State-Level Data Show Recovery Act Protecting Millions From Poverty
Act Also Saving and Creating Jobs, Boosting Economy

PDF of this report (5pp.)

By Arloc Sherman

December 17, 2009

While the recession is expected to drive states’ poverty rates up for 2009, new analysis based on Census data shows that the American Recovery and Reinvestment Act of 2009 (ARRA) is keeping large numbers of Americans out of poverty in states across the country. In addition to boosting economic activity and preserving or creating jobs, the recovery act is softening the recession’s impact on poverty by directly lifting family incomes.

The Center’s analysis, which covers 36 states and the District of Columbia, examines the effect on poverty of seven ARRA provisions: the expansion of three tax credits for working families, two provisions that strengthen unemployment insurance assistance, a provision that boosts food stamp benefits, and a one-time payment for retirees, veterans, and people with disabilities.[1] Nationally, these provisions are keeping more than 6 million Americans out of poverty and reducing the severity of poverty for 33 million more. (These figures include both people whom ARRA has lifted out of poverty and people whom ARRA has kept from falling into poverty.)

These estimates are conservative. The seven provisions examined cover only about one-fourth of the recovery act’s total spending. The remainder of the act contains an array of provisions that also have an effect on poverty either through direct job creation or through increased spending (on areas such as education, health care, and housing) that leads to more consumer demand in the economy, which in turn preserves or creates jobs. The Congressional Budget Office has estimated that the legislation as a whole had increased employment by 600,000 to 1.6 million jobs as of September 2009 and is expected to boost employment by 900,000 to 2.3 million jobs by the fourth quarter of this year.[2]

Moreover, this analysis does not capture the full anti-poverty impact of the seven provisions it examines. It considers the provisions’ direct effects on the incomes of the families that receive added income or benefits as a result of these provisions, but not the provisions’ additional effects on the economy and private-sector employment. For example, increased jobless benefits or food stamps preserve private-sector jobs in a recession by enabling consumers to continue purchasing goods and services they otherwise could not have afforded. That additional spending, in turn, ripples through the economy, helping stores and companies to stay in business and avoid steeper layoffs and reductions in work hours, and thereby averts larger increases in poverty.

Act Also Reduces Severity of Poverty for Millions of Americans

In addition to keeping more than 6 million Americans out of poverty in 2009, ARRA is reducing the severity of poverty for 33 million additional Americans who are poor by lifting their incomes, typically by more than $700. Due to data limitations, these figures are conservative and underestimate the number of people that the seven ARRA provisions examined here have helped in 2009.

Estimating Antipoverty Impact of Recovery Act Provisions

Congress designed the recovery act to reach a wide spectrum of low-, moderate-, and middle-income Americans. Policymakers took care to include provisions that provide assistance to low-income families, not only because they stand the greatest risk of hardship during downturns but also because of evidence that they are the most likely to spend quickly whatever money they receive, thereby pumping more money back into the economy in a timely manner.

Our analysis considers seven of the act’s temporary provisions, totaling $205 billion over five years:

  • a new Making Work Pay tax credit of up to $400 for workers ($800 for a couple) earning up to $95,000 ($190,000 for a couple);
  • an expanded Child Tax Credit for lower-income working families with children;
  • an expanded Earned Income Tax Credit, including increased tax-credit benefits for a working family with three or more children and for married families to lessen the marriage penalty the EITC can otherwise impose;
  • additional weeks of emergency unemployment compensation benefits (paid after a worker’s 26 weeks of regular state unemployment benefits expire);
  • an additional $25 per week for unemployed workers to supplement their unemployment benefits;
  • a $250 one-time payment to elderly people and people with disabilities who receive Social Security, SSI, or veterans’ benefits; and
  • an increase in food stamp benefit levels.

The state-by-state findings presented here build on a Center analysis released in September 2009, which focused on figures for the nation as a whole as well as five large states. Details of the methods used here are described in the appendices of that report. [3]

In brief, the analysis uses Census data to examine how these policy changes will affect family income and poverty status by state. The estimates start with data collected in March 2004, March 2005, and March 2006 through the Census Bureau's Current Population Survey. Data for three years are combined to increase the reliability of the state-by-state estimates.

We make three adjustments to these Census data. First, we correct the tendency of Census and other surveys to undercount receipt of certain public benefits, using the data and methods for making such adjustments that are reflected in the U.S. Department of Health and Human Services’ TRIM model. [4] Next, we adjust the data to approximate recent economic and demographic conditions in each state, including labor-market conditions and state population levels in April through June of 2009. Finally, we adjust the food stamp participation data to approximate actual food stamp participation levels by state in May 2009. For each family in the resulting data, we estimate the family’s 2009 income with and without the seven recovery act provisions.

The analysis considers a family to be kept out of poverty if its estimated income is below the poverty line without the recovery act provisions but above the poverty line with the provisions. We use a measure of poverty that adheres to National Academy of Sciences poverty measurement recommendations by including after-tax cash and non-cash income, while subtracting child care and work expenses and out-of-pocket medical expenditures.

We provide estimates for 36 states and the District of Columbia. For the remaining 14 states, our data are insufficient to show reliable results. [5] Given the uncertainty associated with using a sample of the population, we show a range of estimates for each state. This range can be substantial, particularly for states with the smallest survey samples. For example, estimates for Iowa range from 25,000 to 55,000 residents kept out of poverty, with our best estimate falling in the middle (40,000).

