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President Joe Biden in a speech last week said his $1.9 trillion Covid relief plan would lift 5 million kids from the ranks of the poor and cut the child poverty rate in half.
That would be the biggest child-poverty reduction in recent history, according to some experts who study the social safety net. But its scope isn’t far-fetched and may prove even more substantial if Biden’s plan is fully enacted, they said.
Overall, the plan — which includes additional stimulus checks, tax breaks and enhanced unemployment benefits — may have the greatest impact on Black and Hispanic families.
“This seems reasonable,” Chloe East, an assistant professor of economics at the University of Colorado, said of the analysis. “If all these things Biden proposed passed, we might expect [poverty reduction] to be even larger.”
However, parts of Biden’s agenda would be temporary, potentially diluting those poverty-reduction benefits in the long run. Some conservative economists say the plan, especially aspects like a higher minimum wage and changes to the child tax credit — would actually increase poverty over the long term.
Children and poverty
The upside of stimulus programs
The CARES Act, a $2.2 trillion relief measure, helped poverty rates fall in the early days of the pandemic, blunting what would have otherwise been the worst rise in poverty in 50 years.
Yet the poverty rate spiked 2.4 points between June and November last year, to 11.7%, after families spent stimulus checks and their extra unemployment relief lapsed, according to research co-authored by Sullivan.
That was more than double any year-to-year rise 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 is larger for children than it is for adults or the elderly,” Sullivan said. “They are paying a bigger price.”
Joblessness is still near Great Depression levels for the lowest-income Americans, stressing cash flow for those least able to weather a financial shock.
Biden’s relief plan
There’s a clear and documented relationship between stimulus measures and poverty reduction during the pandemic — a trajectory likely to continue if Biden’s plan is enacted, Sullivan said.
The proposal includes $1,400 stimulus checks, expanded tax breaks (like the child tax credit), $400 enhanced unemployment benefits, extended jobless benefits for the long-term unemployed and a food-stamp expansion.
Overall, these policies would reduce the poverty rate by 3.6 points, to 9% — which would be below pre-pandemic levels and lift nearly 12 million Americans out of poverty, according to an analysis published by researchers at Columbia University’s Center on Poverty and Social Policy.
The child-poverty rate would fall by 51%, the largest drop relative to other groups, to 6.6%, lifting more than 5 million out of poverty, according to the Columbia analysis.
Biden cited the paper’s findings during a speech outlining his proposal on Jan. 13.
The rise in poverty since June is larger for children than it is for adults or the elderly. They are paying a bigger price.
economics professor at the University of Notre-Dame
“Cutting child poverty by that amount represents the largest reduction in recent history,” Megan Curran, a Columbia researcher who co-authored the study, said of any prior year-over-year reduction in child poverty.
Poverty among Blacks and Hispanics would also fall by more than a third, according to the paper. The reductions come on top of the effects of the $900 billion Covid relief package passed last month.
The Columbia analysis uses an alternative measure of poverty, the Supplemental Poverty Measure, which accounts for benefits like food stamps, tax breaks and health care, unlike the government’s official measure. A family of four living in an average-cost city and getting less than $28,000 a year in income and benefits would be considered poor under this barometer.
The Columbia analysis doesn’t factor in other Biden proposals, like raising the minimum wage to $15 an hour from the current $7.25, extending a moratorium on evictions and offering rental and child-care assistance.
“If you added those in, it means the total anti-poverty effects would in all likelihood be even greater than our estimates here,” Curran said.
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Of course, the Columbia paper is a forecast, meaning its estimates are subject to change based on economic conditions. Researchers assume a 6% average unemployment rate in 2021, for example. (It’s currently 6.7%.)
And it remains to be seen whether Biden can push policies like a minimum-wage increase through a divided Congress. The Senate flipped to Democratic control but by the slimmest of margins — the chamber is split 50-50, favoring Democrats after a tie-breaking vote from Vice President Kamala Harris.
Some believe policies meant to combat poverty would actually have the opposite effect.
A $15 minimum wage, for example, would wipe out 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 that’d be more harmful than that,” Rector said. “The people losing jobs won’t be teenagers working in the suburbs, they’ll be the least employable people.”
Stimulus checks, child tax credits
The positive effects of Biden’s plan would be largest for children due to the targeted measures — the most important being stimulus checks and the expanded child tax credit, according to economists who support the proposals.
Families would get an extra $1,400 stimulus payment per child. The child tax credit is also aimed directly at families with kids.
The president wants to increase the child tax credit to $3,000 for qualifying children aged 17 and under. Kids under age 6 would be eligible for a $3,600 credit. (Families can currently claim up to $2,000 per child under age 17.)
Biden also wants to make the structure of the credit more progressive, by making it fully refundable. That means taxpayers could get a refund check, even if the credit exceeds their tax liability. Right now, the credit is partially refundable up to $1,400.
“The proposal recognizes that this is a little backwards — that we ought to be giving the largest amounts of money to very low-income children, not higher-income children,” said Elaine Maag, principal research associate in the Urban-Brookings Tax Policy Center.
Biden’s plan would expand the tax credit for a year on an emergency basis. But that may be a step toward making the break permanent — which could raise poverty in the long term, Heritage’s Rector said, since it may discourage work.
— CNBC’s Darla Mercado contributed to this report.