Tag: economy

“Most surprising is that declines in poverty, rather than stalling with the decline of the Covid-19 pandemic, accelerated. While economic conditions could have led to one of the largest increases in poverty on record, the federal government stepped in to support families as the economy ground to a halt. While the pandemic brought a new set of hardships, these federal relief efforts prompted child poverty to fall sharply: In 2020, according to the supplemental poverty measure, child poverty fell from 12.5 percent to 9.7 percent — by far the largest single-year drop over the previous half-century.

These declines continued in 2021. In figures released Tuesday, we learned that in 2021 child poverty fell even further, to just 5.2 percent, by far the lowest rate ever recorded. This means that, between 2020 and 2021, an additional 3.4 million children were pulled out of poverty, and over the past two years almost 5.5 million children were, as the child poverty rate fell by nearly 60 percent in just two years.”

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“it’s no great mystery how it happened. To stave off a recession and prevent a spike in material hardship amid widespread joblessness and economic uncertainty, the federal government temporarily reinvented the traditional US safety net, pushing cash into US households. There were three rounds of economic impact payments (stimulus checks), expanded unemployment assistance, and, in 2021, an expanded child tax credit, which sent modest monthly cash payments to most American households with children from July through December 2021.

While the traditional safety net targets poor families and relies heavily on in-kind benefits rather than money, the pandemic safety net was largely cash-based, unrestricted, and nearly universal.”

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“it worked.

Over the past two years, tens of millions of people lost work and had their lives disrupted by Covid-19. Yet amid this economic disruption, child poverty plummeted.”

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“An analysis from the Center on Budget and Policy Priorities found that, absent government intervention, poverty in 2020 would have experienced its second-largest increase on record, but as a result of the pandemic safety net, poverty in the US experienced the largest single-year decline in more than 50 years.”

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“these programs were long gone before inflation became more entrenched. Inflation began in the goods-producing sector, as supply chain problems and rising shipping costs, combined with increased demand for goods, led prices to soar. Inflation was further spurred by Russia’s invasion of Ukraine and its impact on global energy and food prices. More notably, as relief programs ended, growth in demand did not appreciably slow. A quick look across the globe reveals that inflation has hit most countries in the wake of the pandemic regardless of the share of children who go to bed hungry.

While government pandemic spending has certainly played some role in pushing prices upward, it is important to recognize the uncertainty around the economic recovery. These same policies were responsible for the economy’s rapid recovery and swift employment growth. Following the Great Recession, unemployment remained elevated for years, to devastating effect.”

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“in the last two years, labor force participation rates have steadily recovered as the economy adjusted to living with the pandemic and showed no sign of accelerating as income supports expired.”

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“One pandemic-era policy is permanent: a change to the way food assistance benefit levels are calculated. This will reduce hardship and poverty going forward and should be celebrated. But most of the new Covid-era safety net has already expired, and we should expect child poverty to rise in tandem in 2022.

The clearest avenue for action, to relieve the current rise in hardship and ensure the lessons of the pandemic safety net are not lost to history, is to revive the expanded child tax credit. Most wealthy Western nations use a universal child allowance or child benefit — money sent to families with children across the income spectrum — to help defray the big costs that come with raising children and better ensure the healthy development of that nation’s children.

For the final six months of 2021, the US finally joined this group, and the results, as we now know, were staggering. Child poverty, child food insecurity, and other measures of material hardship all fell sharply. Critics feared the payments would provide a disincentive to work, but the policy had no discernible impact on the labor force participation of recipients. The benefits of the policy were extraordinary, and the downsides were negligible. We can, and should, bring it back.”

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“But what about inflation? Can we really send more cash to households while the Fed is trying to rein in spending? Data shows that low- and middle-income families receiving child tax credit payments in 2021 largely spent the funds on necessities, like food and utilities — the same necessities that Americans are now paying higher prices for — so the payments would go a long way toward relieving rising material hardship.
At the same time, a number of economists have noted that the expanded child tax credit is “too small to meaningfully increase inflation across the whole economy.” Perhaps most importantly, the government can help the most vulnerable in our society, even if it means asking others to chip in more to offset those costs. The Inflation Reduction Act begins that process by ensuring that the IRS can collect the tax revenue that high-income Americans actually owe.”