Government stimulus kept millions of Americans out of poverty last year

·Reporter
·3 min read

Despite a pandemic, recession, and historic job losses, the share of Americans facing poverty dropped last year to the lowest level on record — thanks to generous government support.

The Supplemental Poverty Measure (SPM), which takes into account all government aid, fell to 9.1% in 2020 — a low since records began in 2009 — from 11.8% in 2019, according to the Census Bureau. The official poverty measure, which doesn’t reflect government support, rose to 11.4% in 2020 from 10.4% in 2019.

“This really shows the importance of the social safety net,” Liana Fox, poverty researcher at the U.S. Census Bureau, said at a press conference on Tuesday. “When we see differences in trends between the official poverty rate and SPM... that's really the impact of our tax system and our non-cash benefits.”

There were 8.5 million fewer Americans in poverty last year compared with 2019, the report found.

The two rounds of stimulus checks in 2020 lifted 11.7 million people out of poverty, which the Census defines as an income of less than $26,200 a year for a family of four. Unemployment benefits prevented 5.5 million from falling into poverty. Social Security — again the largest anti-poverty driver — moved 26.5 million individuals out of poverty.

Hispanic and Black Americans saw the biggest drop in poverty rates in 2020 — as measured by the SPM. The rate for Hispanics dropped 4.3 percentage points, while the rate for Black Americans shrunk 4.9 percentage points. The overall SPM measure fell by 2.7 percentage points.

‘Make the most critical part for child poverty permanent’

At the start of the pandemic, Congress passed the $2.2 trillion CARES stimulus package which included numerous aid measures, including expanded unemployment insurance for contractors and freelancers, an additional $600 a week in benefits, and $1,200 stimulus payments. Another stimulus package at the end of 2020 extended pandemic-era unemployment programs and included $600 stimulus payments.

BRONX, NEW YORK - JULY 30: New Yorkers in need wait outside to receive food items from Part Of The Solution (POTS), one of Food Bank for NYC's partner pantries on July 30, 2021 in Bronx, New York. (Photo by Michael Loccisano/Getty Images for Food Bank For New York City)
New Yorkers in need wait outside to receive food items from Part Of The Solution (POTS), one of Food Bank for NYC's partner pantries on July 30, 2021 in Bronx, New York. (Photo by Michael Loccisano/Getty Images for Food Bank For New York City)

Many of the programs that helped alleviate poverty have now expired.

An estimated 7.5 million unemployed workers lost all benefits in September when key pandemic unemployment programs ended. Four million more lost some or all benefits in June and July after 26 states opted out of federal programs early. The last round of $1,400 stimulus payments were distributed in the spring and no more rounds are on the horizon.

As part of the $3.5 trillion packages moving through Congress, Democrats are looking to extend the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC) through 2025. Both measures are hailed as key poverty-fighting tools.

“Biden proposed to make the most critical part for child poverty permanent,” Robert Greenstein, a fellow at the Brookings Institution, previously told Yahoo Money. “There is a real distinct possibility that that is indeed what Congress could do and that would be transformational.”

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Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova

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