Federal Dollars Drive Record Drop in Poverty

Federal Dollars Drive Record Drop in Poverty

Dado Ruvic

The level of poverty in the U.S. will fall by roughly half this year, due almost entirely to the increase in government aid provided during the Covid-19 pandemic, according to a new analysis by a team of researchers at the Urban Institute.

Looking at the effects of the $1.9 trillion American Rescue Plan Act, which provided a range of benefits including direct payments, enhanced unemployment aid and refundable child tax credits, the researchers estimate that the poverty rate will fall to 7.7% in 2021 — a huge drop from the 13.9% rate estimated for 2018, and the largest single-year reduction on record. In raw numbers, about 20 million fewer people are living in poverty due to the programs in the ARPA.

More broadly, the researchers estimate that without government assistance — including “unemployment insurance (UI), government means tested programs (either standard benefits or benefits increased because of the pandemic), pandemic-related stimulus payments or state payments, or the advance child tax credit” — the poverty rate in 2021 would be 23.1%. All told, those programs are keeping about 50 million people out of poverty.

“Wow — these are stunning findings,” the Brookings Institution’s Bob Greenstein told The New York Times. “The policy response since the start of the pandemic goes beyond anything we’ve ever done, and the antipoverty effect dwarfs what most of us thought was possible.”

Soaring costs, temporary programs: “The extraordinary reduction in poverty has come at extraordinary cost, with annual spending on major programs projected to rise fourfold to more than $1 trillion,” says The New York Times’ Jason DeParle. “Yet without further expensive new measures, millions of families may find the escape from poverty brief. The three programs that cut poverty most — stimulus checks, increased food stamps and expanded unemployment insurance — have ended or are scheduled to soon revert to their prepandemic size.”

For more, read the Urban Institute analysis here and DeParle’s extensive write-up here