Government Aid is Effective in Reducing the Poverty Rate

Posted in Economy , Financial News • November 8, 2011

On Monday, the Census Bureau released a report that revealed the 2010 U.S. poverty rate would have been nearly one percentage point higher than originally reported in September had Americans not received government aid. Utilizing statistics not normally considered when calculating the official poverty rate, the bureau determined that government aid is critical in keeping more families above the poverty line.

Poverty Rate in Alternate Report Jumps to 16 Percent

The Census Bureau said in September that 46.6 million people– 15.2 percent of the U.S. population– were living in poverty in 2010, which was the highest number since 1993. This official report, released each year, is used to determine eligibility for public assistance and federal funding distribution.

However, as noted in an alternate Census Bureau report, the poverty rate would actually jump to 16 percent and include 49 million people if more details regarding geographical price differences and the impact of non-cash public aid were included.

Created on a recommendation from the National Academy of Sciences, the Census Bureau says its new report shows the need for government aid is great, as it fulfills its purpose of keeping some Americans out of poverty.

Bureau Stresses Importance of Government Aid Programs

The Census Bureau says that government programs and tax breaks are highly effective and, in many ways, essential to the well-being of the American people, especially in the midst of a tough economy.

For instance, the report found the earned income tax credit lowered the poverty rate for recipients by as much as 2 percentage points. Also, six temporary safety net government aid programs that originated from the 2009 stimulus act, including three new or expanded tax credits, two enhancements of unemployment insurance and expanded food stamp benefits, helped keep 7 million people out of poverty.

On the other hand, the report found that income and payroll taxes, work-related expenses such as transportation and child care and medical costs reportedly increased the rate by as much as 3.3 percentage points.

In the official report, the poverty threshold for a family with two adults and two children in 2010 was $22,113. But in the alternate measure, the threshold rose to $24,343. Though the bureau can’t use the threshold in its official report, it hopes the government will use these numbers as a true snapshot of the economy when deciding the fate of various federal programs.

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