First, consider the Temporary Assistance to Needy Families program (TANF), which provides cash benefits to low-income (primarily female-headed) families with children.
Holding constant any behavioral response, TANF will increase the incomes of the poor.
However, it is expected to have little effect on the poverty rate because TANF transfers are phased out at income levels significantly below the poverty line. I
n contrast, the EITC, a federal tax credit targeted to low-income working families with children, transfers income much higher in the income distribution, but because the official definition of poverty is based on pretax income, tax benefits provided through the EITC do not directly affect the poverty rate.
Finally, government spending on in-kind transfers will not have a direct effect on the official poverty rate because these transfers are not counted in income forthe purposes of measuring poverty.
Rather, they are targeted on social goals like improving nutrition and increasing access to medical care (Burtless, 1995; Blank,1997).