2009 Recovery Act Kept Millions out of Poverty

The Washington Post points out that the 2009 Recovery Act, signed five years ago yesterday, accomplished much more than its critics acknowledge.  When it comes to using the safety net to keep people out of poverty, for example, the Recovery Act was probably the most effective piece of legislation since the 1935 Social Security Act, as our 2011 analysis explained.

Six Recovery Act provisions — three new or expanded tax credits, two expansions of unemployment insurance, and a SNAP (food stamp) benefit expansion — kept 6.9 million Americans out of poverty in 2010.  This estimate uses an alternative poverty measure based on National Academy of Sciences recommendations (a forerunner to the Supplemental Poverty Measure that the federal government now regularly reports) that considers the effect of government benefit programs and tax credits as well as cash income.

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As the graph shows:

• 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 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.  The 6.9 million total, though, counts each person only once.

And, as the graph shows, existing (pre-2009) policies to promote family income also kept millions of Americans 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, despite the crippling recession, contributing to economic growth.

To be sure, these figures don’t mean that government assistance staved off all, or even most, recession-related hardship.  But they show that government assistance kept millions of Americans above the poverty line during the worst economic downturn since the Great Depression.  That’s no small accomplishment.