Contrary to the tired trope that “we fought a war on poverty and poverty won,” our anti-poverty policy agenda has been far more effective than most people realize. In 1967, the safety net lifted the incomes of only about 4% of otherwise-poor people above the poverty line; today it lifts 42%.
The safety net’s effectiveness was extremely important during the Great Recession in 2008. Thanks in part to President Obama’s work through the Recovery Act, programs like the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and SNAP (food stamps)—not counted by the official poverty measure—were particularly effective at protecting people. While the official poverty rate grew by 2.6 percentage points between 2007 and 2010, the Supplemental Poverty Measure (SPM)—which includes the effects of safety net programs—grew by only a fraction (0.5 percentage points). In contrast, the milder downturn of the early 1990s resulted in the official poverty rate rising 2.3 percentage points, while the SPM was up a similar 2.2 points. All told, the Recovery Act kept nearly 9 million Americans out of poverty.
Get TalkPoverty In Your Inbox
The Recovery Act’s expansions of the EITC and CTC were eventually made permanent, and—along with the Affordable Care Act’s Medicaid expansion, if preserved—will serve as long-lasting anti-poverty achievements of the Obama Administration. These and other safety net programs will also continue to boost long-term opportunities by raising earnings and improving health outcomes in adulthood for people who received the assistance as children.
Unfortunately, Medicaid and other anti-poverty programs—not to mention labor standards like the Department of Labor’s new overtime rule—will likely be in jeopardy under a Trump Administration and Republican-led Congress. Protecting these programs from unwarranted attacks must be a top goal of advocates in the coming years.
Pursuing full employment must be another top goal. Though 2015 brought the biggest single-year improvements in income and poverty since the late 1960s—3.5 million fewer people were in poverty than during the preceding year, and inflation-adjusted median household income rose by $2,800—one strong year does not make up for years of wage and income stagnation. Real household income still remains lower—and poverty remains higher—than they were in 2007, before the Great Recession. We haven’t yet offset the weak (“jobless” or “wageless”) early stages of the economic recovery.
Full employment is, quite simply, a situation in which most everyone who wants a job is able to find one. The least economically well-off benefit the most from a full employment economy through higher hourly wages and more hours of work. A decrease in the unemployment rate from 7% to 4.9%, for example, would be associated with a 3.2% raise in hourly pay for low-income workers, a 1.3% raise for middle-income workers, and no raise at all for workers at the top.
Full employment also provides low-income, working families with the opportunity to increase the time they spend in the paid labor market. In simulations, for example, a fall in the unemployment rate from 5.3% to 4% correlates with a substantial increase in annual hours worked by single mothers in the bottom third of the income scale, from about 700 hours per year to over 900. Given their average hourly wage of about $10, that increase in hours worked adds $2,000 to their annual income.
These figures demonstrate that labor demand matters—the working class will take advantage of available hours. Far too often, what conservatives label as an unwillingness to work is in reality an absence of ample, remunerative opportunities to work.
So where do we go from here?
To keep the recovery going, the Federal Reserve must support a full employment economy by not overreacting to price pressures and thus preemptively raising interest rates. Congress should pass a deficit-financed job-creating infrastructure program, rather than the president-elect’s proposed infrastructure privatization scheme and tax giveaway to the wealthy. We must also continue to pressure policymakers to pursue better trade deals—which would remove special investor privileges and patent protections and include enforceable environmental standards, human rights provisions, and rules against currency manipulation—and strengthen labor standards, like the minimum wage, that are extremely popular and improve job quality.
Policymakers also need to start preparing for the next recession. One of the best ways to do so would be to strengthen the federal budget’s “automatic stabilizers,” which are features that expand and contract in response to economic need. SNAP, Medicaid, and unemployment insurance already serve this function well, but they can be improved to better stimulate the economy. We recommend building on what Congress and the Obama Administration did in the last recession by improving the existing triggers—or economic indicators—that automatically extend the number of weeks during which people can receive unemployment insurance benefits. New triggers that would temporarily bump up both SNAP benefits and the portion of Medicaid spending that the federal government covers for states should also be added.
Concerns about whether a government controlled by the Republican Party will even consider such reforms are well warranted; politicians who oppose anti-poverty spending in general are not likely to support making more of such spending automatic. But recessions can quickly change the politics of public investments. Both Republican President George W. Bush and Democratic President Obama passed stimulus legislation during the last recession, and Congress has enacted temporary expansions of unemployment compensation in response to every major recession since 1970.
Much of our job over the next few years will be to protect vital gains we have made in the fight against poverty. But recognizing those gains—and how much work remains to be done—should provide us with all of the motivation we need to continue that fight.
Editor’s note: TalkPoverty presents this series in collaboration with the Georgetown Center on Poverty and Inequality.