The study uses a multivariate time series approach (Vector Autoregression) to compare the relative effects of government transfer spending versus macroeconomic change on poverty reduction. The analysis disaggregates transfer spending among federal budget subcategories and poverty rates among different demographic groups. The analysis also tested for the possibility that spending on government programs is adjusted in response to changes in poverty. The findings indicated that out of five separate transfer spending categories, only Income Security and Social Security spending had significant impacts, affecting White and elderly poverty only. Black, youth, and female head-of-house poverty rates were not significantly influenced by any spending category. Economic growth and lower unemployment rates were both observed to reduce poverty in all categories except the elderly, but the unemployment rate appeared to be the dominant effect. We found only a single instance in which transfer spending (Income Security) appeared to respond to changes in poverty (youth poverty). (author abstract)