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Recovery Act Kept 4.5 Million People Out of Poverty in 2009, Helping Keep Poverty Flat

Our analysis of data that the Census Bureau released this week shows that the 2009 American Recovery and Reinvestment Act was one of the single most effective pieces of antipoverty legislation in decades. In 2009, the Recovery Act’s temporary expansion of the safety net kept 4.5 million people out of poverty.

Last September, the Census Bureau reported that, under its official measure of poverty, which counts only a household’s cash income (not tax credits or non-cash government assistance such as food stamps), the poverty rate rose from 13.2 percent in 2008 to 14.3 percent in 2009.

On Tuesday, the Census Bureau released several new poverty figures for 2009 that rely on alternative, broader poverty measures — ones that include tax credits and non-cash benefits. Under almost all of these alternative measures, the safety net as a whole, including the Recovery Act expansions, prevented any rise in poverty in 2009, despite the deep recession and very high unemployment. (In one of the eight measures, poverty went up but by only a fraction of the official figures, 0.4 percentage points. None of the other measures was statistically distinguishable from the year before.)

We examined the Census data to see how much of that poverty-reducing impact came from the Recovery Act expansions. We found that they kept more than 4.5 million people out of poverty in 2009 (see graph):

  • 1.3 million people through extensions and expansions of federal unemployment benefits;
  • 1.5 million people through improvements in the Child Tax Credit and Earned Income Tax Credit;
  • nearly 1 million people through the law’s new Making Work Pay tax credit; and
  • 700,000 people through an increase in benefit levels for the SNAP program (previously called food stamps).