This is fueling a debate about the role government should continue to play in reshaping Americans’ livelihoods. Democrats say the gains offer a case study of what American society could look like if Congress drastically widened the social safety net – an argument many are making as lawmakers question whether to shell out $ 3.5 trillion additional dollars for programs that would limit families’ child care spending, make health insurance more affordable and provide permanent tax relief to families with children, among other provisions.
“You have to admit that these changes are making a difference – that we are making a bit of progress and there is a noticeable reduction in poverty,” said Rep. Danny Davis, an Illinois Democrat who chairs the House subcommittee. Ways and Means on Support of Workers and Families. “We are investing in the return of our economy.
But Republicans and others who oppose additional spending on social programs say expanding the government’s safety net through policies like the expanded child tax credit would be prohibitive, leaving families dependent on federal money and destroy the incentives to work.
“The best way out of poverty and raising the standard of living is not with endless government checks, but our growing job opportunities and paychecks,” said Representative Kevin Brady of Texas. , the highest republican of the Ways and Means Committee. “This offers limitless opportunities for families, especially those trying to climb the economic ladder.”
Admittedly, large swathes of the economy are still reeling from the pandemic, with nearly 8.4 million people unemployed in August. Some 2.6 million tenants are in imminent danger of imminent eviction without assistance after the expiration of a federal moratorium on evictions, according to the Urban Institute. And economic forecasters cut their growth estimates for the rest of the year, fearing the coronavirus resurgence could upend plans to get back to normal.
And there is no guarantee that the benefits granted by the federal government in 2020 will be sustainable. Some real-time data shows a direct link between increased government assistance and immediate improvements in Americans’ livelihoods, and in contrast, a drop as soon as relief payments have dried up.
Yet some areas have seen remarkable improvement since the government rolled out its aid measures, the most dramatic of which is poverty reduction.
Just over 9% of Americans were in poverty in 2020, according to the Census Bureau’s Supplementary Poverty Measure, which takes into account federal programs to help low-income families. This is a decrease of 2.6 percentage points from the rate of almost 12% in 2019. The office also found that stimulus checks lifted 11.7 million people out of poverty, while that improved federal unemployment benefits kept $ 5.5 million from falling into extreme hardship.
More generally, other aspects of the economy have also exploded. Median hourly wages are up 3.9% from a year ago, according to the Federal Reserve Bank of Atlanta, in large part due to an unexpected labor shortage. Annual bankruptcy filings fell almost 30% in 2020 compared to the previous year.
US household net wealth jumped $ 5.85 trillion in the second quarter of this year, up 4.3% from the first three months of the year, the Federal Reserve reported Thursday. Household net worth is now about $ 24.5 trillion above its end-2019 level after more than a year of solid growth, the Fed said.
And the percentage of people late in paying their debts has fallen by 2 percentage points since the pandemic first hit, according to the Federal Reserve Bank of New York.
“There is more money in low-income households than at any time in 2019, and lots and lots of metrics to show it’s true,” said Angela Rachidi, an expert in poverty at the American Enterprise Institute, a right-wing organization.
It is impossible to fully know what the economy would have looked like without any government assistance. But the Urban Institute estimates the poverty rate in 2021 would rise to 12.6% with only the country’s long-standing relief measures, like social security, in place. Taking into account additional measures adopted last year – improved federal unemployment benefits, the expanded child tax credit and stimulus checks – the poverty rate would fall to 7.7%, keeping nearly $ 50 million. Americans out of trouble, the Washington think tank found.
“We’ve heard a lot of times that we have more willpower than wallet, but when we really open up our wallet we can do a lot of things,” said Greg Acs, vice president of income and benefits policy at the institute.
Food insecurity rates increased in March 2020, for example, when the pandemic first struck. And although they fell in the following months after stimulus checks and additional unemployment benefits expired, they increased in September 2020 after aid expired, said Elaine Waxman, an expert on food insecurity and unemployment benefits. as a food aid safety net with the Urban Institute. .
“There are two big lessons,” Waxman said. “The first is that when we lean forward, we can make a big difference. And when we let go, you know, we lose some of that ground. “
Despite the improvements, however, some experts point out that the massive levels of federal spending in 2020 were born out of dire necessity, and that in normal economic times – especially once the unemployment rate falls closer to 3.5 %, where it was before the pandemic – there is less justification for such expensive social programs.
The argument against new investment is that such high spending could ultimately dampen economic growth, especially if taxes are raised to pay for programs, and government intervention in private industries like childcare. ‘children could lead to layoffs and inefficiencies, said Rachidi.
“It is not a given that we need these very large and expansive government programs,” she said, “in order to maintain the progress we have made on poverty.”