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US Poverty Rate, Slashed During COVID-19, Set to Rise as Relief Expires

FILE - Frank, a homeless man, sits in his tent with a river view in Portland, Ore., on June 5, 2021.

The United States made tremendous progress lifting its citizens out of poverty with an expansion of public assistance programs during the coronavirus pandemic, but now, with many emergency measures set to expire, millions face the grim possibility of a return to impoverishment.

A sobering report from the Urban Institute, a prominent liberal-leaning think tank in Washington, this week projects poverty levels in the U.S. will sit at 7.7% through the end of 2021, down from 13.9% in 2018. The decline can be attributed to a suite of policies, including stimulus checks, enhanced unemployment insurance payments and eligibility, Supplemental Nutrition Assistance Program (SNAP) payments and refundable child tax credits.

The impact of these various programs was especially pronounced among children. In 2018, government programs kept the rate of poverty among Americans under the age of 18 at 14.2% rather than the 26.9% rate that would have been the case without government assistance. But in 2021, a year when 30.1% of children would have been living in poverty without government assistance, the addition of pandemic-related relief to normal assistance programs drove the child poverty rate down to 5.6%.

Amazing ... or not

“On the one hand, it was rather amazing to see the projected poverty rates that low,” said Laura Wheaton, a senior fellow at the Urban Institute and one of the report’s authors. “But then on the other hand, when we look at the amount of resources that have been provided, it's not surprising.”

The report finds that by the end of 2021, governments at the federal and state levels will have plowed more than $1 trillion dollars in benefits into the bank accounts of low-income Americans, far more than the $237 billion they paid out in 2018.

“The average person below poverty is getting almost two and a half times more from the government in 2021, than they did in 2018,” Wheaton said. “And so that really makes a difference.”

Support is going away

The majority of the additional support injected into the economy this year is expected to disappear in the near term. Stimulus checks have been distributed and no additional round of payments is on the horizon; expanded unemployment insurance is scheduled to sunset by later this year -- and has already been canceled in some states; likewise, expanded SNAP payments are ending. Most of the subsidy programs were financed through deficit spending.

The only additional benefit not slated to disappear is monthly child tax credit refunds. However, according to the Urban Institute analysis, those have a far lower effect on poverty levels than other relief programs.

This leaves U.S. policymakers with some difficult choices.

Defining poverty

In the U.S., the “poverty threshold” is a level of income below which an individual or family cannot afford the basic necessities of life. For example, in 2021, a family of four living in the contiguous 48 states is considered to be in poverty if its annual income falls below $26,500.

For its report, the Urban Institute relied on what is known as the Supplemental Poverty Measure, created by the Census Bureau, which takes a family’s income plus government payments into account to determine whether or not income is below the poverty line.

The report from the Urban Institute states its conclusions in fairly anodyne language, saying, “Our projections demonstrate that government benefits can reduce poverty well below traditional levels when substantial resources are devoted to that task.”

It continues, “Policymakers who want to make some aspects of the higher level of support permanent will need to consider the appropriate levels and types of increased supports, the best ways to fund such efforts, and the potential macroeconomic implications of various choices.”

Other poverty researchers were more pointed in their observations.

A ‘policy choice’

“Often, we think of poverty as an inevitable social problem; but this is indicating how it's actually a policy choice in many ways,” said Sarah Halpern-Meekin, a professor in the LaFollette School of Public Affairs and the Department of Human Development and Family Studies at the University of Wisconsin-Madison.

At the most basic level, she said, the major lesson here is simple: “Policy works. If we give folks money, they will end up above the poverty line. That, I think, is the most fundamental lesson.”

Indivar Dutta-Gupta, the co-executive director of the Center on Poverty and Inequality at Georgetown Law School, agreed, saying, “The central takeaway from the Urban Institute that poverty is a choice, but not by the people who experience it so much as it is by national policymakers.”

What next?

While the primary lesson in the report may be simple, interpreting it for the future is quite a bit more complex. The benefits people received during the pandemic were broadly understood to be temporary, which means that it's dangerous to extrapolate from the results of the past year to the future effects of similar policies.

“One mistake we could make is assuming that whatever we saw people doing over this last year tells us how these policies would affect people's behavior during ‘normal’ times,” Halpern-Meekin said. “People react differently to policies when they're temporary. You react differently to money when it's your monthly wages that you expect to get over and over again versus a big gift from your aunt or something like that.”

She said it is important to be careful when trying to generalize from the experience of the pandemic.

“Because families are encountering extraordinary circumstances because of the pandemic, the set of choices that they have to make with their money in terms of employment, around child care and schooling, etc., are different than the options and choices they would have during other periods of time,” she said.

Reassessing the need for support

At the least, the success of the pandemic-era programs at lowering poverty ought to prompt a reassessment by policymakers of who actually needs government support, Dutta-Gupta said.

He noted that one aspect of the relief programs implemented during the pandemic was a simple expansion of eligibility, for example, by making unemployment insurance payments available to people who would not ordinarily have qualified. By some estimates, only about three in 10 of the people who received unemployment benefits during the pandemic would have qualified before it.

“The truth is some of the hardship that was addressed through the extraordinary emergency and temporary responses during the pandemic were long-standing problems,” Dutta-Gupta said. “Now, policymakers face a choice. Do they want to go back to a system that was excluding, in this case, the vast majority of unemployed workers? Or did they learn something about the shortcomings of our system for protecting unemployed workers and across the board?”