The $1.9 trillion American Rescue Plan Act could cut poverty by more than a third in 2021, according to a new analysis from researchers at the Urban Institute.
Without the Covid relief bill, about 44 million would be living in poverty in the U.S. this year, the researchers estimated. But the legislation will result in 16 million of those being pulled above the poverty line, reducing the poverty rate from 13.7% to 8.7%. For children, the numbers are even more pronounced, with the poverty rate falling by half in the wake of the relief bill.
The spending package is also projected to have a powerful effect on Black and Hispanic populations. “Poverty would fall 42 percent for Black, non-Hispanic people and 39 percent for Hispanic people compared with 34 percent for white, non-Hispanic people, thus reducing the disparities in poverty rates for Black, non-Hispanic people and Hispanic people relative to white, non-Hispanic people,” the report said.
The Urban researchers said that four provisions within the relief bill produce the most significant poverty-reducing effects:
Unemployment benefits: The bill extends the current $300 per week supplement to state unemployment benefits for another 25 weeks, expiring on September 6. This provision on its own is projected to reduce the poverty rate from 13.7% to 12.6%.
Direct payments: The legislation includes direct federal payments of up to $1,400 per person for those who qualify, which includes most Americans. This provision has the largest single effect on poverty, dropping the poverty rate from 13.7% to 10.2%.
Child tax credit: The bill makes several changes to the existing child tax credit, making it fully refundable while increasing its value to $3,600 for children under the age of 6 and $3,000 for those between 6 and 17. This provision is projected to reduce the poverty rate by nearly a full percentage point.
Food assistance: The bill includes a three-month extension of enhanced benefits through the Supplemental Nutrition Assistance Program, also known as SNAP or food stamps. The extension is projected to reduce the poverty rate by a tenth of a percentage point.
All of this poverty-reducing spending comes at a time of particularly pressing need, according to a separate report Wednesday from the Center on Budget and Policy Priorities. Economic hardship was at high levels at the end of last month, CBPP said, especially for families with children. The most recent Census data, collected in the last two weeks of February, indicate that 14% of adults with children reported that they hadn’t had enough food in the last week, significantly higher than the 4% who reported the same at any point during 2019. And 41% of adults with children reported that they had had trouble covering household expenses such as rent and car payments over the last week.
