This'll be a little wonky, but I'll try and make it short. Every once in awhile, you hear conservatives argue that the Earned Income Tax Credit (EITC) can't lift folks out of poverty because it's not counted in the Federal Poverty Rate. Tim Worstall, thinking he had a "gotcha," made this argument in the comments to the "Apples and Manatees" thread:
Please Ezra, learn something about the statistics you are commenting upon. The calculation of the Federal Poverty Rate (that 12.6% that everyone is commenting upon at present) cannot be affected in any way whatsoever by the expansion or even the abolition of the EITC. Because the EITC is not included in the calculation of the Federal Poverty Rate.
Condescension will getcha everywhere, Tim. This argument, made routinely by conservatives seeking to ascribe welfare reform panacea status, is ridiculous. The EITC is a refundable tax credit that's calculated as a percentage of your income. In other words, it makes your job pay more. Which makes low wage jobs more attractive economic prospects. Which spurs more people to take them. Which lowers the poverty rate (surely conservatives agree compensated labor lifts folks out of poverty).
The reason Clinton's expansion of the EITC mattered for the poverty rate, in other words, is that it compelled folks whose available employment options were below their reservation wage to take the job anyway, secure in the knowledge that their EITC credit would make up the difference. Sure enough, research shows that the EITC did indeed boost labor participation, particularly among single mothers. And while the EITC isn't factored into the poverty rate, the salary from the job they took is -- which lowers the poverty rate. But hey, don't take it from me: Ronald Reagan famously called the EITC the "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress." Speaking of which, it's about time we pumped that sucker up again.
