In Case You Missed It - Pandemic Aid Cut Child Poverty by More Than Half

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ICYMI: Pandemic Aid Cut Child Poverty by More Than Half

When the pandemic hit in 2020, large parts of the economy shut down and millions of people lost their jobs, but ironically, poverty plummeted for the next two years, government data released this week showed.

In fact, by one measure, both the overall and child poverty rates dropped to all-time lows in 2021, according to the Census Bureau. The Supplemental Poverty Measure (SPM)—which takes taxes into account, and which has only been measured since 2009—showed dramatic declines for both children and all ages, even though the official poverty rate (not SPM) remained above the record lows set in 1969. The SPM poverty rate for children fell to 5.2%, from 12.6% in 2019, and the rate for all ages fell to 7.8% from 11.8% over the same period.

This sharp decline in SPM poverty was because of pandemic aid such as child tax credits and stimulus payments. Tuesday's official numbers confirm what poverty researchers have been saying for several years now—the widespread aid distributed by the government was extremely effective in fighting poverty, especially among children. However, now that those pandemic policies have ended, it's likely that child poverty will increase, economists say.

"Unfortunately, this will likely prove to be a historic aberration," Kathryn Edwards, an economist at think-tank RAND Corporation, wrote on Twitter. "The expanded child tax credit ended in 2021, just as cost of living (as measured by inflation) increased. Both would [predict] large jumps in poverty, in particular child poverty, in 2022."

- Diccon

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Term of the Day

Federal Poverty Level

The U.S. federal poverty level is a measure of income the U.S. government uses to determine who is eligible for subsidies, programs, and benefits. The Department of Health and Human Services (HHS) updates the poverty guidelines each January to account for inflation.

Many federal programs use the poverty guidelines to determine eligibility. The most notable are the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and the Affordable Care Act (ACA).

The poverty level measures a family's annual cash income before taxes. It includes income from earnings, unemployment benefits, Social Security, rent, and dividends. It does not include non-cash capital gains or benefits such as public housing and food stamps.

The poverty guidelines only measure income. Other poverty indicators measure total wealth, annual consumption, or a subjective assessment of well-being. Those indicators point to one's standard of living, which takes into account the material goods and services available to the individual or family.

Off the Charts

The U.S. national debt crested $30.8 trillion in August 2022. The largest holder of national debt is actually the government.

Why would the government owe money to itself? Because some agencies, like the Social Security Trust Fund, take in more revenue from taxes than they need. These agencies then invest in U.S. Treasurys rather than stick this cash under a giant mattress. This transfers the agencies' excess revenue to the general fund, where it's spent. They redeem their Treasury notes for funds as needed. The federal government then either raises taxes or issues more debt to raise the cash.