How Biden’s Covid Aid Plan can lower little one poverty in half

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In a speech last week, President Joe Biden said his $ 1.9 trillion Covid relief plan would lift 5 million children from the ranks of the poor and cut child poverty rates in half.

According to some experts working on the social safety net, this would be the largest reduction in child poverty in recent history. But its scope isn’t far-fetched and could prove even more substantial if Biden’s plan is fully implemented, they said.

Overall, the plan – which includes additional incentive controls, tax breaks, and improved unemployment benefits – may have the greatest impact on black and Hispanic families.

“That seems reasonable,” said Chloe East, assistant professor of economics at the University of Colorado, of the analysis. “If all of these things Biden suggested passed, we could expect [poverty reduction] be even bigger. “

However, parts of Biden’s agenda would only be temporary and could dilute these anti-poverty services in the long term. Some conservative economists say the plan, particularly aspects like a higher minimum wage and changes in child tax credits, would increase poverty in the long run.

Children and poverty

The benefits of stimulus programs

The CARES bill, a $ 2.2 trillion relief effort, helped lower poverty rates in the early days of the pandemic and mitigate what was otherwise the worst spike in poverty in 50 years.

However, the poverty rate rose 2.4 points to 11.7% between June and November last year after families issued stimulus checks and their supplementary unemployment benefits wiped out, according to a study co-authored by Sullivan.

That is more than double a year-to-year increase in poverty since measurements began in the 1960s, he said, pushing 8 million people into the ranks of the poor.

“The rise in poverty since June has been greater for children than for adults or the elderly,” Sullivan said. “You pay a higher price.”

Unemployment is still near the Great Depression for the lowest-income Americans and stresses cash flow for those least able to weather a financial shock.

Biden’s aid plan

There’s a clear and documented link between stimulus measures and poverty reduction during the pandemic – a path that is likely to continue once Biden’s plan goes into effect, Sullivan said.

The proposal includes $ 1,400 stimulus checks, expanded tax breaks (such as the child tax credit), $ 400 improved unemployment benefits, expanded unemployment benefits for the long-term unemployed, and an expansion of grocery stamps.

Overall, these policies would lower the poverty rate by 3.6 points to 9% – which is below pre-pandemic levels and lift nearly 12 million Americans out of poverty, according to an analysis by researchers from the Columbia Center for Poverty and Social Affairs University was published politics.

The child poverty rate would decrease by 51%, the biggest decrease compared to other groups, to 6.6%, lifting more than 5 million people out of poverty, according to the Columbia analysis.

Biden quoted the results of the paper in a speech in which he set out his proposal on January 13th.

The rise in poverty since June has been greater in children than in adults or the elderly. They pay a higher price.

James Sullivan

Professor of Economics at the University of Notre-Dame

“The reduction in child poverty by this amount represents the largest decrease in recent history,” said Megan Curran, a researcher from Colombia who co-authored the study, of a year-over-year reduction in child poverty.

Black and Hispanic poverty would also decrease by more than a third, according to the paper. The cuts add to the impact of Covid’s $ 900 billion aid package passed last month.

The Columbia Analysis uses an alternative measure of poverty, the Supplemental Poverty Measure, which, unlike the government’s official measure, takes into account benefits such as grocery stamps, tax breaks, and health care. A family of four living in an average cost city and receiving less than $ 28,000 a year in income and benefits is considered poor under this barometer.

The Columbia analysis does not consider other proposals from Biden, such as raising the minimum wage from currently $ 7.25 to $ 15 an hour, extending an eviction moratorium, and offering rental and childcare assistance.

“If you add those in, it means that the overall poverty alleviation impact is in all likelihood even greater than our estimates here,” Curran said.

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Of course, the Columbia paper is a forecast, which means its estimates can change based on economic conditions. For example, the researchers assume an average unemployment rate of 6% in 2021. (It is currently 6.7%.)

And it remains to be seen whether, through a divided Congress, Biden can push ahead with measures like an increase in the minimum wage. The Senate switched to Democratic control, but with the least amount of leeway – the chamber is split 50-50, favoring the Democrats after a groundbreaking vote by Vice President Kamala Harris.

Some believe that action to fight poverty would actually have the opposite effect.

For example, a minimum wage of $ 15 would destroy jobs for some groups and increase poverty, said Robert Rector, a senior research fellow at the Heritage Foundation, a conservative think tank.

“I can’t think of anything more harmful than that,” said Rector. “The people who are losing their jobs will not be teenagers working in the suburbs, they will be the least employable people.”

Stimulus checks, child tax credits

The positive effects of Biden’s plan would be greatest because of the targeted interventions for children. The main ones, according to economists who support the proposals, are stimulus checks and the expanded child tax credit.

Families would receive an additional stimulus payment of $ 1,400 per child. The child tax credit is also aimed directly at families with children.

The president plans to increase the child tax credit for qualified children under the age of 17 to $ 3,000. Children under the age of 6 are eligible for $ 3,600 credit. (Families can currently claim up to $ 2,000 per child under the age of 17.)

Biden also wants to make the structure of the loan more progressive by being fully refundable. This means that taxpayers could get a refund check even if the credit exceeded their tax liability. Currently, the credit is partially refunded up to $ 1,400.

“The proposal recognizes that this is a little backward – that we should give the largest amount of money to very low-income children, not higher-income children,” said Elaine Maag, research fellow in taxation at Urban-Brookings Center.

Biden’s plan would extend the tax credit for a year in an emergency. But that could be a step to make the hiatus permanent – which could lead to poverty in the long run, said the rector of Heritage, as it could hinder the work.

– CNBC’s Darla Mercado contributed to this report.

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