Child poverty in the US was stagnant — and then something changed

“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.”

“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.”

“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.”

“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.”

“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.”

“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.”

“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.”

“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.”

What’s the best way to help extremely poor people? After 20 years, the evidence is in.

“On a certain level, it seems intuitive that doing more for people — giving assets and training and cash — will produce better outcomes than just giving one thing, like cash. But the downside is that it takes more time, effort, and money to run a more complex intervention.

So a major question looms over the graduation program: Is it worth spending that money on the program or is it more efficient to just give all the money directly to people in need? In other words, is it really useful to teach the person to fish or should you just give them the damn fish already?”

“In recent years, development experts have moved toward an important idea called “cash benchmarking,” which basically says that cash is the benchmark against which all other anti-poverty interventions should be judged. Since giving people cash is easy, efficient, and respectful of their autonomy, aid agencies should only run a different type of program if testing shows that it works better than cash would.
Nowadays, when studies come out showing positive results for graduation programs, there’s a tendency to think that this particular combination — cash plus assets plus training — does work better than simply giving cash. But just because the graduation approach works great in some scenarios doesn’t mean it’s always the most efficient approach.

For starters, though, let’s look at the evidence suggesting that cash-plus programs work better than simple cash programs. Three studies have run this sort of comparison.

In South Sudan, a study looked at what happened to 250 households that got a full graduation program, compared to 125 households that got only cash and 274 households that received neither. Both graduation and cash increased consumption, but only the graduation group saw a significant increase in assets, a sign of more durable wealth. Although the cash group shifted a bit from agriculture to other types of work, they didn’t set up their own lasting businesses that may have been higher-paying.

In Uganda, researchers evaluated a graduation-style program run by a group called Village Enterprise. It offered training and a capital grant to extremely poor people so they could start a small business. The researchers found that it worked well, increasing self-employment income and consumption. In fact, it outperformed cash on these measures. The authors speculate that, “left to themselves — without training and mentorship — beneficiaries [of cash transfers alone] struggled to make productive investments, maintain them, and derive sustained value from them.”

In Niger, a new randomized study has highlighted the benefits of taking a multifaceted approach to extreme poverty. The study evaluated women who were already enrolled in a government cash transfer program. The goal was to understand how psychosocial issues — like feeling depressed or disconnected from your community — might make it harder to seize economic opportunities. The study found that the women who got psychosocial support showed rates of returns that were higher than those who got only cash. Offering psychosocial support was the most cost-effective route 18 months after the intervention.”

“while graduation programs appear to work great in some places, they’re dependent on the market — and they can run into problems in places where the market is either too dysfunctional or, ironically, too functional.

One randomized trial in India, published in 2012, is an example of the latter. It found that a graduation program yielded no net impact. Although it shifted participants away from agricultural jobs to other sorts of work, they could’ve earned just as much in their original agricultural jobs. While those original jobs were far from big money-makers, wages for agricultural labor had been improving in India, thanks to programs like the ambitious National Rural Employment Guarantee, so adding in a graduation program didn’t really help.

Dysfunctional markets produce their own obstacles. Abed told me about his experience trying to run a graduation program in Balochistan, an extremely dry, desert-like province in southwestern Pakistan, where participants were taught how to run a small business. One problem: There wasn’t a functional market for the businesses to thrive in. “Once they graduated, there wasn’t much to go to,” said Abed. “And there wasn’t microfinance available. So it was very, very difficult.””

“Another way a graduation program can flop is if it fails to be cost-effective. In the huge 2015 randomized study that looked at graduation programs in six countries, Banerjee and his co-authors note that although the program proved extremely cost-effective in some places, easily paying for itself within 10 years, other countries don’t have such low costs and high benefits in the short run. In Peru, for example, such a program wouldn’t break even.”

“Abed is convinced that graduation is the best approach for the ultra-poor, but he acknowledges that what makes the most sense for the moderate poor is a somewhat open question. Also, while graduation may be best for ultra-poor people who are young and healthy enough to go start businesses if given half a chance, it may not work for those who are elderly or disabled. For those groups, the answer may well be cash transfers.”

