Safety Net Is Fraying for the Very Poor

By ERIK ECKHOLM

Published: July 4, 2009

Government “safety net” programs like Social Security and food stamps have pulled growing numbers of Americans out of poverty since the mid-1990s. But even before the current recession, these programs were providing less help to the most desperately poor, mainly nonworking families with children, according to a new study by the Center on Budget and Policy Priorities, a private group in Washington.

The recession is expected to raise poverty rates, economists agree, although the impact is being softened by the federal stimulus package adopted this year, which temporarily expanded measures like food stamps, child tax credits, unemployment benefits and housing and tuition aid.

In view of the gloomy employment report last week, economists are debating whether to increase stimulus funds over all. But in a side argument, poverty experts are also asking whether elements of the package aimed at the most vulnerable Americans should be extended beyond their scheduled expiration in two years or even made permanent.

The new safety-net study found that federal aid programs had helped tens of millions of Americans stay afloat in recent years, especially those with low-end jobs who benefited from rising tax credits.

Going into the recession that began in late 2007, however, “the safety net was already enfeebled for jobless families,” said Arloc Sherman, a senior researcher at the center on budget priorities and author of the new study.

“It’s a good thing we have the stimulus package,” Mr. Sherman said. “But what happens to the most vulnerable families in two years, when most of the provisions expire?”

On Thursday, the Labor Department announced that unemployment had crept to 9.5 percent. The rate is far higher among blacks and Hispanics.

Even after growth resumes, all signs are that the recession’s impacts will be protracted, said Harry J. Holzer, a labor economist at Georgetown University. “We’ll not only see an increase in poverty and unemployment, but those numbers are not going to improve quickly,” Mr. Holzer said. “I think it will be important to extend some of the provisions of the stimulus plan beyond 2010.”

The recession and the stimulus package have brought “a new focus on the need for expanding and modernizing the social safety net,” said Sheldon Danziger, an economist and professor of public policy at the University of Michigan.

Mr. Danziger said the overhaul of cash welfare since 1996, aimed at pushing single mothers into jobs, “makes sense when unemployment is 5 percent.”

“But if you are out of work, the welfare system in a time of recession doesn’t have anything to offer,” he said.

In a recent paper, Mr. Danziger and Maria Cancian, professor of public affairs and social work at the University of Wisconsin, argued that because of changes in the economy, in the population and in social policy, economic growth per se did less to reduce poverty than it used to. Specific efforts to raise low-end wages, support working parents with child care and tax credits and raise education levels will be vital to reducing poverty, they said.

In the new study of the safety net, the center on budget priorities used a broader method for calculating poverty rates than is used by the federal government in its annual assessments, including the value of food stamps, housing subsidies and tax credits as income, but also adjusting for the local cost of housing.

The study found that federal aid in 2005 had reduced the number of Americans living in poverty, under this expanded definition, by 44 percent — lifting 31 million people above the poverty line. But it also found that as aid programs were increasingly aimed at supporting work, fewer of the worst-off, jobless families were pulled out of the deepest poverty, defined as an income below half the poverty line.

Douglas Besharov, an economist at the University of Maryland, said that while aid programs had undeniably reduced poverty, the 31 million number was overstated. Noting that the largest group helped was retirees receiving Social Security, Mr. Besharov said that in the expectation of benefits, some cling to larger houses or transfer assets to children, making their incomes lower than they would otherwise be.

The figures for families in “deep poverty,” too, may be misleading, Mr. Besharov and others say. In surveys, it appears that some people are eking by on almost nothing. But some have off-the-books income or receive aid from housemates or relatives that is never recorded.