Group Proposes Detailed Plan to Reduce Poverty by Half

By Erik Eckholm
The New York Times

Wednesday 25 April 2007

With a large increase in the minimum wage and a handful of other measures to raise the income of low-end workers, the United States could cut the number of people living in poverty by half within a decade, a report from a liberal research group says.

The antipoverty strategy, which would cost the government $90 billion a year, was developed over the last year by a group of economists, poverty experts and leaders of labor and community groups. It is to be issued today by the Center for American Progress in Washington. It is likely to be a fount of ideas for Congress, where Democratic control has led to new interest in fighting poverty and for candidates, especially Democrats, in the presidential campaign.

According to federal data, 37 million residents lived below the poverty line in 2005, defined as an income of $20,000 a year for a family of four.

The new strategy reflects a change in the political climate since the welfare overhaul of 1996. That put strict limits on cash welfare that many experts said had reduced incentives to work. The new strategy emphasizes measures to promote work and would use tax credits and other measures to bolster the incomes of low-wage workers.

Peter B. Edelman, a co-chairman of the group and a professor of law at Georgetown University who advised the Clinton administration on social policy, cited the antipoverty initiatives of Mayors Michael R. Bloomberg of New York, a Republican, and Antonio Villaraigosa of Los Angeles, a Democrat, as evidence of a growing and widely shared concern.

Many of the proposals in the report seem unlikely to fly unless a Democrat is in the White House.

The panel argues that although the $90 billion price tag may appear unrealistic amid the current Congressional stalemate over taxes, rescinding tax cuts for the wealthiest Americans would free more than the required dollars.

Other experts, including Douglas Besharov, a public policy scholar at the American Enterprise Institute, say that even the Democrats will be divided on using any money freed by tax changes and that reducing the alternative minimum tax for the middle class may, for example, have a higher priority than the proposed strategy.

Citing studies by the Urban Institute, the report says steps in three areas, costing the government $50 billion a year, would reduce poverty 26 percent, or nine million people.

First is an increase in the minimum wage to half the average hourly wage. Congress has just agreed to raise the minimum wage, to $7.25 an hour by 2009 from its current $5.15 an hour. By the report's standard, the wage would have reached $8.40 in 2006 and be higher in future years.

Research indicates that such an increase would eliminate a relatively small number of jobs, the institute said, while lifting the incomes of more than 4.5 million poor workers and nine million people whose incomes are just above the poverty line.

Second, the report calls for expanding the earned-income tax credit and the child care credit. The earned-income tax credit for childless workers and noncustodial parents, in particular, which is now negligible, would increase along with credits for working families. That would reduce the number of poor by two million.

Third, expanding child care subsidies for families with incomes below $40,000 a year and expanding the child care tax credit would raise employment and help lift nearly three million people out of poverty, the study forecasts.

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