The end of Roe will mean more children living in poverty

“Almost half the United States is ready to outlaw abortion now that the Supreme Court has overruled Roe v. Wade. But many of those states are not willing to give new babies and their families the educational, medical, or financial support they need to lead a healthy life. That could leave tens of thousands of future children unnecessarily disadvantaged and living in poverty.”

“Those births will predominately be in the states with the most draconian post-Roe abortion restrictions. And with a few exceptions, those 22 states rank in the bottom half of states in the comprehensive support they provide to children and their families, according to the State-by-State Spending on Kids Dataset compiled by Brown University’s Margot Jackson and her colleagues. The disparities can be enormous: Vermont spends three times as much money on education, health care, and other economic support for children as Utah.”

“The children born in these circumstances will start life a few steps behind, all because their political leaders strove to ban abortion without offering support to the children who would be born if their aims were achieved.”

US policy is fueling Afghanistan’s humanitarian crisis

“Prior to the fall of Kabul in August 2021, the Afghan economy relied heavily on foreign aid; after the Taliban takeover, that influx of cash ceased. Under Taliban rule, unemployment is rampant and banks operate intermittently, with people able to withdraw no more than $100 in a month. On top of that, the US froze much of the $9.4 billion in Afghan currency reserves in Afghanistan’s central bank in August — a move which has functionally cut the country off from many foreign banks and left the Central Bank of Afghanistan unable to access its reserves and shore up the country’s cash flow.

Now, much of the country is facing poverty and starvation: In December, the World Food Program (WFP) found that 98 percent of Afghans aren’t getting enough to eat, and Guterres warned this month that “we are in a race against time to help the Afghan people.””

“Many of Afghanistan’s current problems are intimately connected to the US withdrawal from the country last year, and the Taliban’s ensuing takeover of the central government. Since then, US sanctions and an abrupt end to international aid have wrecked Afghanistan’s economy and sent it spiraling into crisis.

The US and the UN have made some concessions to allow humanitarian aid to operate outside the auspices of the Taliban; the Treasury Department’s Office of Foreign Assets Control (OFAC) granted some licenses to aid groups to operate in Afghanistan without running afoul of financial restrictions on other individuals and institutions in the country.

But, as experts have said, it’s not nearly enough to bring the Afghan people anywhere close to the needed aid, and regardless of the OFAC licenses, the Afghan banking system is still essentially held hostage by US sanctions against the Taliban.”

“The chilling effect of sanctions is keeping businesses and banks from actually engaging with the economy. As House Democrats pointed out in their letter last month, relatively simple steps — like issuing letters to international businesses assuring them that they are not violating US sanctions — could help alleviate the crisis and shore up the Afghan private sector, but the US Treasury has yet to do so.”

“In the meantime, the Taliban will hold talks this coming week with Western nations, including Norway, the UK, the US, Italy, France, and Germany, about humanitarian aid. The talks should not be seen as a legitimization of Taliban rule, Norwegian Foreign Minister Anniken Huitfeldt stressed to AFP on Friday, “but we must talk to the de facto authorities in the country. We cannot allow the political situation to lead to an even worse humanitarian disaster.””

Could Covid-19 finally end hunger in America?

“A peculiar thing happened last year during the Covid-19 pandemic: As large swaths of the U.S. economy shut down and unemployment skyrocketed, hunger rates held steady and poverty rates went down.

From the pandemic’s earliest days, Washington showed it had learned the lessons of past crises like the 2008 financial collapse, when policymakers responded with too little too late to help people get by and the economic recovery was hampered as a result. So as the country faced a once-in-a-century pandemic and the sharpest economic downturn since the Great Depression, Congress threw trillions at the double disaster, sending unprecedented levels of aid to American families and businesses.

Soon, a pattern was evident, thanks in part to real-time monitoring by the U.S. Census Bureau: When Washington doled out federal aid, hardship declined. When Washington let aid expire, hardship ticked back up.

In essence, the pandemic triggered a country-wide policy experiment aimed at keeping families fed and financially afloat. There have been big increases in food stamps and unemployment benefits. Three rounds of stimulus checks. Universal free meals at schools and new grocery benefits for kids who are learning virtually, or out of school during the summer. Hundreds of millions of food boxes flooded into churches and other nonprofits.

