Tools to End the Poverty Pandemic

In normal times, the United States stands out among advanced democracies for its high levels of poverty and its low levels of aid. In 2019, right before Covid struck, America’s relative child poverty rate resembled that of Mexico or Bulgaria. Then, during the pandemic, the federal government enacted three enormous and historic relief bills. These reduced child poverty by an astonishing 57.5 percent, more than doubling the government’s typical impact and suddenly placing the United States alongside Germany and Switzerland on this score. For a moment we had a different country, one with a European-style welfare state (which is to say, large) and European-style levels of poverty (which is to say, low).

During a time of sickness and fear and isolation, millions of American families experienced economic security—all thanks to the government’s response to Covid, a response that began during the Trump administration and continued into the Biden presidency. The aid worked so well that we sometimes forget how bad things truly got for the economy. In the first two months of the pandemic alone, one in six workers lost their job, numbers not seen since 1929. In The Pandemic Paradox, Scott Fulford, a senior economist at the Consumer Financial Protection Bureau, charts unemployment insurance claims since 2000. His graph resembles an EKG monitor, with rhythmic spikes and troughs that tick along over the years until suddenly a line juts way up in 2020, signaling over six million weekly claims. Even particularly bad years like 2009 look trivial by comparison.

And yet it is the Great Recession, not the pandemic, that we remember as a time of acute financial hardship, when businesses folded, bankruptcies climbed, and millions of Americans lost their homes. It took families in the bottom half of the income distribution a decade to recover their precrisis incomes. But after the much more severe Covid-induced economic catastrophe, it took just twenty months. The painful memories of the pandemic are of lives lost, loneliness and uncertainty, school closures, and murmuring conspiracy theories, not of widespread financial ruin. Instead, most Americans became more economically secure as the pandemic ran its course. Missed credit card, mortgage, and rent payments fell. Savings accounts grew. People started new businesses. Suicides declined, as did homelessness, as evictions plummeted to the lowest levels on record.

“How could so much good,” Fulford asks, “come out of a pandemic that killed more than a million of us?” And how, we must ask today, having done so much good, having designed and deployed social policies that made a profound difference in the lives of millions of Americans, could we have let it all slip away?

The first relief bill became law on March 27, 2020, with President Trump’s signature. That this legislation was drafted so quickly and passed by a unanimous vote in the Senate—mere weeks after Trump’s first impeachment trial, no less—was mind-boggling. But Democrats and Republicans alike seemed to grasp the enormity of the crisis and the need for a commensurate response. Republicans, recognizing that, as the party in power, they would be blamed if the economy tanked, were the ones to first propose stimulus checks. Some even pushed for more, not less, spending. When Marco Rubio, then chair of the Senate Small Business Committee, learned that $40 billion was originally allocated for loans to small businesses, he remarked that effective aid would have to be “multiples of that.” It was as if much of Washington had learned a powerful lesson from the government’s inadequate response to the 2008 crash: a crisis is no time for restraint.

With a price tag of $2.2 trillion over a ten-year period, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was anything but restrained. It provided loans to states and localities, distributed billions to small businesses, funded the first round of stimulus checks, and supported expanded unemployment insurance, among enacting several other measures. By early April 80 million economic impact payments—the stimulus checks—had gone out; by May the IRS had sent them to almost 90 percent of eligible households. The speed with which the Treasury worked during those early days of Covid was breathtaking, revealing the federal government’s newfound ability to dispense with red tape and disburse aid efficiently.

Expanded unemployment insurance would become the most controversial aspect of the CARES Act. This provision extended coverage from twenty-six to thirty-nine weeks and included a $600 weekly supplement on top of the normal benefit ($387 a week for the average worker), which was a hell of a lot better than the insultingly low $25 weekly increase included in the 2009 American Recovery and Reinvestment Act. As a result, many Americans who had lost their jobs found themselves receiving more money from unemployment than they had when they were working. This led conservatives to blame the program for incentivizing would-be workers to stay home, but the unemployment benefits exceeded wages mostly because the jobs hadn’t paid much. Four out of five workers who lost jobs during the pandemic were earning wages in the bottom quarter of the income distribution.

