Estimating the Impacts of Policy Changes
To generate estimates of poverty reduction from a range of program and policy changes, the committee commissioned research from the Urban Institute’s Transfer Income Model, version 3 (TRIM3), a microsimulation model that applies the rules of benefit and tax programs to each of the households in a survey data file, one by one. The model can simulate the outcomes of either the actual rules of programs (“baseline” simulations) or potential alternative policies, showing whether a particular policy lifts a family’s income above the poverty line and whether family members work more or less under an alternative policy than under baseline circumstances.
To explore whether program and policy changes could reach the goal of reducing child poverty and deep poverty in the United States by half within 10 years, the committee developed four policy packages. Simulations by TRIM3 showed that two policy packages – a “means-tested supports and work package” and a “universal supports and work package” – could meet the 50 percent poverty reduction goal:
- The means-tested supports and work package combines expansions of the Earned Income Tax Credit (EITC) and the child dependent care tax credit (CDCTC) with expansions of two existing income support programs: the Supplemental Nutritional Assistance Program (SNAP) and housing voucher programs. The committee estimated that this package of programs would cost $90.7 billion per year based on the 2015 tax law. The package is also estimated to add about 400,000 workers and generate $2.2 billion in annual earnings.
- The universal supports and work package is designed to enhance income security and stability while also rewarding work and promoting social inclusion. The cornerstone of this package is a child allowance, but the package also includes a new child support assurance program, an expansion of the EITC and CDCTC, an increase in the minimum wage, and elimination of the immigrant eligibility restrictions imposed by the 1996 welfare reform.
This package of programs is estimated to cost $108.8 billion per year based on the 2015 tax law. The net effect of this full package is to increase employment by more than 600,000 jobs and earnings by $13.4 billion.
At a lower cost of about $44 billion per year, a promising third program package combined expansions in the EITC and CDCTC with a child allowance, and was estimated to reduce child poverty by a third, rather than a half. It too increased employment and earnings substantially.
Any policies aimed at reducing child poverty would be implemented in complex societal and individual contexts, and these contexts can influence the policies’ success. The report identifies six major contextual factors that policymakers and program administrators should consider when designing and implementing anti-poverty programs including: stability and predictability of income, equitable and ready access to programs, equitable treatment across racial and ethnic groups, equitable treatment by the criminal justice system, positive neighborhood conditions, and health and well-being.
Assuming that Congress, federal and state agencies, and the public agree that further reduction of child poverty is a priority goal for U.S. policy, the report recommends that a coordinating mechanism be put in place to ensure that well-considered decisions are made on new anti-poverty programs and policies. This mechanism would also ensure that the associated research and data needed for monitoring, evaluating, and further improvement are supported as well. The report recommends that the White House Office of Management and Budget coordinate an assessment of the report’s conclusions and put together an implementation plan.
View a snapshot of the report at https://www.nap.edu/child-poverty/.