Last week I linked to an OK Policy post about “cliff effects” that reduce or disqualify people for benefits whenever they increase their earnings, sometimes leaving people even farther behind even as they get better jobs or benefits.
The Associated Press reports that ARRA, the stimulus legislation, is causing some cliff effects of its own, and giving the unemployed a little bit of boost and a little bit of bust:
Under the economic recovery plan, laid-off workers have seen a $25 weekly bump in their unemployment checks as part of a broad expansion of benefits for the poor. But the law did not raise the income cap for food stamp eligibility, so the extra money has pushed some people over the limit.
One unemployed man in Georgia was pushed over the limit by the bump, causing him to miss out on $300/month in food stamps assistance.
Since policymakers are becoming increasingly aware of the problems of cliff effects, they wouldn’t intentionally cause such dramatic consequences in entirely new, emergency relief programs, right? Wrong:
Lawmakers crafting the stimulus knew this would become a problem, said Stacy Dean, director of food assistance policy at Center on Budget and Policy Priorities, a liberal think tank. They could have headed it off by raising the income tax or declaring that the $25 stimulus checks would not affect food stamp eligibility. Both were expensive options that could have forced states to reprogram their computer systems.
But more importantly, hashing out those details would have taken time.
“People were aware of this but, as you recall, the stimulus was moving along and then it was passed in about a day,” Dean said. “There was not a lot of policy discussion on this.”
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Cornell University published a paper in 2004 that measured the stimulative effect of early education spending in each state’s economy. It found that for every dollar invested in early childhood programs in Oklahoma, $1.97 of additional economic activity was generated. In 2007, the state spent an estimated $121 million on pre-K and Head Start (very large PDF) – not counting local and private sources of funding (such as philanthropic) – which should return more than $238 million to the economy.
The impact generated by child care spending in Oklahoma – called a multiplier – is larger than the multipliers for every sector it was compared with, including agriculture, mineral, manufacturing, retail, and service industries. It also beat “like” sectors in education, job training, and public transit.
Image used under a Creative Commons license from flickr user pressuretobear.
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The Center on Budget and Policy Priorities has been analyzing the impact of stimulus proposals on low-income families and state budgets. Today they released an estimate of the impact of the proposed child tax credit in the stimulus agreement.
Bottom line: 13 million children nationwide and 200,000 in Oklahoma will benefit from the measure.
The compromise stimulus package expands access to the Additional Child Tax Credit, an important source of income to low-income families. The credit is worth up to $1,000 per child. To receive any of the credit, a family must earn more than a certain threshold income, and the credit increases by 15 cents for every additional dollar a family earns. In 2009, that threshold was to be $12,550, but will decrease to $3,000 if the measure stays in the final legislation.
That change will allow 2.9 million children to benefit from the CTC that would not have been eligible otherwise.
Not only will the change expand the number of children benefiting from the credit, but it will also increase the amount of the benefit. A family of four with two children and income at the poverty line ($22,050) would receive $1,425 under the status quo; with the stimulus proposal, they would take home the full $2,000 credit.
CBPP estimates that 10 million children will benefit from this increase in the amount of the credit, impacting a total of nearly 13 million children. In Oklahoma, the group expects roughly 200,000 kids to benefit from the measure.
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Ezra Klein remarks that it seems wild to him that 1 in 9 Americans receive food stamps. “Not only are 31.5 million Americans eligible for food stamps. But 31.5 million are facing such grueling economic stress that they were willing to enroll in the food stamp program.”
At the same time, he points out, the benefit is falling further behind a family’s nutritional needs. Klein posts this chart from the Center on Budget and Policy Priorities, which I hadn’t seen before, that shows the difference between the maximum food stamp benefit and the cost of a “minimally adequate diet” for a family of fourt (as defined by the USDA):
And while people from the left and the right are criticizing the President-elect’s recovery plan, here’s a solution: according to Mood’ys Economy.com, food stamp spending generates $1.73 for every $1 in government spending, making it the most effective stimulus agent studied.
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