Prioritizing poverty

I became a registered Democrat during the Trump administration.  Prior to that, I was an Independent. Although I have consistently self-identified as a liberal, I didn’t feel that I was in sufficient alignment with Democratic party platforms to adopt that label. I still don’t; but the combination of not having the ability to vote in NY primaries and my clear preference for the Democrats in the binary choice of them versus the other, I succumbed. 

My misgivings about the Democratic party are largely a matter of prioritization.  I put addressing poverty at the top of the list.  Democrats do care about poverty; but by their rhetoric, they seem to put a higher emphasis on supporting the middle class over directly combating poverty.  The two are related of course, but in a world of limited resources, I think the poor deserve to come first.   

Part of the problem is that in contrast with many other economic data – data like those pertaining to inflation, economic growth, unemployment, etc. -- information about poverty is disseminated much less frequently. We’re now in the middle of September 2024, and the Bureau of the Census just released its 2023 report on poverty.  With this paucity of exposure, poverty doesn’t get the media attention that it deserves. It’s more like background noise in the overall assessment of economic well-being. 

The Census report distinguishes between the official policy measure and the supplemental poverty measure.  The latter seems to be the better metric in that it incorporates the impact of some government programs that assist low-income households, the largest being social security payments.  Those payments are not included in the “official” measure. 

I think it safe to say that the massive fiscal stimulus following the start of the pandemic (i.e., spending under the 2020 CARES Act, the 2021 American Rescue Plan (ARP), and the 2022 Inflation Reduction Act kept many households that otherwise would have fallen below the poverty line from doing so.   Before the pandemic, in 2019, 11.8 percent of the population had income below the poverty line, but by the end of 2021, that figure had dropped to 7.8 percent – a remarkable outcome given the sharp cutback of economic activity nationwide that we had experienced. 

A provision of the ARP that was particularly relevant to the issue of poverty was the refundable child tax credit.  This program distributed monthly cash grants to qualifying, low-income families with children, irrespective of the tax liabilities that these households would otherwise bear. (In normal usage, tax credits serve to lower tax liabilities, meaning that families with no taxable income would enjoy no benefit.  Incorporating the use of the term “refundable” obscures the reality that this program gave the full credit benefit to qualifying households, irrespective of their tax liability.) In any case, the refundable tax credit program initiated under the ARP expired as of the end of 2002.

During 2021 when the grant payments were being distributed, child poverty fell to 5.2 percent – its lowest percentage ever recorded.  With the termination of the distributions, however, child poverty shot back up to 12.4 percent in 2022 and then 13.7 percent in 2023, surpassing its pre-pandemic level.

The consensus among economists is that the most efficient way to address poverty – if we want to -- is to give poor people money; and the experience with the refundable child tax credits bears this out.  Being poor means not having sufficient income or wealth to meet basic needs.  Giving grants mitigates this problem in an efficient manner, in part because the required bureaucratic infrastructure to provide such benefits is minimal. It also has the attribute of giving the recipients greater agency in determining the goods and services that are most critical to their particular needs.

It appears that the Democrats understand this lesson, as Candidate Harris is calling for a $6,000 refundable tax credit for parents with children during the child’s first year. Passing anything like that, however, will likely depend on Democratic wins down-ballot.  That said, although not a single Republican in the House voted for the ARP, J. D. Vance has recently voiced support for increasing the size of the current (non-refundable) child’s tax credit from $2,000 to $5,000. Again, the non-refundable design effectively truncates the benefit from the poorest of the poor whose tax liabilities are lower that than the stipulated tax credit allowances. In any case, without new legislation passing to add or expand child tax credit amounts, the current benefit level of $2,000 per child will be halved to $1,000 in 2026.

With child tax credits being part of the campaign talking point on both sides of the isle, it would be a shame to come so close to passing something, without sealing the deal.  The well-being of millions of at-risk families is as stake.