A key pandemic lesson: Throwing money at the problem of poverty actually works

By: - October 20, 2021 12:00 pm

Photo: Spencer Platt/Getty Images

Photo: Spencer Platt/Getty Images

I [/dropcap]f there’s one enduring myth in America, it’s that there’s nothing we can really do to end poverty.

Most policy prescriptions during the last few decades — from setting up Byzantine barriers to programs like food stamps and Medicaid to doing nothing at all — are rooted in condescending lore that poor people deserve to suffer because they clearly made poor personal choices, while conveniently ignoring structural problems of inequality and racism.

But the COVID-19 pandemic showed us, once and for all, that we can eradicate poverty — if we want to.

That’s the key — and it’s why President Biden and progressive Democrats have such a tough fight on their hands to pass the “Build Back Better” plan that would boost school meals for kids, provide universal preschool and free community college, expand Medicare coverage for seniors and more.

Key parts of the Build Back Better plan:

  • Universal preschool
  • 12 weeks of paid family and medical leave
  • Two years of free community college
  • Letting Medicare negotiate drug prices rather than pharma companies
  • Reduce health insurance premiums
  • Expand Medicare coverage
  • Expand home care for older and disabled Americans
  • Bolster affordable, resilient housing via tax credits and government financing
  • Extend the Child Tax Credit expansion to reduce child poverty
  • Extend increase to earned-income tax credit for workers without children
  • Investments in job training programs and workforce development
  • Create more clean energy jobs
  • Enlist a Civilian Climate Corps
  • Invest in retaining more teachers, particularly teachers of color
  • Expand free school meals to additional 9.3 million children
  • Investments in school infrastructure upgrades

Much of Washington is trapped in old myths and old ways of thinking. That’s why you’ve seen scary headlines about $3.5 trillion in spending (if only Republicans’ massive tax cuts for the rich in 2017 warranted that coverage) and Democratic infighting instead of breakdowns of plans designed to alleviate human suffering. Writing about policy is hard; chronicling drama is easy.

Of course, a challenge for reporters is that Republicans just aren’t a policy-driven party anymore. Lawmakers now focus almost exclusively on culture war issues like “critical race theory” to rile up their base; voting restrictions and election machinations so they never have to deal with fair elections again like 2020; and scatological tweets slamming Democrats.

Meanwhile, centrists in Congress and think tanks funded by corporate interests have told us for years that poverty is a thorny problem that can only be solved with complicated, innovative programs outside government (conveniently dovetailing with their commitment to never raise taxes on the rich, which is a key part of Biden’s plan).

But thanks to the robust federal government response to the pandemic, we now know definitively that poverty is a policy choice.

Several university studies have basically shown that the government throwing money at the problem works. As it turns out, it’s not really complicated.

There were 20 million people unemployed at the beginning of the pandemic in April 2020 — the highest rate since the Great Depression. Many couldn’t pay rent or for basic household expenses and anxiety and depression rates soared.

U.S. President Joe Biden speaks outside the White House with a bipartisan group of senators after a June meeting (Photo by Kevin Dietsch/Getty Images)

But a University of Michigan Poverty Solutions report using U.S. Census household survey data found that federal support, like the CARES Act of March 2020 and the American Rescue Plan Act of March 2021, made a huge difference. Direct stimulus payments and expanded unemployment benefits in particular helped people pay their bills, pay down debt, get medical care — and they also improved their mental health.

“There’s a question of what we do during severe recessions: What we did [during the pandemic] worked, and it worked better than anything we’ve ever done before,” said Director of Poverty Solutions Luke Shaefer.

“… If we ever wondered if the well-being of families is sensitive to money in their pockets, I don’t think we ever have to wonder that again because the results are so clear and simple,” he added.

So what would have happened if Congress didn’t act? We actually know the answer to that, too. Reports of financial and mental health challenges increased sharply in November 2020, when COVID-19 infections spiked and then-President Trump and Republicans in Congress refused to act on more relief after Biden won the 2020 election.

But even with that delay, the overall poverty rate fell in 2020, thanks to temporary stimulus payments. The Census Bureau reports that almost 8.5 million people were lifted out of poverty last year, which is an unprecedented change (the poverty line for a family of four is about $26,250 a year).

The American Rescue Plan included even more robust poverty-fighting solutions, like temporarily increasing the child tax credit. If it were made permanent — which progressives are currently fighting to do — an Urban Institute study found that alone could cut child poverty almost in half.

Right now, there’s a mad dash from Republicans, centrist Democrats like U.S. Sens. Joe Manchin (D-W.V.) and Kyrsten Sinema (D-Ariz.), and business lobbyists to scuttle Biden’s “Build Back Better” agenda, even though it’s popular (even 47% of Republicans like it). But it would be the biggest government investment in the public good since LBJ’s “Great Society” in the ‘60s, and that just can’t stand.

Since the ‘80s, Democrats have played defense against the unfounded conservative talking point that government can’t be a force for good. (Even today, you can barely go a few weeks covering the Michigan Legislature without hearing some GOP lawmaker drop what they consider to be the sickest burn ever from Reagan: “The nine most terrifying words in the English language are: ‘I’m from the government, and I’m here to help.’”)

But we now have empirical proof that the government can help people, especially during their darkest times of need.

“During an unprecedented recession, Americans were not reporting they were worse off financially,” Schaefer noted. “I don’t think people appreciate how effective what we’ve done has been. When we hit the next recession, we have a model for what we can do that can buffer families from extreme hardship.”

And more importantly, we should want to help people escape poverty. That is a good in and of itself. We have the chance to learn from the unspeakable tragedy of this pandemic and make life better for millions of people. We can’t allow petty politics to squander this moment.

Susan J. Demas is the editor-in-chief of the Michigan Advance, which first published this essay.

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