How U.S. Poverty Could Spike in the Last Half of the Year
Millions more Americans will be thrown into poverty if Congress fails to enact three policies meant to help families get through economic hardships related to the pandemic, according to a new study by the Urban Institute.
The report finds that the poverty rate for the last five months of 2020 will rise to 11.9% if expanded unemployment-insurance benefits, a second round of stimulus checks, and increased SNAP allotments are not approved, a significant increase over the projected annual rate of 8.9%. Those three measures are contained in the HEROES Act that was passed by the House in May but has yet to clear the Senate.
The study anticipates what happens when families have spent their one-time stimulus payments and the $600 weekly payments expire, as they are set to at the end of July. If legislation is passed that contains the three policies, about 12.2 million Americans would be kept out of poverty, the authors found. “Many families are looking at continued hardship as the initial effects of our stimulus and support passed in the early spring start to dissipate,” said Gregory Acs, vice president for income and benefits policy at the Urban Institute and one of the study’s authors. “Without continued support, families are looking at relatively high levels of deprivation in the second half of the year.”
The grim assessment of U.S. poverty, published Friday, comes as lawmakers debate how to extend benefits that individuals and families have relied on to replace wages lost during the pandemic. Republicans on Monday announced a $1 trillion plan that would slash the weekly supplement but provide a second round of direct payments to individuals and families. Democrats have said the plan doesn’t go far enough.
The projected surge in poverty in the last five months of 2020 is the result of several factors, the study states. The annual rate includes the months before the economic impact of the pandemic, when conditions were better on the whole. And both the $600 weekly payments and the one-time stimulus payment have kept many families above the annual poverty threshold, researchers said.
The increase in poverty would not hit all families equally: In households where at least one person has lost a job because of the crisis, the poverty rate between August and December is estimated at 15.6%, compared to a projected annual rate of 9.1% for those households. Black and Hispanic families that have lost at least one job would be hit disproportionately hard by an absence of stimulus: The poverty rate in those communities would be near 20% from August to December, according to the study.
The most effective of the three measures in preventing poverty would be the stimulus payments, largely because they are available regardless of a family’s employment or immigration status, the researchers said. Those direct payments alone — $1,200 for individuals, and $2,400 for married couples plus $1,200 per dependent — would keep 8.3 million people above the poverty line between August and December. The $600 weekly payment would bring 3.6 million people above the poverty line in that period, and SNAP extensions — which would increase allotments by 15% — would lift another 1.7 million.
Jobless claims climbed to 1.42 million last week for their first increase since March, meaning an unprecedented number of American families are still relying on pandemic-era stimulus payments to get by. Continued unemployment, along with a failure by Congress to pass benefits before they expire, could spell disaster for millions. “High unemployment is going to contribute to poverty,” Acs said. “But policies like these can have a significant effect in protecting families from severe hardship.”
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