Constant dollars

Federal aid helped lift millions of Americans out of poverty last year. Further reforms could make this social safety net permanent.

Poverty rates fell to 9.1% in 2020 after taking into account federal stimulus aid. Getty Images / Marco Geber

  • Paul Constant is a writer at Civic Ventures and co-host of the “Pitchfork Economics” podcast.

  • In a recent episode, he and his co-host Jessyn Farrell examine how poverty rates have fallen during the pandemic.

  • Constant says the continued benefits of the pandemic could help form a stronger safety net for all Americans.

In March 2020, when the global economy came to a halt to stop the wildfire-like spread of COVID-19, the economic results for many Americans looked dire. With unemployment reaching unprecedented levels and businesses shutting down coast to coast, many economists predicted that we were on the verge of seeing levels of poverty in America comparable to the widespread suffering of the Great Depression.

But that’s not what happened. Heather Long and Amy Goldstein reported to the Washington Post last month that according to the US census, “poverty fell to 9.1% in 2020 after taking all government aid into account – the lowest rate on record and a significant decrease from 11.8% in 2019. “

In the face of all this economic uncertainty, nearly 8.5 million people passed the poverty line last year – a change that Goldstein and Long’s report was “largely attributed to stimulus payments” of several thousand. dollars for most Americans that Congress approved through bipartisan support. . Many of these Americans have also been bolstered by expanding pandemic unemployment checks, which totaled $ 600 per week for the first days of the pandemic and $ 300 per week for most of 2021 until the end of the program. September 4.

When those expanded unemployment benefits ended, economists predicted increased employment levels as Americans rushed back to work. It didn’t happen either. States that ended extra unemployment benefits haven’t seen an increase in employment, and after benefits expired everywhere, September’s employment report was lackluster at best. It is most likely the lack of child care, low wages and unsafe working conditions, not larger unemployment checks, that are keeping Americans from returning to work.

The pandemic taught us two important economic lessons: We learned that we could drastically reduce poverty through large cash investments, and we learned that large remittances did not prevent Americans from returning to work. When taken in tandem, the lessons from the two findings contribute to what could hopefully be a whole new understanding of how America’s social safety net actually works.

In the latest episode of “Pitchfork Economics,” Jessyn Farrell and I explore the performance of the social safety net under the pandemic, through interviews with Amy Goldstein of the Washington Post and Economist data reporter Elliott Morris.

The social safety net did not collapse when it was strained by the pandemic. In fact, the strong protections put in place by our leaders have been successful in drastically reducing poverty and preventing the economy from slipping into recession. The bigger benefits clearly haven’t convinced people to stay home, be lazy, and quit participating in the economy, either. In other words, the benefits worked exactly as they should.

So why can’t America have a strong safety net all the time? Pandemic assistance benefits were not strictly means-tested or hard to access, as many benefits have been over the past 40 years, and they have taken millions of Americans out. of poverty. Additionally, when those people who had lost their jobs were able to pay their rent, buy food for themselves, and provide for their children, their expenses likely kept more businesses from closing and more Americans from closing. lose their jobs. In fact, estimates suggest that the continued extension of unemployment benefits until 2021 has created more than 5 million jobs.

The point is, our creaky old benefit systems are not serving the modern economy. In particular, our unemployment insurance program, which was created in the 1930s for a nation of farms and factories, is totally failing to meet the needs of our service economy.

In a new report for the Economic Policy Institute, Rebecca Dixon and William Spriggs propose the first steps in systemic unemployment insurance reform “to ensure fairness and adequate standards regarding funding, eligibility , duration of benefits and levels and amounts of benefits – so that no one is left behind. “

Their proposals include increasing federal funding for higher unemployment benefits, expanding the system to apply to part-time and concert workers, and including triggers that would automatically increase unemployment benefits. unemployment and the length of payments when the economy goes into recession or depression. This is a good start to rebuilding an important part of our safety net. After all, now that we know what a working benefit system looks like, why would we go back to a broken old system that is hurting us all?

Read the original article on Business Insider

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