The federal government’s atypical generosity toward the unemployed stood in sharp contrast to its treatment of the frontline, largely low-wage laborers who came to be called “essential workers.” Many grocery clerks, nurses, meat-packers, and others were now earning less than the laid off—and risking their health and lives for the privilege. The Columbia University economist Suresh Naidu wondered in the pages of The Washington Post if we had “turned the workers we call heroes into something closer to forced labor.” States also made use of incarcerated labor. New York inmates bottled hand sanitizer during a shortage. In Texas, incarcerated workers were paid two dollars an hour to move the dead.

During this moment of robust government action, when it seemed every staffer in every federal agency was working around the clock, the Occupational Safety and Health Administration (OSHA) was caught flat-footed. It issued unenforceable recommendations for worker protections instead of enforceable emergency standards, failed to consistently inspect workplaces with safety lapses documented in the press, and took far too few disciplinary actions. An essay in The Journal of the American Medical Association by two accomplished public health scholars, David Michaels of George Washington University and Gregory R. Wagner of Harvard, put it bluntly:

In the face of the greatest worker health crisis in recent history, OSHA, the lead government agency responsible for worker health and safety, has not fulfilled its responsibilities.

The government’s decision to dispatch considerable aid to the unemployed while doing comparatively little for essential workers resulted in a strange, unfair imbalance, one with racial overtones. Although it was true that Black and particularly Latino workers were more likely to lose their jobs during the pandemic because they were overrepresented in sectors that suffered the highest layoffs, they were also overrepresented among essential workers. “White people’s ability to work relatively safely at home,” writes Steven Thrasher in The Viral Underclass, “was possible only because disproportionately Black and brown delivery drivers, food workers, and shoppers made it possible.” A journalism professor at Northwestern University, Thrasher aims in this book to reveal how illness follows the ruts worn deep by structural disadvantage. He cites a study by the sociologist Elizabeth Wrigley-Field showing that even with all the excess deaths caused by Covid, the life expectancy of white Americans in 2020 was still higher than it has ever been for Black Americans.

The CARES Act lifted 18 million people out of poverty a month after its passage. The biggest difference was made not by the much-debated supplemental unemployment payments but by the expansion of the benefit to independent contractors and the self-employed, who had previously been ineligible. In Poverty in the Pandemic, Zachary Parolin, a social policy professor at Bocconi University, carries out a simple but convincing simulation that drives this point home. (Disclosure: Parolin and I have coauthored an academic study together.) He compares two policy scenarios. In the first, unemployment insurance is expanded to cover 90 percent of unemployed adults, who are provided a very modest stipend. In the second, eligibility is not expanded, but unemployed workers who do qualify are issued a generous stipend. The first scenario does much more to reduce poverty, demonstrating the importance of permanently expanding access to unemployment insurance to workers with nontraditional jobs—part-timers, freelancers, and other members of the gig economy’s swelling proletariat.

The CARES Act also provided forgivable loans to small businesses through the Paycheck Protection Program (PPP), issued by banks and other lending institutions. This program was why Representative Alexandria Ocasio-Cortez, Democrat of New York, initially criticized the CARES Act. “When Republicans say that they have urgency around this bill,” she said on the floor of the chamber, “the only folks they have urgency around are folks like Ruth’s Chris Steak House and Shake Shack. Those are the people getting assistance.” In December 2020 a court order forced the Small Business Administration, which oversaw the PPP, to cough up data on the program. They showed that a quarter of PPP funds had indeed gone to just one percent of borrowers. Several national restaurant chains (Ruth’s Chris and Shake Shack among them) received millions of dollars in loans. This doesn’t mean that mom-and-pop shops were left out—astonishingly, nearly every small business in the country (94 percent of firms with fewer than 500 employees) received a loan—but since businesses could apply for loans up to 2.5 times the size of their prepandemic payroll, the bigger shops collected the bigger loans. According to the latest data from the Small Business Administration, 93 percent of all PPP loans have been forgiven in whole or in part.

All told, the federal government spent over $800 billion on the PPP. It also paid $50 billion in bank fees alone, more than we spent on Emergency Rental Assistance payments to prevent millions of underwater tenants from being evicted. Was it money well spent? If we evaluate the PPP on how well it preserved jobs, then the answer is an emphatic no. Firms with fewer than five hundred employees that were eligible for the loans had only slightly higher employment than ineligible firms with marginally larger workforces, and many companies laid off workers once the loan period expired. “The Paycheck Protection Program protected few paychecks,” Fulford concludes. And when it did, it was at enormous expense: between $170,000 and $377,000 per job.

