Congress just passed a long-awaited package designed to be a rescue plan for workers, families, and businesses struggling through the dual economic and public health crisis caused by the COVID-19 pandemic.
This sweeping package demonstrates the undeniable power of the federal government to significantly reduce poverty when it decides to, and raises two questions:
- Why should we wait for once-in-a-generation global catastrophes to use the tools we have to reduce poverty?
- Why should we let these provisions expire at the end of the year?
The $1.9 trillion relief package isn’t perfect, and it is missing some notable pieces of President Biden’s original proposal like the $15 minimum wage, but it will, in the short-term, have dramatic positive effects.
A recent analysis from the Urban Institute examined the impact on poverty of the bill’s expansion of the Child Tax Credit (CTC), extension of the Pandemic Unemployment Insurance (UI) benefits, expansion of the Supplemental Nutrition Assistance Program (SNAP), and $1,400 stimulus checks. For 2021, they’re projecting:
- Over a 50% reduction in child poverty.
- Roughly 16 million people pulled from poverty.
- A 42% reduction in poverty for black, non-Hispanic people. A 39% reduction for Hispanic people, and a 34% reduction for white, non-Hispanic people.
- A roughly 33% reduction of those experiencing deep poverty (resources of less than half the poverty threshold).
- A 7% reduction in the share of the population with low family income (income below twice the poverty threshold).
That’s before we even get to the impact of other pieces of the legislation, including funding for rental assistance, energy payments, and expansion of the Supplemental Nutrition Programs for Women Infants and Children (WIC). The analysis also does not include the expansion of the Earned Income Tax Credit (EITC), whose benefits won’t be seen until 2022.
The good news is that this bill clearly has a number of incredibly effective poverty-reduction programs. The bad news is that UI benefits and the 15% increase in SNAP benefits expire in September, the checks are one-and-done, and the expansion of the CTC and EITC only apply to tax year 2021. This bill will undeniably have a major impact, but without further action, it will be a short-lived one.
By comparison, the last Administration’s landmark legislation, the Tax Cuts and Jobs Act funneled trillions in tax cuts mostly to the top of the income bracket and grew wealth inequality over an entire decade at best, while many of the most regressive pieces of the bill are permanent
Democrats have taken an opportunity to show what can be done when we focus resources on the people who need it the most. Our economy is consumer driven, and providing resources to low-income workers and families will allow families to cover their basic needs and drive money into struggling businesses. That was true before the pandemic, it’s true right now, and it will continue to be true after COVID-19 is a distant memory. So why stop programs that work?
The expanded Child Tax Credit will be fully refundable in 2021, and will provide $3,600 per child under 6 and $3,000 per child over 6 for eligible families (benefits phase out for those with higher incomes). Depending on the age of your child, this is an increase of between $1,000 and $1,600 per child from the current law, and can make a big difference in these families’ lives. The Earned Income Tax Credit, specifically aimed at low-income workers and families, was also significantly increased, and the income threshold was almost doubled to capture more workers.
There’s no reason to let these expansions expire in 2022, since the end of the pandemic will not magically reduce the costs of having children or keeping a roof over your head. Congress should act fast to make them permanent, rather than a one-off boost.
We already have a model for how we can make some of these other programs permanent. After seeing the success of expanded unemployment insurance benefits at the beginning of the pandemic, Reps. Madeleine Dean and Matt Cartwright introduced the Payments for the People Act, which would automatically trigger increased unemployment benefits whenever unemployment crept above 5.5%. This kind of solution can help fight economic downturns in the future and significantly reduce poverty rates by keeping consumers’ income more stable and stimulating economic activity. This type of automatic trigger could be used for a host of other relief and stimulus provisions, even with stimulus payments.
Democrats have dipped their toe in the water on an effort to help working people and families, but it’s time to dive in headfirst and make these programs permanent.