- Pandemic aid kept millions of Americans from sliding into poverty. New Census data indicate that the supplemental poverty rate fell to a record low 9.1% in 2020. (The Wall Street Journal)
- NH: Last week, the Census released its Income and Poverty in the United States: 2020 report. It found that the official poverty rate for 2020 rose +1.0 percentage point to 11.4%. It also found that the supplemental poverty rate fell -2.7 percentage points to 9.1%. That's a record low.
- How could one measure of poverty rise while the other fell?
- Let's look at the differences between the two measures. The official poverty rate is the old measure: It's based on a minimum food budget, and it only counts pretax cash income. The supplemental measure is more sophisticated and complex. It is based on a broader index of living expenses. And it includes (on the negative side) taxes and (on the positive side) tax credits and all in-kind benefits, such as SNAP, Medicaid, and Medicare.
- Normally, the supplemental poverty rate is higher. Yes, the inclusion of in-kind benefits pushes it down. But its more generous poverty threshold and the impact of taxes do even more to push it up.
- Last year, the two measures switched places. And mostly for one very simple reason: The official measure did not include the two big rounds of stimulus checks, but the supplemental measure did. Technically, the stimulus checks sent out by the IRS were deemed to be tax credits. So even though they seemed like cash to recipients, the official measure excluded them.
- These two stimulus payments amounted to just over $400B. They were all distributed to households under $75K (single) or $150K (married). Altogether, they pulled 11.7M people out of poverty. So progressive was the impact of the stimulus payments that the share of households in poverty fell by 23% even in a year in which real median household income dropped by 3%.
- Stimulus checks were not, of course, the only government benefits keeping people out of poverty. But the impact of most of the benefits didn't change in 2020 from earlier years. Social Security in 2020 kept 26.5M above the line, unchanged from 2019. SNAP kept 2.9M above the line, also unchanged. Unemployment insurance kept 5.5M above the line. And that was an increase--of 11% increase from 2019.
- Most of the pandemic benefits were only temporary. The stimulus checks were one-offs. The extra unemployment insurance ended earlier this month. And the child tax credit will sunset at the end of 2021. While these programs will still do something to reduce the poverty rate in 2021, the impact won't be nearly as dramatic as it was in 2020.
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