We could have supported laid-off workers at a fraction of the cost by adopting a model popular in Europe, where employers kept furloughed employees on payroll, paid them 60 to 80 percent of their wages, and sought reimbursement from the government. Instead, we opened the vault of the Treasury and waved off any real accountability measures. Perhaps predictably, business owners and shareholders pocketed most of the funds. For every dollar distributed through the PPP, 75 cents found its way into the hands of families in the top 20 percent of the income distribution.

The PPP does seem to have protected some businesses from going under and helped them strengthen their balance sheets. But which businesses? Fulford shows that communities with the fewest Covid cases initially received more PPP money because banks in those (predominantly white and richer) neighborhoods were better able to process loan applications than those in (predominantly nonwhite and poorer) neighborhoods harder hit by the pandemic. As a result, more money flowed to shops that weren’t planning on laying off anyone in the first place. We kept tossing life preservers to people who weren’t drowning.

Congress passed the second major Covid relief bill, the Consolidated Appropriations Act, on December 21, 2020. President Trump signed it into law six days later, on December 27, the same day he told Acting Attorney General Jeff Rosen to “just say that the election was corrupt and leave the rest to me and the Republican congressmen.” The bill included an additional $900 billion in pandemic relief, along with $1.4 trillion in omnibus spending. Although the longest piece of legislation ever passed in the history of the nation, at 5,593 pages, it more or less extended many programs that the CARES Act had initiated, supporting expanded unemployment insurance, the Paycheck Protection Program, rental assistance, food support, and public education.

On March 11, 2021, exactly a year after the World Health Organization officially declared the start of the pandemic, President Biden signed the third and final Covid relief bill, the American Rescue Plan. Democrats had secured the slightest of majorities in both houses of Congress, but that was enough to pass a suite of provisions that were unquestionably the most important intervention the federal government has made in the lives of low-income Americans since the Great Society. Committing $1.9 trillion in relief, roughly as much as the CARES Act, the American Rescue Plan funded another round of stimulus checks, increased assistance for struggling renters, and extended an increase to the Supplemental Nutrition Assistance Program (SNAP), better known as food stamps. (In the fall of 2021 SNAP benefits were permanently increased by an average of 27 percent in what will almost certainly be the most enduring antipoverty program of Biden’s first term.)

The crown jewel of the American Rescue Plan was the expanded child tax credit. A child tax credit has been around since 1997, but the legislation redesigned it in three crucial ways. It increased the stipend from $2,000 to $3,000 for children six and above and to $3,600 for children under six; it distributed the credit monthly, instead of annually, so that it acted more like steady income than a tax-season windfall; and most importantly, it removed earnings requirements and made the credit fully refundable. This last point deserves some unpacking.

The old credit was only partially refundable, meaning you had to pay a certain amount in federal taxes to receive the full benefit. And it had income requirements, phasing in after a family’s earnings surpassed $2,500 and was worth fifteen percent of those earnings until it maxed out at $2,000 per child. Married parents of three young dependent children who earned $17,000 could receive a total credit of $2,175 ($725 per kid), but those making $400,000 could receive $6,000 ($2,000 per kid). Under the old model, then, middle- and upper-income families received significantly more than low-income families, including disabled parents, those working for poverty wages, and people with unsteady work. And the very poorest families didn’t receive anything.

The 2021 credit was different. It was fully refundable and had no income requirements. Unmarried parents earning less than $112,500 a year and married parents earning less than $150,000 were eligible for the full benefit. This made the credit “available to almost all children,” writes Parolin. Neither he nor Fulford is given to exaggeration—they write in the restrained, clipped cadence of economists—yet both admit that the American Rescue Plan transformed the child tax credit into something closer to a universal child allowance, one that reached poor, working-class, and middle-class families alike. The United States had long been one of only a handful of rich democracies lacking a universal cash benefit for families with children. Now we finally had one.

The American Rescue Plan, and the expanded child tax credit in particular, reduced child poverty to its lowest rate in US history, driving it down by 44 percent in six months. Forty-four percent. Six months. When Christmas came in 2021, 5.5 million fewer children were living in poverty than had been the previous Christmas. The extraordinary progress displayed during the pandemic should make it impossible for anyone to still maintain the false belief that poverty cannot be ameliorated by government action.

