We Know How to Curb Poverty, We Simply Fail to Act

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The Nation

We Know How to Curb Poverty, We Simply Fail to Act

This Week in Poverty: An American Commitment to Children?

This week, at a forum on poverty and the 2012 election, Republican pollster Jim McLaughlin said 88 percent of voters view a candidate’s position on equal opportunity for children of all races as important in deciding their vote for President. Washington Post columnist Michael Gerson commented that it was “most encouraging” that “Americans of every ideological background believe in opportunity for children. It’s a common ground commitment.”

I wish I shared his confidence. I think if that commitment were truly a strong one, we would be doing much more to help the 22 percent of American children and their families—disproportionately people of color—get out of poverty. 

Yet too many politicians and citizens still seize on President Reagan’s old line—“We fought a war against poverty, and poverty won”—as a reason not to make substantial investments in children and families. The data, however, suggests that this take on antipoverty legislation is a myth.

From 1964 to 1973 we reduced poverty by 43 percent. More recently, six initiatives in the Recovery Act kept nearly 7 million Americans from falling into poverty. Saying we failed simply because there is still poverty is like saying clean air and clean water laws failed because there is still pollution.

The truth is we do know many of the things that need to be done to reduce poverty, and our failure to act means we are choosing to accept a brutal status quo. Here’s a look back at how we could have reduced poverty by 25 percent if we had possessed the will. These programs and others still offer us opportunities to prove our commitment to children and their families today.  

Task Force on Poverty

In 2007, a Center for American Progress Task Force on Poverty that included Peter Edelman, Angela Glover Blackwell, and others, released a report with 12 recommendations on how to cut poverty in half over ten years. The Urban Institute used widely respected modeling to study just four of the recommendations—raising the minimum wage, strengthening the Earned Income Tax Credit, expanding the Child Tax Credit, and improving child care assistance—and found that together they would reduce poverty by 26 percent. While the numbers may have changed, it’s still true that improving public policy in these four areas would have a major impact on poverty.

The Minimum Wage

The Task Force on Poverty recommended raising the minimum wage to half the average hourly wage—the historic marker for the minimum wage—and indexing it to inflation. In 2007, that would have meant raising it to $8.40 and it would have reduced poverty by 1.7 million people.

For most of the 1960’s and 70’s a worker with a full-time minimum wage job could lift a family of three above the poverty line, about $17,300 today. But the federal minimum wage has only been raised three times in the past 30 years and now stands at $7.25 per hour, which results in sub-poverty earnings of $15,080 for a year round, full-time employee. If the minimum wage had kept pace with inflation it would now be $10.39 and pay a full-time worker $21,611 annually. 

Polls show wide bipartisan support for an hourly minimum wage of at least $10.00. Maybe that’s why Republican frontrunner Mitt Romney came out in support of raising it automatically with inflation every year. At least that’s what he told NELP policy analyst Anne Thompson in New Hampshire. When informed of Romney’s statement, anti-poor crusader Newt Gingrich was incredulous.

In the 2008 campaign, President Obama’s endorsed raising the federal minimum wage to $9.50 by 2011, and indexing it to inflation. Many states aren’t waiting for Congress to get its act together—nineteen (including DC) have raised the minimum wage above the federal level, and ten automatically increase it to keep pace with inflation. New York, New Jersey, Delaware, California, Missouri, Illinois, Massachusetts, Maryland, and Connecticut are all currently considering raising the minimum wage.

A commitment to creating opportunities for poor families means a commitment to raising sub-poverty wages.

The Earned Income Tax Credit and Child Tax Credit

The Earned Income Tax Credit (EITC) is a federal tax credit for low- and moderate-income working people that serves as a wage supplement. If it exceeds a low-wage worker’s tax liability, the IRS refunds the balance. The Child Tax Credit helps working parents cope with the rising costs of raising their kids, providing up to $1000 for each child, depending on earnings.

In 2007, the Task Force on Poverty recommended expanding the EITC to include childless workers and improving benefits for families with three or more children. It also recommended adjusting the Child Tax Credit for inflation and lowering the earnings threshold for qualifying (then at $11,300) so that the poorest working families would benefit. These measures alone would have reduced poverty by 5.5 million, according to the Urban Institute.

