In any given year, the poverty rate in the United States would be much higher than it ultimately is if it weren’t for a variety of government programs, such as Unemployment Insurance (UI) , the Supplemental Nutrition Assistance Program (SNAP, commonly known as food stamps), the Supplementary Security Income (SSI) and social housing, among others.
In 2021, for example, traditional non-pandemic government programs reduced the poverty rate from 23.1% to 12.6% using the additional measure. These figures are based on estimates from the Urban Institute, since official data from the US Census Bureau will be released later this year. This reduction in poverty (45%) is typical in the United States after the distribution of our standard list of government assistance programs.
What was unique in 2021 was that the government created additional programs to help American families cope with the COVID-19 pandemic, including stimulus checks and child tax credits.
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Thanks to these additional programs, the poverty rate was further reduced from 12.6% to 7.7%. The combination of traditional government assistance and pandemic-related programs is expected to have reduced poverty by 67% overall (from 23.1% to 7.7%), keeping nearly 50 million Americans out of poverty . The projected rate for children was even lower at 5.6%, compared to 30.1% before standard benefits and pandemic programs (a reduction of 81%).
These projected poverty rates, both overall and for children, would be the lowest ever recorded in the United States
To get an idea of a typical US poverty rate using the additional measure, the average global rate for the decade before the pandemic was 14.3% (average reduction of 45%) while the average child poverty rate was 15.7% (mean reduction 40%).
Projected overall poverty rates differed by state, ranging from a low of 4.9% in Minnesota to a high of 10.9% in Florida. Projected rates of child poverty ranged from a low of 1.9% in Maine to a high of 8.8% in Delaware and Florida.
Here in Pennsylvania, the overall projected rate was 5.8%, compared to 21% without any government assistance (72% reduction). The expected rate for children was 3.5%.
Poverty reduction is nothing new to the US government. In 2019, for example, before the pandemic hit the United States, traditional government programs were responsible for a 47% reduction in poverty (from 21.9% to 11.7%). What the much higher projected reduction (67%) in 2021 shows us, however, is that we can reduce poverty much more if we choose to.
Concrete evidence from other countries also helps demonstrate that much lower poverty rates are possible. Various wealthy countries have pledged to reduce poverty more than is traditionally attempted in the United States
Using the most recent non-pandemic data available from the Luxembourg Income Study (LIS) and applying the US Census Bureau’s official measure of absolute poverty to other countries, for example, we find that countries like Luxembourg ( 90%), Belgium (83%), Austria (81%), Ireland (80%), Germany (79%) and Denmark (79%), among others, are reducing their rates of poverty by much larger margins than the United States (50% with these data). After these reductions, a number of these countries end up with very low poverty rates. Luxembourg, for example, has a poverty rate of 2.2%, while Switzerland, Norway, Denmark and the Netherlands have rates below 5%.
This all sounds good, but there are downsides. We reached out to David Wessel, senior fellow in economics at the Brookings Institution and director of their Hutchins Center on Fiscal and Monetary Policy, to help us understand one of those macroeconomic implications that many Americans are currently facing: inflation. .
Wessel explained to us that the current inflation is likely due to a combination of factors, including a particularly strong demand for goods during the pandemic, the unforeseen reluctance of millions of workers to return to the labor market, the “zero COVID” policies of China and the supply chain. problems.
An additional factor cited by Wessel? The late 2020 and early 2021 fiscal stimulus. He doesn’t think the stimulus was a bad idea, especially for low-income families, but that it could have been better designed to prevent inflationary effects.
He told us, “I think the size of the March 2021 US bailout package (ARP) was too large, especially on top of the December 2020 legislation. The Fed could have reacted to the larger than expected ARP, but she didn’t. I think the child tax credit may have been too generous to upper middle class families, but full refund for those who don’t owe taxes is very good social and economic policy. We shouldn’t shy away from helping people at the bottom of the income scale because we worry about the inflationary effect – we can offset that in other ways.
We also reached out to Mona Charen, national columnist and policy editor of the right-wing newspaper The Bulwark, to get a conservative perspective on the possible permanent implementation of some of these linked family supports. to the pandemic. She answered:
“The best thing for a child is two devoted married parents. But if we can’t give that to every American child, at least we can lift more of them out of poverty. Our outdated system of EITCs, tax credits, WICs and TANFs is overly complex and contains disincentives and trapdoors. It is much better to provide a direct family allowance to poor and working class families.
As data from the LIS and the Urban Institute reveal, government programs can work very well to reduce poverty. They provide us with useful evidence to continue the conversation about the best ways to address economic deprivation in the United States. However, we should not underestimate that additional government programs incur additional costs, so programs must be properly designed to take into account all possible social and negative effects. economic repercussions.
Lawrence Eppard is a researcher, professor at the University of Shippensburg, director of the Connors Forum and host of their podcast Utterly Moderate. Jörg Neugschwender is a researcher and head of the data team at the LIS Cross-National Data Center in Luxembourg.