God is in the details, as were countless government bureaucrats and congressional staffers who saw in the pandemic a rare opportunity not just to deploy enormous resources but to deploy them differently, to edit and revise the fine print of public policy in ways that we now see truly mattered. “The pandemic policy response unleashed a set of experiments,” Parolin writes, and a resounding insight from those experiments is that seemingly pie-in-the-sky ideas, progressive fantasies routinely dismissed as unserious and infeasible—like a universal basic income for families—are but a few policy tweaks away.

The pandemic holds untold lessons for students of social policy and democracy, lessons that could both expand what we believe to be possible and provide insight into how to improve many social programs. By evaluating the successes and disappointments of pandemic policies, Fulford and Parolin have begun the vital work of drawing out those lessons. Inexplicably, The Viral Underclass ignores pandemic aid altogether. Thrasher even goes so far as to claim that during the pandemic the government “left us to fend for ourselves.” “The risks of the novel coronavirus of 2019 could have been shared with robust state support for protection, housing, and food insecurity,” he writes. “But because the state (at the behest of the wealthy who control it) did not want to share this risk, the onus was put on every individual to figure out Covid-19 largely on their own.”

Yet the pandemic in fact was met with bold relief. It wasn’t perfect—not everything worked—but if $5 trillion in aid doesn’t constitute “robust state support,” I don’t know what does. Let’s criticize what deserves criticizing: that the pandemic claimed over a million lives in the United States; that the very rich grew considerably wealthier during the crisis; that domestic violence calls shot up; that schools with more poor and nonwhite students were more likely to close, widening education gaps. But let’s abandon misguided, counterproductive fatalism that prevents us from praising what deserves praising, like an unprecedented federal response that benefited most Americans and resulted in the lowest rates of poverty this country has ever seen. We know the government didn’t leave us to fend for ourselves. We cashed the checks.

Still, it is important to recognize that although most Americans received some form of aid during the pandemic, large numbers were left out. Troublingly, the excluded tended to be among the country’s most vulnerable. For instance, you had to have a Social Security number to receive a stimulus check. According to the Migration Policy Institute, this restriction prevented 14.4 million people from receiving a payment: 9.3 million unauthorized immigrants plus an additional 5.1 million citizens and green card holders who were their children and spouses.

Even the expanded child tax credit, redesigned to reach the bottommost rungs of society, failed to do so because the federal government simply had no way of knowing how to find the poorest families. Households above the poverty line were thus more likely to receive stimulus checks and the child tax credit than those below it. The IRS found that three to five million of the nation’s most disadvantaged children didn’t receive the child tax credit, and Fulford estimates that one sixth of the US population may have been “mostly or entirely left out from the aid.” This likely explains why food banks reported record demand even as government relief was flying out the door.

That those who most needed the help didn’t get it was a tragedy, one that raises several questions for policymakers. For one, what does the United States owe its unauthorized immigrants? How long will we tolerate this intolerable situation where millions of people live within the country’s borders—harvesting our food, roofing our homes—without much access to the safety net? The American project of building a multiracial democracy demands that we grapple with questions that, until recently, walled-off, ethnically homogeneous European states have not had to address. As the political analyst Anand Giridharadas has put it, it’s much easier to build a strong welfare state when everyone looks like your cousin. However difficult our path, it strikes me as untenable, and immoral, to accept the labor of millions of immigrants only to deny them aid in times of need.

Covid also laid bare the brokenness, even nonexistence, of our distribution channels. In some cases, this had to do with the reality that millions of poor Americans are disconnected from mainstream institutions—banks, government agencies, employers with formal payrolls—and thus from aid that flows through those institutions. In other cases, it had to do with what Parolin calls the trade-off between timeliness (getting the relief out quickly) and targeting (making sure the right people get it). Policymakers sometimes chose timeliness over targeting, tossing out the accountability measures to increase the speed of the aid; at other times, they made the opposite choice. Often, the rich got efficiency and the poor got paperwork.

