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


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.

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.