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Meeting the Needs of Low-Income Families in the Economic Recovery

SOURCE: AP/Greg Wahl-Stephens

A preschooler holds up her finished art work at a Head Start Program in Hillsboro, Oregon. Head Start is one of the programs that would be expanded under the House stimulus plan.

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Read also: Basic Needs Assistance for the Poor Advances Economic Recovery and Employment Goals 

The current, severe economic crisis has made addressing poverty much more urgent. Job losses are mounting across the country and the unemployment rate has spiked to 7.2 percent. Unemployment is projected to increase to 9 percent later this year, and the number of Americans in poverty could rise by between 7.5 and 10.3 million over the next several years. The American Recovery and Reinvestment Act, which passed the House of Representatives last week, contains many important measures intended to reduce the number of people that will enter poverty during the recession and help low-income families.

The version of the act currently being debated in the Senate is similar to the House bill, but it has weaker provisions in some important areas and does not have the same poverty-reduction potential as the House plan. The House and Senate will come together to hash out differences between the bills during the conference period after the Senate passes its plan, and Congress will be faced with important decisions at that time—decisions that will have a significant effect on how much the law contributes to poverty reduction.

Expanded assistance for low-income families is crucial both to promoting recovery and minimizing the growth and extent of poverty during the recession. Key areas of the House’s American Recovery and Reinvestment Act of 2009 that accomplish these goals are:

The Child Tax Credit and Earned Income Tax Credit. A provision in the bill would eliminate the Child Tax Credit’s earnings threshold so that all low-earning families can qualify for at least a small credit. This would make 3.7 million children newly eligible for the credit in 2009 and increase the credit for 10.4 million children. It would also increase the Earned Income Tax Credit for families with three or more children and reduce the “marriage penalty.” More information on these provisions can be found in the Earned Income Tax Credit and Child Tax Credit 101.

Child care and early education to low-income families. The House bill provides $2 billion for the Child Care and Development Block Grants. It is estimated that these grants will enable states to provide child care assistance for an additional 300,000 children in low-income families while their parents work, and it will generate paid employment for an additional 125,000 caregivers. The bill also provides $2.1 billion to Head Start for comprehensive development services that would help 110,000 additional children succeed in school.

The Unemployment Insurance system. The bill provides $7 billion in incentives to states to modernize UI rules that disproportionately disqualify jobless low-wage and part-time workers, and it dedicates $500 million toward helping states administer the UI program. It also continues the current extension of UI benefits through December 31, 2009 at a cost of $27 billion and dedicates $9 billion to increase UI benefits by $25 per week.

Affordable housing. It would allocate $1.5 billion to the HOME program for state and local governments to create affordable housing for low-income households. It also promotes energy efficiency by appropriating $2.5 billion for energy-efficient renovations and retrofits of HUD units, and $6.2 billion for the Weatherization Assistance Program, which provides funds to cover the costs of insulating private residences.

Opportunities for disconnected youth. The bill would connect dislocated youth with employment opportunities by providing hiring incentives to businesses through the Work Opportunity Tax Credit. It also provides $1.2 billion for grants to states for youth activities such as summer jobs, and $50 million to expand YouthBuild activities.

Pell Grants and education tax credits. The House bill appropriates $17.1 billion total to increase the maximum Pell Grant by $500. It also provides for an education tax credit called the “American Opportunity Tax Credit” at an estimated cost of $13.7 billion. This credit restructures the existing Hope Scholarship Credit while modifying certain rules.

The House American Recovery and Reinvestment Act also targets direct assistance to low-income households. Providing families with resources to meet their basic needs eases hardship and boosts the economy. Low-income individuals and families are more likely to spend the additional income immediately to purchase needed goods and services in their communities, which helps the families and gets money back into the economy quickly. Provisions in the House bill that provide direct assistance to low-income families include:

Nutrition assistance. A total of $20 billion would go to increasing Supplemental Nutrition Assistance Program benefits, or food stamps. This would fund a 13.6-percent increase in maximum SNAP benefits for all recipient households. The bill also provides $200 million for nutrition programs for the elderly and $150 million for food banks.

Energy assistance. The bill appropriates $1 billion for the Low Income Home Energy Assistance Program.

Housing assistance. It provides $1.5 billion to states for emergency shelter grants.

Supplemental Security Income. The bill appropriates $4.2 billion to poor elderly and disabled SSI recipients for a one-time payment of approximately $450 for individuals and $630 for married couples.

Temporary Assistance for Needy Families. The bill creates a new emergency fund to cover 80 percent of the additional costs faced by states that increase expenditures for cash assistance, subsidized employment, or temporary help for poor families.

The Senate is continuing debate on the American Recovery and Reinvestment Act , and its bill should ultimately reflect the strengths of the House version. Both the House and Senate bills, for example, expand the Child Tax Credit, but families that earn between $1 and $6,000 a year would receive a partial credit under the House plan while remaining ineligible under the Senate bill. Other low-earnings families would receive smaller credits under the Senate bill because their first $6,000 in earnings would not count toward calculating their credit. This means that 2.2 million fewer children would benefit from the additional income that the credit provides families.

The Senate bill offers some strong provisions in a few areas that could be made stronger when combined with the House approach, including Supplemental Security Income. The House-passed bill provides SSI recipients with a one-time payment of $450, while the Senate appropriates funds for a one-time payment of $300 to recipients of SSI, Social Security, Railroad Retirement, and Veterans’ Disability or Compensation. The Senate’s approach here casts a wider net and provides needed income for a broader range of people, but does not recognize the greater need of SSI recipients, who tend to be very low income and should receive a larger payment.

Growing numbers of families are relying on a beleaguered safety net that cannot adequately meet their needs as the recession deepens. The American Recovery and Reinvestment Act contains spending and tax programs that will help communities around the nation while advancing a number of the poverty-reduction strategies set forth in the Center for American Progress’ Poverty Task Force Report, “From Poverty to Prosperity: A National Strategy to Cut Poverty in Half.The act does offer some much needed relief for low-income families, but there is still much more that needs to be done to fight rising rates of poverty.

More from CAP on the stimulus:

Interactive Map: Beyond the Beltway: Helping Those Most in Need

Column: How to Help 12 Million Low-Income Children

Brief: Recovery and Reinvestment 101

Interactive: Build Your Own Stimulus Package

To speak with our experts on this topic, please contact:

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Print: Tom Caiazza (foreign policy, health care, energy and environment, LGBT issues, gun-violence prevention)
202.481.7141 or tcaiazza@americanprogress.org

Print: Chelsea Kiene (women's issues, Legal Progress, Half in Ten Education Fund)
202.478.5328 or ckiene@americanprogress.org

Spanish-language and ethnic media: Tanya Arditi
202.741.6258 or tarditi@americanprogress.org

TV: Rachel Rosen
202.483.2675 or rrosen@americanprogress.org

Radio: Chelsea Kiene
202.478.5328 or ckiene@americanprogress.org