I met a woman in public housing who said the biggest problem in the war on poverty was Poverty Pimps – those who profited from the poor. An example is politicians arguing for expanding the Child Tax Credit (CTC). Once again, the poor are being used. Here is why:
- The CTC expansion aimed to give more cash to people out of poverty than in it. If we want to help the middle class with government benefits, say so, but don’t justify it on the backs of the poor.
- The politicians argue that the expansion of the CTC during the pandemic lowered the poverty rate and the expiration at the end of the pandemic increased poverty. Not true – the poverty level remained flat over the timeframe. CTC is not a poverty buster.
The CTC covered more people in the middle class than in poverty
The CTC expansion in the Pandemic Legislation was provided to families with income up to $150,000 and then began to phase out. This income level is far higher than the Poverty Threshold of $29,950 for a married family with two kids. The graph to the left compares the CTC phase-out to the Poverty Thresholds. As shown, The CTC expansion was a family support program far more than a poverty program. Current arguments for making the expansion permanent are arguments for the support of the middle class more so than for the poor.
The CTC did not lower the Poverty Rate
Poverty was not lowered during the timeframe of the expansion of the CTC. The poverty rate was 10.4% in 2019 prior to the Pandemic. It was 11.4% in 2020, 11.5% in 2021 and 11.6% in 2022. That is the Census Bureau’s “Official Measurement” of poverty. It measures people’s income and compares it to the Poverty Threshold. Those below the Threshold are considered in poverty. It is a measure of people’s financial wherewithal. The expansion of the CTC did not help people grow their income to transcend poverty. It made their lives more comfortable during the Pandemic but did not help them escape poverty.
What is the basis for arguing that the poverty rate was lowered?
The Census Bureau does a second measurement called the Supplemental Poverty Measure (SPM), which includes government benefits in analyzing poverty levels. The Poverty rate using SPM was 11.9% in 2019 before the pandemic. Then, it was lowered to 9.2% in 2020 and 7.8% in 2021 due to the expansion of benefits in the Coronavirus legislation, including the CTC. It rose to 12.4% in 2022 as the pandemic benefits expired. The increased benefits helped many poor people live above the poverty threshold. It did not help them transcend poverty; it made it easier to live in poverty. If that was the goal of the legislation, good for us. But it wasn’t. The Pandemic Legislation was aimed at most Americans, not just the poor. So much money was paid out to so many people and things that trillions were spent, which kicked off inflation.
The purpose then versus the purpose now
The purpose of the Coronavirus legislation was to help Americans survive the economic shutdown during the pandemic. The poor were included in that goal but were not the focus. But now that the Pandemic is over, the argument is being made that we need the expansion of the CTC for the sake of the poor – particularly children. Okay, then aim it at the poor. It would be much cheaper and would get more support in Congress. But the Poverty Pimps are at it again. They point to the poor to justify reinstating the CTC expansion but will give most of the aid to middle-class voters.
The numbers
Here are the facts. In fiscal year 2022, The federal government spent $622 billion on 13 welfare programs, not including Medicaid (healthcare for the poor). But if we simply gave everyone in poverty enough cash to make up the shortfall in income versus the Poverty Threshold, it would cost $279 billion (see Poverty Gap Page), and the SPM poverty rate would go to zero. We have raised federal spending on welfare from $364 billion in 2019 to $623 billion in 2022 – an increase of $259 billion. The increase alone should wipe out poverty, yet we still have a SPM poverty rate of 12.4%. The system is just broken.
We don’t need more money in welfare; we already spend over twice the level necessary to wipe out poverty. If our goal is to have the government pay people enough so they live above the poverty threshold, then do it. That will work counter to the goal of helping people transcend poverty through work and probably drive more people into the hands of government. But stop the old Poverty Pimp game. Stop holding the poor up as the reason we need expansion of programs like the CTC and then merely grow more government, send more money to middle-class voters and marginally help the poor. That formula is why our welfare system is such a mess.