Why the next Congress won't be nearly as good for the poor as the current one.

Commentary about business and finance.
Nov. 5 2010 6:26 PM

The Poor House

Why the next Congress won't be nearly as good for the poor as the current one.

Nancy Pelosi.
Nancy Pelosi

In the just-finished campaign, as usual, every candidate claimed to be standing up for the middle class. Democrats argued that they delivered what the middle class needed: tax breaks, health care reform, and federal aid to states to help ease the recession. Republicans argued that Democrats failed to deliver the only thing the middle class wanted and needed: jobs. Neither party talked much about "low-income families," to use the preferred euphemism—or, more bluntly, poor folks.

In truth, the Congress of the last two years passed more legislation benefiting the poor than any other in memory. That the Democrats didn't campaign on their achievements may indicate one of two things. One, poor folks—unlike, say, politically generous Wall Street bankers or socially conservative Rust Belt Catholics—are generally not viewed as a constituency worth courting. Two, as with the stimulus bill's effect on unemployment, what the Democrats did mainly consisted of preventing a bad situation from getting worse.

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By any measure, poverty increased from 2008 to 2010. As the recession grew deeper, it subtracted millions of jobs from the economy, destroyed trillions of dollars in housing wealth, trapped millions of homeowners in overpriced properties, and eroded both real and nominal wages. In just two years, the number of Americans living in poverty—defined as those with incomes below $11,161 (for an individual) or $21,756 (for a family of four)—grew from 37.3 million to 43.6 million. The number of children in poverty passed 15million, with one in five kids growing up under the poverty line. The number of Americans living in extreme poverty, with income less than half of the poverty level, hit 19 million. And those statistics do not capture the number of Americans who felt poor—economists generally agree that the United States sets its poverty threshold very low.

But during the 111th Congress, the stimulus and other legislation expanded the safety net to capture many of those falling through it. Poverty increased, but so did the number of people saved from it. Indeed, think-tank estimates show that congressional action saved as many as 6 million people from poverty. Most of that came in the form of the stimulus, where a grab bag of provisions—from a more generous food stamp program to a bigger unemployment benefits program—helped the poorest Americans, aiding millions of middle-class families, too.

The unemployment insurance changes provided the biggest boost. States customarily administer the unemployment system, delivering payments for a set period—it varies by state, but usually 13 to 26 weeks—to workers who lost their jobs through no fault of their own. But when the recession deepened and layoffs increased in late 2008, Congress stepped in. The federal government tacked extra weeks of payments onto the state-provided weeks in an effort to accommodate the rising job seekers-to-jobs ratio and the lengthening average duration of unemployment. Some unemployment recipients now receive as many as 99 weeks of benefits—an all-time high, keeping some 3.3 million people from falling into poverty, according to the Center on Budget and Policy Priorities. 

Other measures passed by the 111th Congress had a smaller effect. Consider, for instance, the TANF Emergency Contingency Fund, a pool of money added to the Temporary Assistance for Needy Families program, the federal welfare program. That program subsidized the salaries of 240,000 previously unemployed workers. Congress also tweaked the tax code to help poor Americans, expanding the earned-income tax credit and the child-care tax credit.

So what of the 112th Congress? Well, despite the recent gains made—the jobs private companies are adding, the thaw in the markets—the number and proportion of Americans in poverty is expected to rise for the next year or so. (The official census data lags by about nine months, so we will know the 2010 poverty rate next September.) That's because nearly 15 million Americans remain unemployed. In addition, hundreds of thousands have dropped out of the labor force, discouraged after months of not finding work. Those jobless workers have a tendency to fall into poverty.

"In each of the past three recessions, poverty did not begin to fall until a year after the unemployment rate began to fall," says Robert Greenstein of the Center on Budget and Policy Priorities. The unemployment rate in 2009 was 9.3 percent, and has averaged 9.7 percent this year. The average will likely decline starting in 2011. But while poverty will almost certainly increase, the safety-net programs will end. In fact, many already have—for instance, Congress ended the $25-a-week increase in payments to unemployment insurance recipients this summer.

Republicans have shown themselves loath to reauthorize spending programs of any kind. And Democrats cut a stimulus boost to food stamps—twice—to the horror of anti-poverty advocates. The TANF Emergency Contingency Fund ran out of funding just over a month ago, and Congress has not reauthorized it, though a bipartisan group of governors has asked Congress to reconsider. Other programs look sure to end imminently. For example, unless renewed during the lame-duck session, extended unemployment benefits would start to expire at the end of the month. In a press conference Wednesday, President Obama said he supports the extension. But it's not clear it will pass.

For many programs designed to help the poor and the near-poor, the likeliest outcome is that they simply will come to an end—especially if deficit reduction becomes a higher priority than economic recovery. There are some programs, however, that were enacted by the 111th Congress and have not yet taken effect. Foremost, in 2014, under the new health care law, millions more low-income people will be eligible for low-cost health insurance. Of course, if the 112th Congress—and the slate of newly elected Republicans at the state level—succeeds in defunding the health care law, then the legacy of the 111th Congress will be that much poorer.

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