In fact, the Recovery Act did a lot to improve both tax credits. It expanded the EITC so that working parents with 3 or more kids receive a higher credit than families with fewer children. It also substantially improved the Child Tax Credit by lowering the qualifying earnings threshold to $3000 so that more poor families would receive the benefit.

The results? In 2009 the federal EITC kept 6 million people out of poverty, half of them children. It also kept more than 3 million children out of poverty in 2010. In 2009, the Child Tax Credit protected approximately 2.3 million people from poverty, including about 1.3 million children, according to the Center on Budget and Policy Priorities (CBPP).

But without Congressional action these improvements will expire at the end of 2012. For a family with two or more kids working full time at the minimum wage, that would mean a Child Tax Credit of $300 instead of $1800 (because the first $13,000 in earnings wouldn’t count towards calculating the credit).

Next Thursday—the day before what the IRS has dubbed EITC Awareness Day—the National Community Tax Coalition (NCTC) will release a terrific report highlighting not only the antipoverty effect of the EITC, but its association with improved health outcomes for families and greater educational outcomes for kids, as well as boosting neighborhood businesses, local economies, and the nation’s economic recovery. They will hold a briefing on the Hill along with the Community Action Partnership and others, and call for federal EITC improvements, preserving state EITCs, and expanding Volunteer Income Tax Assistance services to help families take advantage of full tax refunds. 

You can stay informed about efforts around the EITC and CTC through these groups as well as Half In Ten and the Coalition on Human Needs.

Childcare Assistance

In 2007, the Task Force on Poverty noted that only about 1 in 7 families qualifying for federal childcare assistance actually received it. As a result, poor families paid a disproportionate share of their income towards childcare that was often inadequate, and were often forced to choose between things like rent or childcare, or employment and childcare. The Task Force recommended doubling federal spending for early care and education initiatives, with states coordinating childcare, Head Start, pre-K, and other programs for children from birth to age five, promoting healthy child development and more work opportunities for parents.

Five years later, the percentage of families qualifying for federal childcare assistance that actually receive it has barely budged, and there are waiting lists across the country. Poverty rates for families headed by a single mom drop from 40.7 percent to 14 percent when she has full-time, year-round employment—tough for anyone to do when you don’t have access or can’t afford a safe, reliable place for your kids.

Moreover, research shows that low-income mothers who receive childcare subsidies are more likely to be employed, work more hours, and work standard schedules compared to mothers without subsidies. That’s not only good for the parent, it’s good for kids too since a more reliable parental presence has a dramatic impact on children’s brain development.

But instead of bolstering childcare we are moving in the opposite direction. It’s funded with a fixed federal block grant so funding hasn’t risen with increased demand. The Recovery Act provided a temporary boost that allowed states to provide care for an estimated 314,000 children in 2010, according to the Department of Health and Human Services. But that money ran out and wasn’t extended for FY2012.   The result? A recent study by the National Women’s Law Center (NWLC) reveals that families in thirty-seven states were worse off under one or more key child care policies in 2011 than they were in 2010, and only better off in one or more of those areas in eleven states.

NWLC is a great place to stay informed and get involved on this issue.

A Current Battle – Unemployment Extension

We know a parent being unemployed can affect a child’s development in the short-term—including psychological stress and academic performance, and increased incidences of abuse and neglect—and in diminished career opportunities and earnings as an adult over the long-term.

Unemployed workers still outnumber available jobs by over 4-to-1. Yet Congress has refused to offer a clean yearlong extension to help people meet basic expenses, and a two-month extension expires on February 29th. In 2010, federal and state unemployment benefits kept 3.2 million people out of poverty, according to Rabbi Steve Gutow, president of the Jewish Council for Public Affairs.

“We have the opportunity to prevent the completely avoidable slide into poverty and hunger for those looking each day to return to work,” writes Gutow. “A full one year extension to weather the slow recovery is the right thing to do for our economy, for families and individuals who should not have to ask for help, and for the pursuit of justice.”

For further reading and additional resources please see the extended version of this post at The Nation.

Greg Kaufmann

Greg Kaufmann

Greg Kaufmann is a Senior Fellow at the Center for American Progress and Editor of TalkPoverty.org.

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