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Safety Net Cut Poverty Nearly in Half Last Year, New Census Data Show

Safety net programs cut the poverty rate nearly in half in 2013, our analysis of Census data released today finds, lifting 39 million people — including more than 8 million children — out of poverty.  The data highlight the effectiveness of cash assistance such as Social Security, non-cash benefits such as rent subsidies and SNAP (formerly food stamps), and tax credits for working families like the Earned Income Tax Credit (EITC).  They also rebut claims, based on poverty statistics that omit non-cash and tax-based safety net programs, that these programs do little to reduce poverty.

Accounting for government assistance programs and taxes cuts the poverty rate for 2013 from 28.1 percent to 15.5 percent, we found (see chart).  These figures are based on Census’ Supplemental Poverty Measure (SPM), which — unlike the official poverty measure — accounts for taxes and non-cash benefits as well as cash income.  (The SPM also makes other adjustments, such as taking into account out-of-pocket medical and work expenses and differences in living costs across the country.)

Safety net programs cut the poverty rate for children from 27.5 percent to 16.4 percent, we found.

Because the SPM includes taxes and non-cash benefits, it gives a more accurate picture of the impact of anti-poverty programs than the official poverty measure, which counts only cash income.  Non-cash and tax-based benefits now constitute a much larger part of the safety net than 50 years ago, so the official poverty measure’s exclusion of them masks the nation’s progress in reducing poverty over the last five decades.

Nevertheless, some policymakers and pundits have used comparisons based on the official poverty measure to argue that federal anti-poverty programs are ineffective.  As Senator Orrin Hatch, the Finance Committee’s ranking Republican, put it last week, “For 50 years we’ve spent trillions of dollars on massive federal welfare programs that have largely failed.  The poverty rate has remained essentially unchanged since 1967.”  House Budget Committee Chairman Paul Ryan has made similar statements.

Comparing poverty rates in the 1960s and today using the official measure, which doesn’t count programs like SNAP, the EITC, and rental vouchers, implies that those programs — all of which were small or nonexistent in the 1960s — do nothing to reduce poverty, which clearly is not the case.  Columbia University researchers using an SPM-like measure (and adjusting the poverty line for inflation) found that the poverty rate fell from 26 percent in 1967 to 16 percent in 2012 if one includes this assistance.  Today’s Census figures provide further evidence of the safety net’s strong anti-poverty impact.