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Stretching the Safety Net

New Census Poverty Data Suggest the Need for Elevated Government Funding

SOURCE: AP/David Karp

Daisy Nunez, left, and Chris Trei, right, food stamp recipients from New York, join Rabbi Steve Gutow, center, for a food stamp shopping trip in Harlem. The Supplemental Nutrition Assistance Program, or SNAP, formerly known as the food stamp program, received funding from the Recovery Act that in turn helped low-income Americans.

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Today’s poverty numbers gave the nation new statistical confirmation of what was plainly evident in almost every corner of America—more families experienced greater financial struggles last year than in the previous year. The ranks of the poor and near poor swelled dramatically in 2009, the second full year after the Great Recession’s onset. The U.S. Census reports that 14.3 percent of the population or 43.6 million people fell below the poverty line—the largest number in the 51 years since the data has been published. This is compared to 39.8 million the previous year. The change is increasing demand for antipoverty services.

What’s more, the data make clear that poverty is an “all America” problem that reaches across the boundaries of race, ethnicity, gender, and age. Yet some groups continue to experience the highest poverty rates—particularly children, African Americans, and Hispanics.

Today’s data points policymakers in two directions. The sobering high numbers of people in poverty and near poverty suggest that policymakers will need to find ways to stretch our already thin safety net. At the same time, the broad-based nature of the rise in poverty suggests that policymakers should also focus on broad-based poverty reduction efforts.

Congress and the Obama administration have focused on both kinds of policies. The American Recovery and Reinvestment Act, or ARRA, was passed shortly after President Barack Obama took office. It was a bold step toward aggressive job creation and providing basic needs services to those experiencing temporary hardships.

The unprecedented challenges the nation currently faces push us to continue along that path and build on what we’ve already accomplished. Congress should continue to focus on funding key antipoverty programs at the level necessary to address the monumental problems in front of us. This can, in part, be achieved through fiscal year 2011 appropriations and an extension of the TANF Emergency Contingency Fund for at least another year.

Poverty: An “all America” problem

Many seek to divide Americans along lines of political party, race, faith, region, or whatever other factor can be used to drive the news cycle. But today’s data show that poverty is an “all America” problem. Every segment of society has seen their poverty rates rise and that means we all should be invested in a strong and resilient safety net.

Poverty data don’t tell the full story

Poverty is too large not to be a national concern. A significant share (14.3 percent) of Americans are living below the poverty line. Our poverty data, however, do not reflect the true number of struggling families.

Many scholars focus on how our current poverty measure is a far too inadequate measure of hardship. Based on food consumption data from the 1960s and adjusted for inflation since then, the measure fails to take into account the actual income families need for their basic necessities. It similarly fails to account for regional variations in the cost of living.

It thus becomes easy to conclude that the poverty numbers don’t tell the full story. Consider that a family of four—with two adults and two children—fits the definition of being “poor” in 2009 if its income falls below $21,756. This is a low threshold, especially if the family is living in a large urban center where the cost of living is typically higher than the national average. A family earning income a little over the poverty line could not even afford housing, the most basic of needs.

Based on analysis of fair market rents, the National Low-Income Housing Coalition estimates that a family must make at least $38,360 to afford a two-bedroom apartment. Since this is a national average, markets like San Francisco and New York City require that families earn far more that $38,360 in order to simply provide a roof over their heads.

Data on the “near poor” thus become more valuable to any analysis aimed at determining how many Americans are experiencing hardship—in fact, many antipoverty government programs make eligible families who are above the poverty line. A near-poor family of four—defined in this current article as being below 150 percent of poverty—made under $32,634 in 2009. There are 71.8 million Americans—nearly one in four—who fit this definition of near poor yet even this figure suggests that there are still others even above that line who are struggling to provide an adequate living for themselves and their children.

Many different Americans suffer from poverty

Poverty and near poverty affect a diversity of Americans of all ages, races, and regions of the country. Yet some groups continue to experience exceptionally high poverty rates:

  • 20.7 percent of children are poor. They are typically the most vulnerable age group and share the title this year with young adults (ages 18 to 24) who struggled in 2009’s tight job market as they sought to compete with older more experienced workers.
  • One in four African Americans as well as one in four Hispanics are poor, which is about twice the rate for white Americans.
  • Certain southern states are expected to have higher poverty rates when the Census releases more detailed data later this month.

But even groups typically not associated with high poverty are seeing exceptionally high poverty due to the Great Recession. Eighteen percent or 9.9 million white children are poor, for example, and working-age adults have a rate of 13 percent or 24.7 million people. These ratios are better than other groups, but they translate into millions of people. This is far from good and suggests that policymakers should focus on a broad-based effort aimed at reducing and eliminating poverty. If all those affected by poverty became invested in solutions the coalition would cross lines of race, age, region, and, yes, even political party.