The latest tranche of aid may carry the biggest bang yet: six monthly child tax credit payments that will be dispersed through the end of the year. The first two rounds of payments that went out in July and August fueled a dramatic reduction in the rate of American households with kids who report sometimes or often not having enough to eat in the past week, according to the Census Bureau.

All that aid appears to have worked.

“Lo and behold, if you give people money, they are less poor,” said Elaine Waxman, an economist and senior fellow at the Urban Institute who has closely monitored how low-income households have fared throughout the crisis.”

“the U.S. has long been seen as an outlier for its comparatively limited safety net, and is sometimes referred to as “the reluctant welfare state.” Other wealthy countries, like Canada and the United Kingdom, have more generous unemployment programs and provide allowances to help with the costs of raising children, on top of providing health care and other benefits that are broadly available, even to middle-income households.

By contrast, in the United States, there has been a much greater focus on ensuring aid goes primarily to low-income households that have met strict eligibility and income requirements. America’s two biggest safety net programs, Medicaid and the Supplemental Nutrition Assistance Program, or SNAP, (still known to many as “food stamps”), have fairly low income caps and are squarely aimed at providing in-kind benefits like medical coverage and food — not giving people money to spend how they see fit.”

What we talk about when we talk about gentrification

“Racial and income segregation locks low-income people in a trap of concentrated poverty. The best schools are relegated to the highest-income neighborhoods, good jobs often exist in either exclusive or gentrifying neighborhoods, and businesses are less willing to take root in an area of concentrated poverty because there are fewer customers. All of this is a vicious cycle that traps low-income Americans. It also hinders their ability to foster growth on their own because financial insecurity makes people transient and lacking in time and energy to build community.

Meanwhile, homeowners in well-off neighborhoods have cemented systems of local control through rules like exclusionary zoning to keep their neighborhoods prohibitively expensive for lower-income Americans, including many Black and brown Americans.

Zoning laws are the rules and regulations that decide what types of homes can be built where. While this can sound innocuous, exclusionary zoning is anything but. These rules have a dark history in the United States as a tool of racial and economic segregation, used explicitly to keep certain races, religions, and nationalities out of certain neighborhoods. And while the explicit racism has been wiped from the legal text, the effect of many of these rules remains the same: keeping affordable housing and the people who need it away from the wealthiest Americans.

City by city, the message is clear: Segregation and concentrated poverty are the true blights of urban life, despite our fascination with gentrification.”

The big drop in American poverty during the pandemic, explained

“In March, researchers at Columbia led by Zachary Parolin estimated that as a result of President Joe Biden’s stimulus package, the American Rescue Plan, the US poverty rate would fall to 8.5 percent, the lowest figure on record and well below 2018’s figure of 12.8 percent. This past month, researchers at the Urban Institute, using a slightly different means of measuring poverty, found that 2021 poverty will be around 7.7 percent, almost a halving relative to 2018’s rate of 13.9 percent per their methodology. (Official US Census poverty statistics for 2020 have not yet been released.)

The Columbia authors find that if you compare 2021 to every year for which the census does have data, from 1967 to 2019, and use a consistent poverty line, 2021 is projected to have the lowest poverty rate on record.

Considering that the US endured a pandemic and economic shock in 2020, these numbers are remarkable.”

“If handing out cash led people to work dramatically fewer hours or to quit their jobs, then cash payments wouldn’t cut poverty by as much as they initially seem to.

Luckily, cash doesn’t seem to discourage work to that degree. In 2019, a group of economists and sociologists specializing in child poverty put together a major report for the National Academy of Sciences, and their estimate based on the research literature was that a cash benefit of $3,000 per year for all but the richest children would reduce work effort by about 1.15 hours a week on average — a fairly trivial amount that barely changes the antipoverty impact of such a program.

The effects of stimulus checks to adults, like those pursued in the past year, are surely different, but the evidence generally suggests that work disincentive effects of cash are small. University of Pennsylvania economist Ioana Marinescu, in a wide-ranging review of the effects of cash programs, concluded, “Our fear that people will quit their jobs en masse if provided with cash for free is false and misguided.””