TABLE 1:
Projected Number of People Lifted Above the Poverty Line by ARRA Benefits, For 36 States and the District of Columbia, 2009

CBPP simulations using National Academy of Sciences poverty definition

 

Lower-bound estimate

Best estimate

Upper-bound estimate

U.S. TOTAL

5,945,000

6,183,000

6,421,000

Alabama

82,000

115,000

148,000

Arizona

117,000

161,000

205,000

Arkansas

40,000

58,000

76,000

California

743,000

844,000

945,000

Colorado

45,000

70,000

96,000

Connecticut

35,000

56,000

78,000

District of Columbia

8,000

12,000

16,000

Florida

356,000

425,000

495,000

Georgia

190,000

244,000

297,000

Illinois

247,000

305,000

364,000

Indiana

98,000

133,000

168,000

Iowa

25,000

40,000

55,000

Kansas

28,000

44,000

60,000

Kentucky

71,000

102,000

133,000

Maine

14,000

22,000

30,000

Maryland

54,000

82,000

110,000

Massachusetts

67,000

98,000

128,000

Michigan

167,000

215,000

263,000

Minnesota

42,000

66,000

91,000

Mississippi

43,000

63,000

83,000

Missouri

72,000

105,000

138,000

Nebraska

15,000

24,000

34,000

Nevada

40,000

58,000

76,000

New Jersey

79,000

111,000

144,000

New Mexico

38,000

54,000

70,000

New York

355,000

419,000

483,000

North Carolina

157,000

206,000

255,000

North Dakota

7,000

10,000

13,000

Ohio

159,000

204,000

249,000

Oklahoma

44,000

64,000

84,000

Oregon

58,000

84,000

111,000

Pennsylvania

149,000

189,000

230,000

Tennessee

61,000

92,000

124,000

Texas

554,000

640,000

727,000

Vermont

3,000

6,000

9,000

Virginia

85,000

120,000

155,000

Wisconsin

59,000

86,000

112,000

For details on the method used to project these figures, see www.cbpp.org/files/9-9-09pov2.pdf.

For states not shown, reliable state data are not available.

 

TABLE 2:
Projected Number of Poor People for Whom the Severity of Poverty Has Been Reduced by ARRA Benefits, 2009
CBPP simulations using National Academy of Sciences poverty definition

 

Lower-bound estimate

Best estimate

Upper-bound estimate

Total

32,178,000

32,680,000

33,182,000

Alabama

411,000

472,000

533,000

Arizona

796,000

896,000

996,000

Arkansas

241,000

280,000

318,000

California

5,629,000

5,871,000

6,113,000

Colorado

401,000

463,000

526,000

Connecticut

225,000

263,000

300,000

District of Columbia

101,000

113,000

125,000

Florida

1,838,000

1,970,000

2,103,000

Georgia

950,000

1,054,000

1,157,000

Illinois

1,408,000

1,523,000

1,638,000

Indiana

461,000

529,000

597,000

Iowa

168,000

201,000

234,000

Kansas

176,000

209,000

242,000

Kentucky

374,000

431,000

488,000

Maine

94,000

110,000

126,000

Maryland

532,000

602,000

672,000

Massachusetts

640,000

711,000

783,000

Michigan

903,000

994,000

1,084,000

Minnesota

245,000

293,000

341,000

Mississippi

336,000

382,000

428,000

Missouri

373,000

435,000

496,000

Nebraska

95,000

114,000

133,000

Nevada

237,000

273,000

309,000

New Jersey

724,000

804,000

885,000

New Mexico

220,000

252,000

284,000

New York

2,280,000

2,418,000

2,557,000

North Carolina

908,000

1,003,000

1,098,000

North Dakota

33,000

40,000

46,000

Ohio

869,000

959,000

1,049,000

Oklahoma

253,000

295,000

337,000

Oregon

286,000

335,000

383,000

Pennsylvania

955,000

1,048,000

1,140,000

Tennessee

552,000

628,000

704,000

Texas

2,715,000

2,884,000

3,053,000

Vermont

30,000

37,000

43,000

Virginia

614,000

693,000

771,000

Wisconsin

365,000

422,000

479,000

For details on the method used to project these figures, see www.cbpp.org/files/9-9-09pov2.pdf.

For states not shown, reliable state data are not available.

End Notes:

[1] As explained below, data were insufficient to estimate the antipoverty impact in the remaining 14 states.

[2] Congressional Budget Office, "Estimated Impact of the American Economic Recovery and Reinvestment Act on Employment and Economic Output as of September 2009," November 2009; and letter from CBO Director Douglas W. Elmendorf to Senator Charles E. Grassley, March 2, 2009.

[3] See Arloc Sherman, “Stimulus Keeping 6 Million Americans Out of Poverty in 2009, Estimates Show,” Center on Budget and Policy Priorities, September 9, 2009 (appendices).

[4] Specifically, we correct the Census data for underreporting of food stamps, TANF, and SSI benefits using the data and methodologies to correct for underreporting that are used in the U.S. Department of Health and Human Services' TRIM model.

[5] For seven of these 14 states, we do not show results because of very small sample size. In addition, we checked to ensure that our predicted state-to-state distribution of ARRA benefits is generally consistent for each state with the actual distribution of benefits paid through October 30, 2009, as reported on the government website, www.recovery.gov. We do not show results for another seven states because we determined that the state's share of benefits in our model differed by more than 10 percent from the state’s actual share of the benefits (due to random sampling error, the inability of our model to fully capture some complex program interactions, or other reasons).

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