Compare, for instance, the quick money that flowed through the Paycheck Protection Program, which required almost no oversight of the mainly upper-class business owners who collected it, with the overburdened unemployment insurance system, which met furloughed workers’ cries for help with long delays. In states as varied as Kentucky and California, most laid-off workers didn’t receive their benefits within three weeks of applying. In three weeks, the PPP burned through $350 billion. (This summer the Small Business Administration released a report estimating that it had disbursed over $200 billion in potentially fraudulent PPP claims.)

Or consider the rocky start of the Emergency Rental Assistance (ERA) Program. Fully ten months after the relief was allocated, less than a quarter of ERA funds had found their way to renters in arrears. Federalism was to blame for the backlog, as Washington gave state and local governments the task of allocating ERA dollars, which meant that instead of building a single, centralized program, we built four hundred of them, often from scratch. Fulford calls the slow rollout of Emergency Rental Assistance one of the pandemic’s “most notable policy failures.” This is too harsh, if you ask me, especially since the ERA helped keep evictions far below prepandemic levels several months after the end of the national eviction moratorium. However, the delays were as gratuitous as they were terrifying, revealing the critical importance of establishing and strengthening distribution channels ahead of the next crisis, not smack dab in the middle of one.

Many of us breathed a sigh of relief as the pandemic subsided and the country reverted to normal, but in America normal means widespread child poverty and housing insecurity. In September of this year, the Census Bureau released the new poverty numbers. They showed that child poverty more than doubled between 2021 and 2022, jumping from 5.2 to 12.4 percent. Evictions are back with a vengeance, too, exceeding prepandemic levels in several states and homelessness is up 12 percent since last year. As pandemic aid programs have dried up, many families now find themselves considerably worse off than they were during lockdown.

Despite calls to restore some of the most effective programs—this summer, three Democratic representatives reintroduced the American Family Act, which would make the expanded child tax credit permanent—the Republican-controlled House has shown no interest in even considering the possibility. Recognizing this political reality, Parolin makes a case for funding an expanded child tax credit with welfare dollars from the long-degraded Temporary Assistance for Needy Families (TANF) program. I would support this proposal if it was the only one on the table—most TANF dollars never directly reach poor families anyway, as states use those funds for a wide assortment of things, many of which have nothing to do with alleviating hardship—but given that the United States loses $1 trillion a year in unpaid taxes, sensible tax reform and enforcement are clearly better ways to foot the bill. Parolin urges Congress to go after deductions that benefit the rich, but he also wants to be practical, realistic, as we’re taught to be by our buttoned-up policy school professors. But when researchers speculate about what is realistic, we end up defining the very terms of policy pragmatism—and we are often wrong. As the New York Times reporter Jason DeParle has written in these pages, after Covid, “old certainties about what’s feasible no longer hold.”^*

How could we have allowed the relief programs to disappear? Maybe the answer is simply that the aid was temporary. The country was in a state of emergency, and desperate times called for desperate measures. But emergencies have long been the switchmen of lasting social change. The Depression led to the New Deal, and World War II gave us the GI Bill, both of which fundamentally reshaped American life.

Maybe, then, we had to draw down the relief because it caused inflation to swell. In the early days of the American Rescue Plan, some predicted that the increase in spending would overheat the economy, but it is unclear whether it did or how big an effect it had. A diverse confluence of factors likely pushed up prices, including supply chain breakdowns, the Russian invasion of Ukraine, a tightening of the labor market, a shift in spending habits, and corporate markups. Inflation wouldn’t necessarily worsen if we kept the most effective pandemic-era safety-net programs; after all, countries with much more generous welfare states are not crippled by inflation.

The blunt truth is that pandemic antipoverty aid went away because we didn’t fight to keep it. We didn’t care enough. Millions of children were lifted out of poverty. Millions of renting families were spared the pain and humiliation of eviction. Millions of gig workers were finally protected from the cruel indignities of the market. And we seemed to barely notice. We didn’t march. We didn’t phone our congressperson. We didn’t write letters to the editor. We didn’t even talk about it, really.

Sure, there were political obstacles—including a certain Democratic senator from West Virginia, where a quarter of children lived in poverty last year, who gutted the Build Back Better recovery package by loudly opposing the expanded child tax credit—but when aren’t there? We can pin the blame on the Democrats’ “messaging problem.” We can point to the lack of serious policy ideas voiced by the modern Republican Party. But why absolve ourselves? Congress didn’t act to make pandemic aid permanent in large part because we didn’t. And in our silence, over five million children were cast back into poverty.