Biden’s $1.9 trillion stimulus could drastically cut poverty, studies say

Joe Biden
President Joe Biden. Jabin Botsford/The Washington Post via Getty Images
  • Biden’s $US1.9 ($2) trillion stimulus passed the House again today, and is set to be signed into law this week.
  • The legislation could play an enormous role in reducing poverty rates, especially for children.
  • Two separate studies found it could reduce poverty rates by a third, but only over the next year.
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President Joe Biden’s historic $US1.9 ($2) trillion stimulus relief package just passed the House, and is set to be signed into law this week.

The bill will allocate billions towards Americans, providing relief for unemployed workers, parents, and millions more. Many taxpayers are set to receive $US1,400 ($1,817) stimulus checks, and parents could receive up to $US3,600 ($4,671) per child under the child tax credit.

One area where the stimulus will be acutely felt: poverty rates. Two different studies anticipate that the legislation will have a dramatic effect, projecting that millions of Americans will no longer be living in poverty in 2021. The bill, passed via reconciliation along party lines in both the House and Senate, includes measures that will expire in 2022, meaning that it’s an open question what happens to poverty rates at that point.

A study out of the Center on Poverty & Social Policy at Columbia University found that the package could nearly halve child poverty, and would more than halve the rate for Black and Hispanic children. Broadly, that study projects that the annual poverty rate would fall from 12.3% to 8.2% – meaning it would drop by a third.

Meanwhile, a study from the Urban Institute finds the plan would cut poverty by over a third. That study projects that the annual poverty rate would shrink from 13.7% to 8.7%, with 16 million fewer Americans living in poverty in 2021.

This will also impact some of those who have been hardest hit by the pandemic. Poverty rates will drop by half for those in households who experienced job losses during the pandemic, compared to a nearly one-third drop for households who did not lose jobs during the pandemic. As Insider’s Ben Winck previously reported, low-wage, minority workers were the hardest hit by pandemic unemployment.

The share of Americans in deep poverty – defined as those with resources that are less than half of the poverty threshold – would also drop by a third.

The legislation will help address some racial disparities. Historically, poverty rates have been higher for Black and Hispanic Americans. With the American Rescue Plan, it would fall 42% for Black Americans, 39% for Hispanic Americans and 34% for white Americans.

Those drops aren’t unexpected. Throughout America’s pandemic year, poverty has fallen with each new stimulus package and increased unemployment benefits, according to research from economists at University of Chicago, University of Notre Dame, and Zhejiang University.

In a statement on the bill’s passage, Biden highlighted how it will reduce child poverty, and added: “This legislation is about giving the backbone of this nation – the essential workers, the working people who built this country, the people who keep this country going – a fighting chance.”

There is that one catch, though: What happens to poverty rates after the stimulus money runs out?