Policy Priorities

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The New Economic Recovery Law: Helping Children and the Economy

Mother and Child Sitting on a Stoop

The American Recovery and Reinvestment Act—the economic recovery law passed by Congress and signed into law by President Obama—contains numerous provisions that will stimulate the economy and help children and families and: 

  • offers direct assistance (refundable and partially refundable tax credits, unemployment benefits, food stamps) to lower-income families who will spend the money quickly to keep their heads above water
  • offers temporary fiscal relief to states to help prevent painful budget cuts in essential services which would further erode the economy
  • funds infrastructure investments, such as school repair projects, that will create jobs
  • will make preventive investments in children before they face greater risks, such as family instability, homelessness, neglect and abuse.

The Act will help put our nation on a path to economic recovery. Some of its key investments in children and families include:

Creates New and Expanded Tax Credits

Several temporary tax credits for 2009 and 2010 help lower- and middle-income families who are likely to quickly spend the money to meet basic needs. These three tax provisions will keep an estimated 1 million children— and more than 2.3 million Americans of all ages—out of poverty and will reduce the depth of poverty for millions more children.

  • Child Tax Credit: expands this partially refundable credit for families earning above $3,000 benefiting an estimated 13 million children (the 2008 threshold was $8,500)  
  • Earned Income Tax Credit (EITC): increases this partially refundable credit for families with three or more children who previously received the same credit as those with two children despite higher child-rearing expenses 
  • "Making Work Pay" Tax Credit: creates new refundable credit of up to $400 per worker ($800 per couple)

Increases and Extends Unemployment Benefits

  • Extended unemployment benefits: continue through December 2009 helping more than three million jobless workers
  • Unemployment benefits: increase by $100 per month, benefiting almost 18 million unemployed workers
  • Unemployment Insurance Modernization: provides up to $7 billion in incentives for states to implement reforms including extending benefits to part-time workers and other workers who often do not receive benefits and for states to provide dependent allowances for families with children

Increases Food Stamps

The U.S. Department of Agriculture estimates that every $1 in food stamps generates $1.84 in economic activity. This makes food stamps one of the most effective forms of economic stimulus because lower-income individuals tend to spend extra funds quickly to meet their basic needs. 

  • Supplemental Nutrition Assistance Program (or SNAP, formerly the Food Stamp Program): provides $20 billion, mostly to increase benefits by more than 13 percent, helping more than 31 million Americans, half of whom are children. 

Helps with Health Care Costs

Increases in health care funding will help states avoid budget cuts that would further erode the economy, and help workers and their families keep coverage after losing jobs.

  • Medicaid: $87 billion to increase the federal share over the next two years
  • Subsidies for COBRA premiums: 65% COBRA subsidy for workers who loose jobs so they can continue individual and family health coverage for up to 9 months

Increases Investments in Early Childhood Development and Education

The law increases investments so child care workers and teachers can keep their jobs, provides job supports for working parents, and helps ensure that children succeed in school to prepare for future productive employment.

  • Early Head Start: $1.1 billion
  • Head Start: $1 billion
  • Child Care Development Block Grant: $2 billion
  • Title I: $13 billion, particularly in high-poverty areas for disadvantaged school children, including pre-schoolers  
  • Special education: $12.2 billion, including young children with disabilities
  • Pell Grant: increases maximum by $500 in 2009 and 2010, as well as filling the program's funding shortfall
  • College tax credit: creates new, partially refundable $2,500 credit for 2009 and 2010 for families paying tuition
  • State Fiscal Stabilization Fund: provides almost $54 billion, mostly for local school districts to prevent cutbacks and layoffs, modernize schools or other education purposes

Expands Job Training

Job training and employment services help unemployed workers and youths increase their skills to meet the needs of businesses, while increasing the nation's long-term competitiveness.

  • Training and employment services: $4 billion for job training, employment services for dislocated workers, and youth activities (including summer job funding)   

Reaches Other Vulnerable Populations

  • Temporary Assistance for Needy Families (TANF) program: $3 billion for states to address increased need
  • Housing assistance for struggling families: $2 billion for Neighborhood Stabilization Program and $1.5 billion for Emergency Shelter Grant program
  • Child support enforcement: $1 billion to restore program cuts
  • Foster care and adoption assistance: $875 million for increased federal match to help offset child welfare cuts