Moneybox

Congress’ Coronavirus Response Might Have Cut the Poverty Rate

A customer wearing a face mask pays for her groceries at a store counter.
A Local Market Foods store in Chicago, pictured on April 8. Kamil Krzaczynski/AFP via Getty Images

The federal government’s response to the coronavirus crisis kept America’s poverty rate from rising—and might have actually lowered it—even as the country lost a historic number of jobs, according to a pair of new studies out this week.

The research—first reported by the New York Times—is the latest evidence that the massive cash aid programs Congress created in March to deal with the economic turmoil of the pandemic have managed to keep even poorer families financially secure so far during the crisis. Despite unemployment rates unseen since the Great Depression, personal incomes rose to an all-time high in April, thanks primarily to the direct cash payments to families and $600-per-week enhanced jobless benefits that lawmakers included in the CARES Act. Research released last week showed that, among lower-income Americans, consumer spending bounced back to normal by May, suggesting that aid was reaching the neediest families.

The new papers offer the clearest proof yet that Congress’ effort to get money into families’ hands so they could support themselves while businesses shut down was widely successful. The government only reports the official poverty rate once a year. But in one of the studies, professors from the University of Chicago and Notre Dame used federal survey data to estimate the rate’s monthly changes through this past May. They found that poverty declined by 2.3 percentage points, from 10.9 percent in the months leading to the shutdowns to 8.6 percent in the last couple of months.

A chart of poverty rates measured from May 2005 to May 2020.
Bruce Meyer and James Sullivan

In the second study, a group of researchers from Columbia University projected that the cash aid in the CARES Act could keep the annual poverty rate relatively steady at 12.7 percent, compared to 12.5 percent before the pandemic, though the exact figure could go a bit lower or higher depending on how many Americans are ultimately able to access aid (they based their analysis on a government measure known as the Supplemental Poverty Rate, which takes more factors into account than the official poverty rate).

A bar graph showing projections of the poverty rate before and after passage of the CARES Act.
Center on Poverty and Social Policy at Columbia University

These findings require a big asterisk, however. As Zach Parolin, one of the Columbia report’s authors, told me, the poverty rate would likely rise much higher than their study projects if millions of Americans continue to lose their jobs after July, when the enhanced unemployment are set to expire. And though they might not technically be in poverty, many out-of-work Americans could still find themselves short on income in the second half of the year.

And that’s really the key thing to keep in mind about the government’s coronavirus relief efforts so far. At this point, it seems clear that the government did a pretty good job preventing suffering during the downturn by giving people money. It wasn’t perfect: Some people have had to wait months to get their jobless benefits, for instance, which is likely part of why we’ve seen measures of food insecurity rise and long lines at emergency food banks. Many hard-hit workers, especially the undocumented, have been cut out of the aid programs entirely. But overall, it seems like the government has gotten cash to many of the people who’ve needed it most, despite our janky, often infuriating administrative systems that require people to deal with crashing websites and wait on hold for hours if they want to talk with a human being.

The question is what happens next. Cash aid has kept poverty in check. But Congress has yet to decide whether it will renew its enhanced unemployment program past July. If it doesn’t, we could see much more severe deprivation. We know that giving people money succeeded for the past three months. The question is whether Washington will stick with what’s worked.