Finally, rising poverty costs all Americans. Harry Holzer points out in a recent report from the Center for American Progress that elevated child poverty and parental and youth poverty are likely to cost the nation billions of dollars over time due to lost productivity and earnings, bad health and related costs, and increased incarceration. Failing to address poverty now will hurt U.S. competitiveness as well as our collective well-being far into the future.

Stretching the safety net—ARRA and next steps

With more Americans from many different walks of life falling into poverty, we need to make sure that our safety net is flexible enough to meet today’s challenges but not stretched too thin.

There were far more people who qualified for antipoverty programs over the past year, with 3 million more people in poverty and near poverty in 2009 than in 2008. Many of these programs also serve the near poor by reaching families above the Census’ official poverty line. It was therefore clear by 2008—the first full year of the recession—that the safety net needed to be stretched to accommodate increased demand.

ARRA, which the Obama administration swiftly passed upon entering office, did just that. The Recovery Act targeted dollars to programs that could boost demand quickly and meet families’ pressing needs caused by the Great Recession. Putting money in the hands of poor and near-poor families is good economic policy when the economy is suffering from a lack of demand because those families will immediately spend all those dollars, creating demand that will in turn stimulate investment as businesses continue to see customers come through their doors.

The Recovery Act funded programs such as:

  • Homelessness assistance and homeless prevention services
  • The Supplemental Nutrition Assistance Program (formerly known as food stamps) and other forms of food assistance
  • Temporary Assistance for Needy Families, or TANF
  • Additional dollars for seniors and disabled individuals who receive Social Security benefits
  • Child care
  • Home energy assistance

This funding combined with ARRA’s other successful job-creation efforts and tax breaks for low-income individuals and families to benefit millions of families in financial hardship, keeping some out of poverty. This stopped the hemorrhaging of jobs and saved or created 1.4 million to 3.3 million jobs, according to analysis by the nonpartisan Congressional Budget Office. But unemployment has yet to fall.

Policymakers should focus on maintaining persistent and concerted efforts that boost demand and address the high poverty caused by the Great Recession. Congress, as a next step, should enact pieces of the president’s FY 2011 budget that add funds for key antipoverty programs supporting employment, education, and basic needs assistance. Doing so will help the growing numbers of families seeing hardship weather the economic storm and provide them with crucial services such as job opportunities.

Spotlight on TANF

One program seeing particularly increased demand and therefore in need of a stretch is Temporary Assistance for Needy Families, or TANF. The program was the ultimate product to come out of welfare reform more than a decade ago. It originally used most of its resources to provide cash assistance to families—73 percent of resources. Since then a complete reversal has taken place. Now the majority of funds are no longer spent on cash assistance but on other antipoverty services that support work and self-sufficiency.

Importantly, TANF’s central funding stream has been legislatively frozen at $16.5 billion since welfare reform’s inception in 1996. This means the program had its purchasing power reduced by inflation. ARRA’s TANF Emergency Fund provided necessary additional resources of $5 billion over two years to the program.

These added resources led to the creation of more than 240,000 subsidized jobs for families experiencing hardships. States further evaluated their needs and used the program’s flexibility in other areas including child care, job support and readiness, energy assistance, and emergency housing assistance—services that further helped families get and maintain employment or ensure that their basic needs were met during hard times.

Congress must now decide if it wants to extend the TANF Emergency Fund for another year at $2.5 billion, which also means allowing for subsidized jobs programs to continue along with additional funding for work supports and basic needs assistance that will help families through the economic downturn. If TANF doesn’t receive this support it will be severely stretched and miles away from helping all families in need with the growing poverty population.

Conclusion

Americans of all ages, races, and regions of the country are going through very difficult times, as today’s poverty numbers indicate. The numbers further reflect the urgent need to stretch our safety net—3 million more poor and near-poor individuals offer no other choice. ARRA stretched the safety net a little further. But many of its low-income supports expire at the end of this month, and it should only be viewed as an initial intervention in a persistent and difficult problem.

These unprecedented times require continued and persistent efforts until the job of giving a helping hand to the nation’s most vulnerable families is done. We offer two key recommendations here:

  • Implementing the administration’s recommended elevated funding levels for key antipoverty programs in FY 2011
  • Extending the TANF Emergency Fund for at least another year

Joy Moses is a Senior Policy Analyst with the Poverty and Prosperity program at American Progress.

More on poverty from CAP:

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