Better Data, Better Outcomes: How Public Policy is Helping Poor Children

Those of us who follow child poverty are accustomed to bad news. Before the recession, one in five children in America was poor, placing our nation at the back of the pack internationally. The outlook for children has only grown worse during the recession. Over the past three years the number of children receiving nutrition assistance increased 50 percent and the number of children with an unemployed parent doubled, leading to fears of increased child poverty.

Yet a ray of positive news is emerging from recent research on poverty in Wisconsin and other parts of the country-all pointing to how public policy can make a real difference for low-income children. Unfortunately, major threats to government programs assisting families risk reversing recent gains for children..

As in many other states, Wisconsin’s children did not seem to fare well during the recession. Using conventional poverty statistics, child poverty in the state rose by almost four percentage points between 2008 and 2009.

The story alters dramatically when using the new and more comprehensive Wisconsin Poverty Measure, which finds no change in child poverty in the state between 2008 and 2009.

This surprising finding occurs because the new Wisconsin measure takes into account tax credits, nutrition assistance, and other family resources that are omitted from the official, cash-based poverty measure.

In Wisconsin, expansions in tax credits and nutrition assistance benefits were sufficient in 2009 to offset declines in earnings and cash income for many families living on the brink of poverty, according to a recent report from the Institute for Research on Poverty (IRP).

Tax credits reduced child poverty in Wisconsin by nearly one-third in 2009-from 18.5 percent in the absence of tax policies to 13.4 percent after factoring in taxes and tax credits. This five point reduction is twice as large as the previous year, when tax credits reduced child poverty by 2.3 percentage points.

While the state’s own earned income tax credit played a role, the primary impact came from federal tax credits, including the federal Earned Income Tax Credit (EITC) and the refundable portion of the Child Tax Credit. Both of these child-targeted credits were temporarily expanded under the American Recovery and Reinvestment Act (ARRA), in an effort to stimulate the economy and to mitigate financial hardship during the recession.

After tax credits, the most important public benefit for reducing child poverty was the Supplemental Nutrition Assistance Program (SNAP, or food stamps), which serves large numbers of poor children. Almost half of the 44 million Americans currently receiving SNAP benefits are children and another quarter are the adults living with them.

SNAP benefits reduced child poverty by 2.4 percentage points in Wisconsin-not as much as tax credits, but still enough to achieve an impressive 15 percent reduction in poverty. It’s also important to note that, while SNAP is a federal program, state policies – most notably Wisconsin’s efforts to improve outreach and access – contributed to the program’s anti-poverty effectiveness.

Taken together, these success stories show that public policies designed to help the working poor and the unemployed have been remarkably effective in preventing an increase in child poverty in Wisconsin, at least during the first year of the Great Recession.

Other parts of the country are witnessing similar positive findings. For example, child poverty remained flat in New York City between 2008 and 2009 under a comprehensive poverty measure developed by the New York City Center for Economic Opportunity.

Analysis from the Center on Budget and Policy Priorities also finds that existing safety net programs and ARRA expansions prevented an increase in the national level of poverty between 2008 and 2009 according to alternative poverty measures. The more comprehensive measures tell a brighter story than that recounted in official poverty statistics.

Despite these gains, it is important not to overstate the good news. Many families suffered losses of income that brought them closer to the poverty line, if not below it, and many families faced the emotional stress of job loss, foreclosure, and general financial uncertainty.

As hard economic times persist, it is not clear whether support for low-income children and their families will continue. The ARRA expansions of refundable tax credits were extended for two years last December, but only in a tax package that included the much more costly extensions of the Bush-era tax cuts to wealthier Americans. Since that tax cut deal, politicians have focused their attention on fiscal austerity and the need to cut public spending.

In addition to threats to the federal safety net, state assistance to low-income families is imperiled in several states, including Wisconsin, where the state EITC has just been cut and there are plans to privatize enrollment in the state’s SNAP program.

Cutting back on refundable tax credits and access to food assistance benefits is the wrong step to take. Better poverty data in Wisconsin and elsewhere makes it clear that such tax and safety net policies make a real difference for children and families.