If you had told me in recent months that on January 2, 2013, we would have unemployment insurance extended for a year, an improved child tax credit and earned income tax credit extended for five years and no cuts to food stamps (SNAP), Medicaid or Social Security—I would have told you that you were out of your mind.
I understand that the criticism coming from the left about this deal is based largely on where things stand for the next round of negotiations, and also a concern that the deal didn’t raise sufficient revenues to avert substantial cuts down the road. But I’m troubled by the lack of attention being paid to how this deal benefits the more than one in three Americans living below twice the poverty line—earning less than $36,000 annually for a family of three, and the 46 million Americans living below the poverty line (less than $18,000 annually for a family of three).
I’m reminded today of a politically active homeless woman I spoke with earlier this year, who—although she is disgusted with Republican policies—was even more frustrated with “so-called progressives” (her words) whom she said talk about caring about poor people but fail to sufficiently speak up about their issues, bring them into their advocacy work and address their concerns in an ongoing and substantive way.
So let’s look at some of the particulars of this deal and how they affect low-income Americans.
The Earned Income Tax Credit (EITC) and Child Tax Credit (CTC): These tax credits supplement the earnings of low-wage workers and kept 8.7 million people out of poverty in 2011—pretty key, since 28 percent of workers earned poverty-level wages last year and 25 percent of all jobs in the US pay less than the poverty line for a family of four (less than $23,000 annually). Republicans have been trying to limit the reach and effectiveness of both of these tax credits all year (and some Democrats indicated an openness to that position, especially with regard to the CTC). Getting a five-year extension on both—as well as for the American Opportunity Tax Credit that helps make college tuition more affordable—was certainly not a given heading into these negotiations. (It should also be noted, however, that while these provisions were extended for five years, the tax cuts for wealthier households making up to $450,000 annually were made permanent. Another downside, the two percentage-point cut in payroll taxes was allowed to lapse.)
Unemployment Insurance: Let’s remember that without this extension, 2 million long-term unemployed people—who are disproportionately over age 50, women and minorities—would have lost their unemployment benefits as of yesterday; another 1 million would have lost benefits by April 2013, and more than 5 million people would have been without this vital assistance by the end of 2013. Unemployment Insurance lifted 2.3 million people above the poverty line in 2011, and 3.2 million the year before that. If this extension hadn’t happened—and it was by no means a given—you can bet that would have been reflected in the 2013 poverty numbers. Just the two long-term unemployed workers over 50 whom I recently spoke with—former steel worker Richard Crowe and assisted living facility worker Edith Harrison—were staring at the possibility of losing a house and ending up homeless, respectively. The $30 billion extension will also create $48 billion in economic activity according to Moody’s chief economist Mark Zandi, and the Congressional Budget Office estimates it will also create 300,000 jobs.