Stimulus Staves Poverty Says CBPP

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January 20, 2011; Source: The Lookout (Yahoo News Blog) | The jury may still be out on the impact of the American Recovery and Reinvestment Act on creating jobs and reviving the economy, but a new study by the Center for Budget and Policy Priorities makes a different point about the value of the federal stimulus program. ARRA kept "millions of Americans out of poverty," according to CBPP.

CBPP says that the stimulus prevent 4.5 million people from joining the ranks of the poor by putting resources into existing government programs and by capitalizing new ones to help poor people in the midst of a ghastly recession. Through programs such as the extension of unemployment benefits, improvements in the child tax credit and the Earned Income Tax Credit, increases in food stamps, and the creation of the Making Work Pay tax credit, the stimulus put money directly into the hands or pocketbooks of Americans facing economic challenges.

According to the CBPP, the funds from these programs were spent quickly because poor people had "little choice but to spend the money quickly," and therefore had a greater stimulative effect on the economy than other mechanisms such as slow-spending infrastructure investments or tax incentives for corporations. CBPP's powerful conclusion was, "The Recovery Act is one of the single most effective pieces of legislation at preventing poverty to be enacted in decades . . . It is difficult to think of a single piece of legislation since the Social Security Act of 1935 that kept more people above the poverty line in 2009 through direct assistance to households."

CBPP might have further added the various housing, weatherization, employment, and health programs that the stimulus program funded – delivered largely by nonprofits –that provided crucial safety net program supports that supplemented and bolstered the income transfers lauded in the CBPP study.

With the 112th Congress, there are a number of new legislators committed to broad and deep cutbacks in social safety net spending, ostensibly to staunch the growth of a burgeoning federal budget deficit, in some cases motivated more by animus against programs that they see as undermining individual responsibility. Whatever the impetus, the result of such cuts could be a reversal of the CBPP findings, driving families into the poverty conditions that the Recovery Act had helped them avoid.—Rick Cohen