Recovery Act Keeping Roughly 189,000 Pennsylvanians Out of Poverty in Recession

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Investments Have Boosted Economy, Saved and Created Jobs

HARRISBURG, PA (December 17, 2009) – Along with boosting the economy and preserving jobs, seven provisions of the federal economic recovery act are also keeping about 189,000 Pennsylvanians from falling into poverty this year, according to a new study from the Washington, DC-based Center on Budget and Policy Priorities.

The American Recovery and Reinvestment Act of 2009 (ARRA), as a whole, is likely keeping many more Pennsylvanians out of poverty, since these seven provisions account for only about one-fourth of the act’s total funding.

Pennsylvania was one of 11 states to see a statistically significant increase in the official poverty rate from 2007 to 2008, according to the U.S. Census Bureau's American Community Survey. In 2008, 1.5 million Pennsylvanians – 12% of the population – were living below the official poverty level.

“These are difficult economic times, but the recovery act has kept things from being much worse, as this study shows,” said Sharon Ward, Director of the Pennsylvania Budget and Policy Center. “Thousands of Pennsylvania families are getting help making ends meet despite the worst recession in decades”

Act Includes Expanded Food Stamps, Tax Credits for Workers, Jobless Benefits

The study examined the following seven provisions of the recovery act:

  • a new Making Work Pay Tax Credit of up to $400 for workers ($800 for a couple) earning up to $95,000 (up to $190,000 for a couple);
  • an expanded Child Tax Credit for lower-income working families with children;
  • an expanded Earned Income Tax Credit, including increased tax-credit benefits for a working family with three or more children and for married families to lessen the marriage penalty the EITC can otherwise impose;
  • additional weeks of emergency unemployment compensation benefits (paid after a worker’s 26 weeks of regular state unemployment benefits expire);
  • an additional $25 per week for unemployed workers to supplement their unemployment benefits;
  • a $250 one-time payment to elderly people and people with disabilities who receive Social Security, SSI, or veterans’ benefits; and
  • an increase in food stamp benefit levels.

The findings of the report should be instructive for federal policymakers as they consider additional efforts to create jobs and counter the recession, said Arloc Sherman, author of the report.

“Congress agreed to extend the extra unemployment benefits through February,” said Sherman.  “But with unemployment likely to remain high for some time, it will need to extend them further.  Congress should also extend the act’s tax credits next year so they continue to boost the economy and help families.”

Researchers lacked the data to examine other recovery act elements that are likely fighting poverty as well, such as funding for health care and child care.

Recovery Act Also Helping Economy and Jobs

Along with stemming the increase in poverty during the recession, the recovery act is also boosting the economy and preserving jobs, the study notes. 

“When Pennsylvanians spend the extra food stamp or jobless benefits they get from the recovery act in local stores, that helps those stores stay in business and retain their workers,” said Kathy Fisher of Public Citizens for Children and Youth in Philadelphia.  “It’s a win-win for families hit hard by the recession and for our state’s economy.”

More than stimulus bills passed in earlier recessions, the recovery act was designed to reach a wide range of low- and middle-income Americans, the report notes.  Policymakers included extensive help for low-income families not only because they stand the greatest risk of hardship during recessions but also because they are the most likely to spend quickly whatever money they receive, thereby pumping it into the economy.

Study Uses Broader Definition of Poverty

To determine the poverty-fighting impact of the seven provisions, the researchers used a broad poverty measure, which the National Academy of Sciences has recommended and a wide array of analysts favor, rather than the government’s official measure of poverty.  The official measure considers only a family’s cash income, the report explains.  Thus, it would miss many of the recovery act provisions that provide non-cash benefits, such as extra food stamps or tax credits. 

View the report at the Center on Budget and Policy Priorities' web site.