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worker to become eligible based on his or her most recent earnings (rather
than earnings in the previous calendar year) or when quitting a job because
of certain circumstances (compelling family responsibilities, a relocating
spouse, domestic violence, or sexual assault). Proposed reforms also
included offering benefits to individuals seeking only part-time work and
providing for a dependent allowance.
Overall, states invested $3.5 billion of Recovery Act funds toward
these modernization efforts. The law prompted 41 states to make nearly
100 reforms to their unemployment insurance programs. Numerous states
expanded eligibility to workers whose job loss was due to compelling family
circumstances, with 13 states adding coverage for domestic violence,
14 states adding coverage to care for a sick family member, and 16 states
extending coverage to a relocating spouse.
In February 2012, the President signed into law more reforms to
unemployment insurance—many of which were originally proposed in the
American Jobs Act—including measures to help the long-term unemployed
get back to work. Specifically, the new law created opportunities for states
to test new strategies to help the long-term unemployed find new work.
The Administration also expanded “work-sharing” programs across the
country, which will help prevent layoffs by encouraging struggling employers
to reduce hours for workers rather than cut headcount. Additionally,
for the first time, the reforms allowed the long-term unemployed who were
receiving federal benefits to start their own businesses, while also providing
support to states to expand entrepreneurship programs.
Protecting the Most Vulnerable. The Recovery Act and subsequent
legislation also included a range of proposals focused on protecting the
most vulnerable. These measures included expanding the Earned Income
Tax Credit (EITC) and the refundable portion of the child tax credit, both
of which provide an additional reward to work for low-income families.
The Administration also sought to ensure that the Making Work Pay
credit was refundable, so that it benefited not just middle-class families but
moderate-income working families as well. The Recovery Act expanded
the Supplemental Nutrition Assistance Program (SNAP) to help families
through tough times while also providing emergency benefits through
Temporary Assistance to Needy Families (TANF), including subsidies to
encourage hiring of low-income parents. The Recovery Act also ended
or prevented homelessness for over 1.3 million families through the
Homelessness Prevention and Rapid Rehousing Program.
All told, the pre-existing social insurance system combined with
the expansions in the Recovery Act and subsequent extensions were very
effective in preventing a large rise in the poverty rate, despite a substantial
The Economic Impact of the American Recovery and Reinvestment Act Five Years Later | 121