What Would US Poverty Rates Be Without Government Programs? National Bureau of Economic Research Study Finds Surprising Answers

on January 17 2014 12:03 PM
U.S. Poverty
Americans believe that there is more conflict between rich and poor than between immigrants and the native-born or between blacks and whites, according to a Pew Research Center opinion survey. REUTERS

This year marks the 50th anniversary since former president Lyndon B. Johnson declared the War on Poverty, and the overall poverty rate in the U.S. has hardly changed. But what would the poverty rate be without government anti-poverty programs?

That’s the question a National Bureau of Economic Research (NBER) analysis, “Waging War on Poverty,” explored. Researchers from Columbia University's School of Social Work and the Swedish Institute for Social Research conclude in their report, released earlier this month, that government programs have played a larger role in alleviating poverty than the official poverty measures (OPM) compiled by the federal government suggest.

According to OPM, overall poverty rates increased from only 14 percent in 1967 to 15 percent in 2012. OPM dates back to the 1960s and estimates poverty rates by looking at a family or an individual’s cash income.

Using the supplemental poverty measure (SPM), which was introduced in 2010 and adds tax payments, work expenses and other items in its family resource estimates, the researchers estimate that without government programs, poverty would have risen from 25 to 31 percent, while with government benefits, poverty has fallen from 19 to 16 percent.  In other words, they believe government programs today are cutting poverty nearly in half, while in 1967 they cut poverty by only one quarter.

The analysis also concludes that government programs have played a significant and growing role in countering child poverty, particularly deep child poverty, which includes children living below half of the poverty line. Without government programs, deep child poverty rates would be as high as 20 percent during economic downturns, much higher than the 4 to 6 percent with government programs, according to the report.

Additionally, the estimates that use SPM suggest tax credits and food and nutrition programs have a crucial role in alleviating poverty. The report suggests tax credits and food and nutrition programs reduced child poverty rates by 5 and 4 percentage points.

Irwin Garfinkel , Neeraj Kaushal, Jane Waldfogel and Christopher Wimer (all of Columbia University’s School of Social Work) and Liana Fox (of the Swedish Institute for Social Research) contributed to the NBER report.

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