July 26, 1996
On Friday, July 26 the Urban Institute released a study showing that the House welfare bill would push 1.1 million children and 2.6 million people overall into poverty, increasing the number of children in poverty by about 12 percent. The study included the following additional findings:
The assumptions relied on by the Urban Institute are more conservative than the assumptions relied on by the Administration in last year's analysis of the vetoed welfare bill. The report shows that if the same assumptions used last November in the Administration's analysis are applied to the current House bill, the current bill would be projected to push 1.3 million children below the poverty line.
As Senator Moynihan noted yesterday, these poverty estimates are more likely to underestimate than overestimate the extent to which the welfare bill pushes children into poverty and makes already-poor children even poorer.
The welfare bill that passed the Senate would have an almost identical impact on child poverty.
The Urban Institute report shows that the House-passed welfare bill would push 1.1 million children and 2.6 million people overall into poverty, increasing the number of children in poverty by about 12 percent.  The report takes into account most of the cuts in low-income programs in the bill, the changes in the structure of the AFDC program, and the effect the bill could have on moving families from welfare to work.
In addition to increasing the number of children who are poor, the report found the bill would also make many children who are already poor still poorer. This is shown by the report's finding that the bill would cause an increase in the "poverty gap," which is the measure of the total amount of income needed to lift all poor families exactly to the poverty line. The "poverty gap" measure includes both the impact of pushing children who otherwise would not be poor below the poverty line and the impact of driving already-poor children deeper into poverty. As a result, it is an important measure of the effects of the legislation on child poverty.
The researchers found that the "poverty gap" for poor families with children would increase by more than $4 billion, or 20 percent. In total, the report found that the bill would leave some 11 million families, three-quarters of whom have children, with lower incomes. One in five families with children or 8.2 million families would see their incomes fall as a result of the bill by an average of $1,300.
The Urban Institute calculated the bill's impact on poverty under somewhat different assumptions about the bill's likely effect on moving parents into jobs than the Administration used in its analysis of last year's welfare bill. Most notably, the Urban Institute assumed that a larger proportion of families that would be affected by the time limit would find unsubsidized employment than the Administration assumed. The Urban Institute's analysis, therefore, is based on more conservative assumptions than were used in the Administration's estimates. (It should be noted that the assumptions relied on in last year's Administration analysis regarding the number of parents who would find jobs were more conservative than those used by CBO.) The report released today shows that if the same assumptions used last November in the Administration's analysis were used now, the current House bill would be projected to push 1.3 million children below the poverty line. This is the appropriate figure to use for the purpose of comparing the current welfare bills with last year's vetoed welfare conference bill and last year's Senate welfare bill.
The Urban Institute analysis shows that while somewhat less severe than last year's vetoed welfare bill, the current bill would push more children into poverty than last year's Senate welfare bill, which was estimated by drive somewhat fewer than 1.3 million children into poverty. The main difference between this year's House welfare bill and last year's vetoed bill that would affect the number of children pushed into poverty is the reduction in the severity of the cuts in the SSI program for low-income disabled children.
In a press statement on July 25, Sen. Moynihan indicated that the Urban Institute estimates of the effects of the bill on child poverty are likely to be conservative. The Urban Institute used several conservative assumptions in developing their estimates of the effect of the bill on the extent and depth of child poverty.
The Senate Welfare Bill's Effect on Poverty Would Not Differ Substantially
The welfare bill that passed the Senate would have an almost identical impact on child poverty. While the Senate bill does include some provisions that differ, the Congressional Budget Office estimates that the total level of cuts in low-income programs would be nearly the same as in the House bill. There are two main areas where the cuts in the Senate bill are not as deep as in the House bill. The House bill would deny Medicaid to a far larger number of legal immigrants. This does not affect the Urban Institute's estimates because the Institute's study did not consider loss of health care coverage when considering the effect of the bill on poverty. The House bill also would deny food stamps to a significantly larger number of unemployed adults not raising children. These two differences would have virtually no effect on the number of children pushed into poverty, although the harsher food stamp provision in the House would likely lead to a larger total number of individuals being pushed into poverty.
The Senate bill does include a somewhat higher state maintenance-of-effort requirement. As noted, however, the Urban Institute assumed that under the House bill states would not withdraw state resources in response to provisions allowing them to do so. These differences between the House and Senate bills, therefore, would not affect the researchers' estimates of the number of children pushed into poverty.
The Urban Institute report indicates that more than half of the 11 million families who would see their incomes fall as a result of the legislation are low-income working families. Moreover, most of the children pushed below the poverty line live in families with a working parent. Families without earnings that receive AFDC and food stamps typically have incomes well below the federal poverty line. On average, a family of three that receives all of its income from AFDC and food stamps current has income $3,000 below the federal poverty line. These families would be made still poorer by the legislation but would not add to the number of children pushed below the poverty line.
1. The report counts a family as poor if the family's income is beneath the federal poverty line. Family income is defined as cash income such as earnings, cash assistance, social security payments, and child support income; plus in-kind assistance that is similar to cash such as food stamps and housing assistance; plus the Earned Income Tax Credit minus federal income and payroll taxes. This approach is consistent with the approach proposed by a prominent National Academy of Sciences panel on the measurement of poverty. Using this definition, the Urban Institute estimates that there are currently 9.7 million poor children.