The expanded child tax credit lapsed in December as the cost of President Joe Biden's spending plans became a sticking point in Congress. Yet amid the debate over whether its success in reducing poverty is worth its large price tag, many are missing a crucial feature: It was uniquely well-designed to address the increasingly precarious economic reality that millions of Americans experience.
Government programs tend to put people in boxes: elderly, disabled, veteran, unemployed, single parent. The most problematic of these labels often overlaps the others: poor. Most programs are means-tested, based on reported income during application, to direct money to those we perceive as the neediest.
But incomes in the United States can actually vary a lot from month to month: Swings as large as 50% are not uncommon. This affects people in high and low income strata, with potentially severe consequences for those without the savings to smooth out the peaks and valleys. Shift workers—in sectors such as retail or leisure and hospitality, which together account for 1 in 5 U.S. jobs—must contend with unpredictable (PDF) schedules. On-demand contract workers such as rideshare drivers and Instacart shoppers face similar uncertainty. Few get paid time off for an emergency or illness. If they don't or can't work, the money stops coming.
This income volatility means families are continually rising above and dipping below the federally defined poverty level. Researchers at the Census Bureau (PDF) found that over four years, one-third of Americans were poor for at least two months, but less than 3% were poor the entire time. Half of all spells in poverty ended in less than a year, and the long-term poor never made up more than 10% of those in poverty. A separate study examining tax data found that more than 4 in 10 people spent at least one year in poverty between 2007 and 2018.…
The remainder of this commentary is available at bloomberg.com.
Kathryn Edwards is an economist at the nonprofit, nonpartisan RAND Corporation.
This commentary originally appeared on Bloomberg on February 8, 2022. Commentary gives RAND researchers a platform to convey insights based on their professional expertise and often on their peer-reviewed research and analysis.