welfare reforms. In contrast, the well-being of the near poor improved through 2005.”  They caution that studies that consider the poor as a single group may miss these diverging effects of welfare reform.

These conclusions make sense because “welfare reform,” in a broad sense, was not just one policy but many.  In general, working families received more help after the mid-1990s than before — for example, in the form of higher Earned Income Tax Credits or child care assistance.  Yet, families who lost jobs or could not find steady work generally fared worse — they lost access to cash assistance and often could not qualify for the new work-based tax credits and other work supports.

The study adds to the evidence that economic vulnerability at the very bottom of the economic ladder has grown since the federal government weakened the safety net in the 1990s.

House Votes to Eliminate Local Data

May 11, 2012 at 10:21 am

Republicans in the House inexplicably voted this week to defund the American Community Survey (ACS), the nation’s main source of state and local data on affordable housing, household income, poverty, race, state-to-state migration, immigration, education level of the workforce, types of disabilities of local residents, and scores of other major topics.

The federal government uses the data to distribute more than $400 billion in federal formula funds each year, and the information helps communities and businesses decide where to build new roads, bridges, schools, homes, and stores.  Business groups including the U.S. Chamber of Commerce, National Retail Federation, International Council of Shopping Centers, and National Association of Home Builders consider the data vital.

The House proposed no alternative to collecting these data.

The ACS replaced the traditional long form of the decennial census.  Several of the questions date back to the 1850s.

Some who voted to end the ACS funding objected to it as an example of government intrusion because its questions go beyond the Constitution’s required enumeration of inhabitants.  But the census has always asked more than that, all the way back to 1790.  Federal agencies have determined that every ACS question is necessary to carry out legislation that Congress itself has passed.

The key difference between the ACS and the old decennial census is timing.  Instead of blitzing households all at once every ten years, the ACS continuously contacts different households — about 3 million a year — and releases updated findings annually.  To get down to the neighborhood level, the Census Bureau averages together five years of ACS data to generate a sample size that is almost as large as the one the old census long form collected.

Some proponents of the ACS cut cited a desire to save money.  But if the Census Bureau has to return to the old long-form approach to collect the same data, the effort may end up costing more, partly because Census would need to hire and train a new, inexperienced staff every ten years.

The bigger cost by far would come from losing the information entirely.

Tax Credits for Working Families Help Women Now and Later

March 30, 2012 at 10:32 am

March is women’s history month and income taxes are due in April.  So it’s a good time to note the difference that tax credits for working families, such as the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), make for women’s economic security.

Working Family Tax Credits Kept Millions of Women Out of Poverty in 2010 The EITC is enormously successful at encouraging work and boosting earnings among low-income single mothers and is strikingly effective at reducing poverty.  Using data and procedures explained here, I estimate that the EITC kept an estimated 3.4 million women and girls above the poverty line in 2010.  That figure includes the effect of temporary 2009 Recovery Act expansions in the EITC, which alone kept 233,000 women and girls above the poverty line.

The numbers rise when you include a second federal income tax credit — the less well-known CTC, which provides up to $1,000 per child for working families:  together, the CTC and EITC kept 4.9 million women and girls above the poverty line in 2010, including more than 800,000 just by the Recovery Act’s expansions of both credits.  (The Recovery Act expanded other benefits that kept women out of poverty, too.  Counting just a few of them — the Making Work Pay Tax Credit, two expansions of unemployment benefits, and added food stamp benefits, in addition to the EITC and CTC improvements — the Recovery Act and subsequent extensions kept 3.5 million women and girls above the poverty line in 2010.)

Further, research suggests that the EITC may continue to improve these women’s economic security even after they retire.  In a new Congressional Budget Office working paper, researchers project that by raising employment and earnings levels for working-age women, the EITC will boost their Social Security retirement benefits.  That’s because your Social Security eligibility and benefit levels are based on your prior work and earnings history.

The vast majority of seniors rely heavily on Social Security benefits in retirement, but these benefits are especially critical for women and low-wage workers. That the EITC is expected to boost Social Security receipts and benefits among low-wage women is just one more way that it provides economic security by promoting and supporting work.

Under $2 a Day in America, Part 1

March 5, 2012 at 2:03 pm

Note: This is the first in a series of posts on extreme poverty that CBPP will do this week.

Living on less than $2 per person a day is one World Bank definition of poverty for developing nations.  Unfortunately, this threshold is increasingly relevant to the United States, according to a new study from the National Poverty Center.

The number of U.S. households living on less than $2 per person per day — which the study terms “extreme poverty” — more than doubled between 1996 and 2011, from 636,000 to 1.46 million, the study finds (see graph).  The number of children in extremely poor households also doubled, from 1.4 million to 2.8 million.

The figures are for cash income only, although the authors —the University of Michigan’s H. Luke Shaefer and Harvard University’s Kathryn Edin — note that extreme poverty is up even when one counts non-cash benefits like SNAP (food stamps).  We will discuss the connection between these findings and food and housing assistance in follow-up posts.

Extreme Poverty Doubled in Past 15 Years

The authors note an apparent connection between the sharp growth in extreme poverty and the loss of public assistance benefits, stating that “This growth has been concentrated among those groups that were most affected by the 1996 welfare reform.”  The 1996 law replaced Aid to Families with Dependent Children, which primarily provided cash assistance to eligible families, with the Temporary Assistance for Needy Families (TANF) block grant, which provided states with a fixed level of funding which they could use for many different purposes.

The report found that the rate of extreme poverty doubled for households overall but nearly tripled for female-headed households, which make up the bulk of the TANF caseload.

As we’ve explained, TANF’s ability to reach poor families has eroded severely in the past decade and a half.  Whereas, in 1996, TANF provided cash assistance to 68 families for every 100 poor families with children, by 2010 it provided cash assistance to only 27 families for every 100 families in poverty.  Families that have reached welfare time limits are not eligible for any federal cash assistance, and many have serious mental or physical health issues that leave them jobless for long periods.

Also, the sharp decline in the value of TANF benefits over time means that many TANF recipients remain extremely poor.  Benefits are below half of the poverty line in every state.  For a family of three, benefits are only about $2 per person per day in Mississippi and Tennessee and only slightly more than $2 per person per day in Alabama and South Carolina, for example.

Co-author Edin is an authority on the ways in which extremely poor households scraped by day-to-day in the pre-welfare-reform era.  Today, say Shaefer and Edin, “it is unclear how households with no cash income — either from work, government programs, assets, friends, family members, or informal sources — are getting by even if they do manage to claim some form of in-kind [i.e., non-cash] benefit.”

Research has shown that poverty in childhood has a long and harmful reach.  Even modest changes in family income for young children in poor families significantly affect their educational success — and may have a big effect on their earnings as adults.