“The US has been sending out a lot of cash during the pandemic. But that’s almost certainly coming to an end. The enhanced child tax credit is a policy many Democrats want to make permanent, or at least (as the Biden administration has proposed) extend for several more years. But the $1,200 and $600 and $1,400 stimulus checks were emergency measures, as were the $300/$600 weekly unemployment supplements.

All that implies that in 2022, when those measures are gone, poverty is likely to shoot back up again, even in a strong economy with robust job growth.”

The Democratic plan to smash poverty for seniors and people with disabilities

“In 2021, the maximum SSI benefit for an individual is $9,530.12 per year. The poverty line for a single person is $12,880 — meaning that SSI, at most, brings recipients up to less than three-quarters of the poverty line.

It gets worse, though. Let’s say you’re an SSI recipient married to another recipient, which makes you an “eligible couple.” You could both be retirees in your 70s, or disabled/blind people earlier in life.

You don’t get to add your benefit amounts together. Instead, you have to share a maximum benefit of $14,293.61, only 50 percent more than the individual benefit. The effect is a really dramatic marriage penalty: Two SSI recipients receive a large income boost if they get divorced, but those who marry take a big cut in benefits.

In late May 2020, Joe Biden announced his campaign’s disability policy platform, which included major expansions of SSI benefits. The plan set the maximum benefit at 100 percent of the poverty line, a 35 percent increase in benefits over the status quo. The proposal would also eliminate both the marriage penalty — letting couples keep their full benefits — and the complex “in-kind assistance” provisions that result in reduced SSI checks for some people who, say, live for free in a family member’s home.

There’s more. SSI is currently limited to people with assets of less than $2,000, or $3,000 for couples. That means many seniors who have even a small amount of retirement savings, as well as disabled people with nest eggs, aren’t eligible.

Biden would more than double the asset limit for individuals and nearly triple it for couples. I’d personally prefer getting rid of the asset test altogether, as it can encourage people to spend every bit of savings they have to qualify for the benefit; that said, raising it is an improvement.

Biden has recently faced a strong push from his allies in Congress to include these changes in the huge $6 trillion spending package Democrats plan to pass later this summer or in the fall.”

If the US Postal Service fails, rural America will suffer the most

“The USPS is legally required to deliver all mail, to all postal addresses in all regions, at a flat rate, no matter how far it may have to travel. The service’s accessibility and affordability are especially important to rural communities that live in poverty and to people with disabilities, who can’t afford the cost of a private business to deliver their daily necessities. (In 2017, the rural poverty rate was 16.4 percent, compared with 12.9 percent for urban areas.)
And while some may argue that the USPS is becoming more obsolete as an increasing number of services are becoming digitalized, there’s still a large chunk of people who rely on mail because they have poor (or no) internet service. (The Federal Communications Commission estimates that 14.5 million people in rural areas lack access to broadband.) In fact, 18 percent of Americans still pay their bills by mail, according to an ACI Worldwide report; meanwhile, 20 percent of adults over 40 who take medication for a chronic condition get those pills by mail order, according to a survey by the National Community Pharmacists Association.

Then there are the several small towns around the country that vote only by mail because they’re not populated enough to open up polls. In Minnesota, for example, 130,000 receive a mailed ballot every election because they live in a town with fewer than 400 people.

“USPS isn’t just a public service,” Baker said. “It’s a lifeline.””

“The USPS was never really meant to operate as a business but as a public service, which is why it’s been able to keep its prices lower than private companies. Businesses like FedEx and UPS don’t build offices in remote rural areas, like deep in Wyoming or in the mountains of Colorado, because it’s simply not profitable. They often rely on the Post Office for last-mile delivery; the agency delivers mail for them from major transportation hubs to the final delivery destination, often in secluded areas.

This ultimately means that without the USPS, FedEx and UPS won’t have the resources to deliver to remote rural areas, nor will they likely make investments to do so since they’ll lose money in the process. Instead, people will have to bear the burden of traveling to the companies’ offices in larger towns to meet their mailing needs.”

“The USPS also serves a crucial role in ensuring that everyone has a right to vote by delivering mail-in ballots to the most remote areas of America. Several states allow those in small towns to vote by mail so that they don’t have to travel miles to their polling area in larger cities. It’s played a particularly important role in rural areas where the population is growing older — rural communities have the largest share of people above the age of 65 — and is less mobile than younger generations.”