September 30, 2022

Pandemic Aid Cut U.S. Poverty to New Low in 2021, Census Bureau Reports

The expanded child tax credit increased the subsidy to $3,600 for every child under the age of 6 and $3,000 for those 6 to 17, and extended it to parents not working. It was responsible for removing 2.1 million children of the 3.4 million who left poverty. Making it permanent, as progressives have advocated, would signify a departure from a trend toward incentivizing work that began in the 1990s with tougher welfare laws.

Some economists have argued that permanently expanding the child tax credit would over the long term lead some parents to work less, increasing poverty. The census report found poverty among year-round, full-time workers to be almost nonexistent, at 2 percent. But others have found the credit’s potential effects on work force participation to be much more minor, and the impact on children to be beneficial nonetheless.

“Maybe you will have a few people stop working, but regardless, there’s going to be a big decrease in child poverty,” said Jacob Bastian, an economist at Rutgers University. “We should encourage people to work as much as we can, but I don’t think that means we don’t help people.”

In 2021 alone, surveys show, the child tax credit prompted low-income families to eat more healthy meals, pay for more tutoring and extracurricular activities for children and spend more on their own professional development. Even if 2021 marks a low point in the poverty rate — and measures of financial hardship are already on the rise — some beneficial effects may persist.

“Even temporary support can have lasting impact,” said Christopher Wimer, who directs the Center on Poverty and Social Policy at the Columbia University School of Social Work. “There is a great literature that shows — not just suggests, but shows — that improvements in income, especially at early ages, have long-term payoffs for kids.”

Margot Sanger-Katz contributed reporting.

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