On Tuesday, the Census Bureau released its latest income and poverty estimates covering calendar year 2022, including two assessments of poverty in America. One, called the Official Poverty Measure (OPM), focuses on earnings and cash-like government benefits, such as Social Security, unemployment, and welfare checks. A second, known as the Supplemental Poverty Measure (SPM), also counts in-kind government assistance such as Supplemental Nutrition Assistance Program (SNAP, commonly called food stamps) benefits and tax credits paid to millions of low and middle-income households. The SPM varies in other significant ways from the OPM, as discussed in an AEI event this week. Those factors mean these competing data sets often provide a confusing picture of poverty in America.
That was never more prominently on display than during the COVID pandemic, when trillions of dollars in extraordinary benefits were temporarily paid. Some, such as expanded unemployment checks, were counted in the OPM (although the OPM missed a shocking $220 billion, artificially raising its reported poverty rate). But other pandemic benefits were counted only under the SPM. That includes: (1) three rounds of stimulus checks that provided a typical family of four $11,400, at a cost of over $850 billion; (2) food stamp expansions worth an additional $150 billion; and (3) the expanded child tax credit (CTC), which paid an extra $113 billion nominally in 2021 (but really didn’t—more on that later).
One would expect such massive benefits to affect the reported level of poverty in America, and that’s exactly what happened—but only while they were paid and generally only under the SPM. Most pandemic benefits were paid in 2020 and 2021, driving down poverty rates then. But most of those temporary benefits expired by 2022, causing poverty rates to rise (again, under the SPM but not the OPM). New York Times headlines covering recent poverty reports are instructive:
|Calendar Year Covered||New York Times Headline|
|2020||“U.S. Poverty Fell Last Year as Government Aid Made Up for Lost Jobs” (September 14, 2021)|
|2021||“Pandemic Aid Cut U.S. Poverty to New Low in 2021, Census Bureau Reports” (September 13, 2022)|
|2022||“Poverty Rate Soared in 2022 as Aid Ended and Prices Rose” (September 12, 2023)|
Whenever the Census poverty reports are released, significant attention is rightly paid to child poverty. Here, too, this year’s report offers a confusing picture of child poverty, driven by changes in benefits and differences between the surveys. The following offers additional context on those recent changes and reported child poverty rates:
- The decline in the child poverty rate between 2021 and 2022 under the OPM was statistically insignificant (see Figure 2 here). Because the undercounting of UI benefits made the 2021 official rate too high, it’s likely that a better-measured version would have shown an increase this year. But there have been only three years with a lower child poverty rate in US history—2019, 1973, and 1969. (Had inflation—partly caused by massive spending in 2021—been lower, the OPM might have reached an all-time low.)
- Most headlines focused on the fact that the child poverty rate based on the SPM doubled. The doubling was a natural result of temporary COVID aid being withdrawn, including the temporarily expanded CTC. However, not only was the SPM child poverty rate (12.4 percent) lower than the pre-COVID rate of 12.6 percent, it was lower than any year on record (back to 1967) other than 2020 and 2021 (when the rate was temporarily even lower due to COVID aid). (The Census Bureau’s SPM rates go back to only 2009, but a widely respected poverty center at Columbia University has extended the SPM back to 1967, available here.) If the pandemic had never occurred, the headline Tuesday would have been that child poverty was the lowest on record.
- That same Columbia center estimates that even if the CTC had been expanded—at a cost of over $100 billion per year in an inflationary environment—the SPM child poverty rate would still have risen by 3 points.
- One reason the SPM would have risen even with the expanded CTC in place is that the expanded CTC wasn’t the most important temporary COVID program in reducing poverty. Table B-8 in the Census Bureau poverty report breaks down the estimated effects of individual programs.
- Contrary to most coverage, the largest effect on child poverty in 2022 was the end of stimulus checks, not the expiration of the temporary expansion in the CTC.
- The Census Bureau reports that stimulus checks reduced child poverty by almost 2.3 million in 2021, which fell to zero in 2022 as those checks were no longer paid.
- In contrast, the CTC continued to reduce child poverty by an estimated 1.4 million in 2022, which was down by 1.5 million from the 2.9 million reduction in 2021 while the expanded CTC policy was in place.
- This apparent 1.5 million decline is overstated, as the Census Bureau assigned all of the expanded CTC payments to 2021 (which was the tax year to which they applied) rather than also to 2022 (when much of the benefits were received as families filed their annual tax returns). That made the 2021 child poverty rate lower than it really was and the 2022 rate higher than it really was.
- Meanwhile, other programs filled in more. For example, SNAP and school lunch removed approximately 1.0 million more children from poverty in 2022 than in 2021. Social Security and housing subsidies also contributed more to child poverty reduction in 2022 than 2021.
As discussed extensively at Tuesday’s AEI event, policymakers and the public are in dire need of a poverty measure that remedies the well-known flaws of both the OPM and SPM. It should not be this complicated to assess how poverty changes year to year and why. In the meantime, however, it is important not to lose sight of the fact that the nation has made great strides reducing child poverty, quite apart from the temporary programs enacted during the pandemic.