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U.S. Poverty Fell Last Year as Government Aid Made Up for Lost Jobs

Enormous government relief effort helped offset the worst economic contraction since the Great Depression

People wait in line at Holy Apostles food pantry in New York on April 13, 2021. Taking into account government benefits, a smaller share of the population was living in poverty in 2020 even as the pandemic eliminated millions of jobs. (Gabby Jones/The New York Times)

By Ben Casselman and Jeanna Smialek, The New York Times

The share of people living in poverty in the United States fell to a record low last year as an enormous government relief effort helped offset the worst economic contraction since the Great Depression.

In the latest and most conclusive evidence that poverty fell because of government aid, the Census Bureau reported Tuesday that 9.1% of Americans were poor last year, down from 11.8% in 2019. That figure — the lowest since records began in 1967, according to calculations from researchers at Columbia University — is based on a measure that accounts for the impact of government programs. The government’s official measure of poverty, which leaves out some major aid programs, rose to 11.4%.

The new data will almost surely feed into a debate in Washington about efforts by President Joe Biden and congressional leaders to enact a more lasting expansion of the safety net. Democrats’ $3.5 trillion plan, which is still taking shape, could include paid family and medical leave, government-supported child care and a permanent expansion of the Child Tax Credit.

Liberals cited the success of relief programs last year, which were also highlighted in an Agriculture Department report last week that showed that hunger did not rise in 2020, to argue that such policies ought to be continued and expanded. But conservatives argue that higher federal spending is not needed and would increase the federal debt while discouraging people from working.

The fact that poverty did not rise more during an enormous economic disruption reflects the equally enormous government response. Congress expanded unemployment benefits and food aid, doled out hundreds of billions of dollars to small businesses and sent direct checks to most American families. The Census Bureau estimated that the direct checks alone lifted 11.7 million people out of poverty last year, and that unemployment benefits prevented 5.5 million people from falling into poverty.

Poverty rose much more drastically after the last recession, peaking at 16.1% in 2011, by the measure that takes fuller account of government assistance, and improving only slowly after that.

“It all points toward the historic income support that was delivered in response to the pandemic and how successful it was at blunting what could have been a historic rise in poverty,” said Christopher Wimer, a co-director of the Center on Poverty and Social Policy at the Columbia University School of Social Work. “I imagine the momentum from 2020 will continue into 2021.”

Despite that progress, median household income last year fell 2.9%, adjusted for inflation, to about $68,000, a figure that includes unemployment benefits but not stimulus checks or noncash benefits such as food stamps. The decline reflects the huge job losses caused by the pandemic: Some 3 million fewer people worked at all in 2020 than in 2019, and 13.7 million fewer people worked full-time year-round. Among those who kept their jobs, however, 2020 was a good year financially: Median earnings for full-time year-round workers rose 6.9%, adjusted for inflation.

The government defines poverty as an income below about $13,000 for an individual, or about $26,000 for a family of four.

Government aid programs excluded some groups, such as immigrants without legal status and their families, and failed to reach others. Poverty, with or without government aid taken into account, was significantly higher than the overall average for Black and Hispanic Americans, foreign-born residents and those without college educations. Millions of people waited weeks or months to receive benefits, forcing many to turn to food banks or other charities.

“We measure poverty annually, when the reality of poverty is faced on a day-to-day-to-day basis,” said Hilary Hoynes, an economist at the University of California, Berkeley, who has studied the government’s response to the pandemic.

By the government’s official definition, the number of people living in poverty jumped by 3.3 million in 2020, to 37.2 million, among the biggest annual increases on record. But economists have long criticized that definition, which dates to the 1960s, and said it did a particularly poor job of reflecting reality last year.

The official measure ignores the impact of many government programs, such as food and housing assistance and tax credits. This year it also ignored the direct checks sent to households, which were officially considered tax rebates. In recent years, the Census Bureau has produced an alternative poverty rate, known as the Supplemental Poverty Measure, which includes those programs and also factors in regional differences in housing costs, medical expenses and other costs not captured in the official measure. Normally, the supplemental measure is higher than the official measure; 2020 was the first year in which the supplemental measure was lower.

Many of the programs that helped people avert poverty last year have expired, even as the pandemic continues. An estimated 7.5 million people lost unemployment benefits this month after Congress allowed pandemic-era expansions of the program to lapse.

A White House economist, Jared Bernstein, said Tuesday that the new poverty data should encourage lawmakers to enact the $3.5 trillion Democratic measure that includes much of Biden’s agenda for the economy, which the administration argues will create more and better-paying jobs.

“It’s one thing to temporarily lift people out of poverty — hugely important — but you can’t stop there,” said Bernstein, a member of Biden’s Council of Economic Advisers. “We have to make sure that people don’t fall back into poverty after these temporary measures abate.”

But even as Democrats cheered the Tuesday report, most Republican lawmakers, who were in control of Congress and the White House last year, did not issue statements promoting the poverty numbers. That may be a reflection of the party’s unified opposition to the Democratic push for more spending on social programs, which the Senate minority leader, Mitch McConnell, described Monday as a “reckless taxing and spending spree.”

Conservative policy experts said that although some expansion of government aid was appropriate during the pandemic, those programs should be wound down, not expanded, as the economy healed.

“Policymakers did a remarkable job last March enacting CARES and other legislation, lending to businesses, providing loan forbearance, expanding the safety net,” Scott Winship, a senior fellow and the director of poverty studies at the American Enterprise Institute, a conservative group, wrote in reaction to the data, referring to an early pandemic aid bill, which included around $2 trillion in spending. “But we should have pivoted to other priorities thereafter.”

This article originally appeared in The New York Times.

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