Lower-income Americans have thrived under Biden. It probably won’t last.
Americans at the bottom of the ladder ended 2021 with higher wages, better credit scores, and money in the bank. It's fading away in 2022.
As one of America’s top anti-poverty researchers, University of Michigan social-work professor H. Luke Shaefer knows that for too long the vibe around efforts to lift up the nation’s poorest residents has largely been one of failure. So he laughed recently when a journalist told him that his editor insisted on changing his copy when he wrote — accurately — that poverty in the United States actually declined during 2021.
“Everybody is in such a bad place that all we can think about is bad news,” Shaefer, who heads UM’s Institute for Research on Poverty, told me this week. And when it comes to the complex beast that is the American economy, that’s not surprising. For millions of folks already in a sour mood over two years of pandemic restrictions and our divisive politics, it’s hard not to see red over $4-a-gallon gas or a $9 steak burrito.
But what if I told you that — at least at the start of 2022 — “the economy” looked pretty darned good to one large segment of Americans: those starting out at the bottom of the economic pyramid. The Biden presidency began on January 20, 2021, with hopes that aggressive relief around COVID-19 — especially for middle-class families with kids — and efforts to prop up the job market in areas like restaurants and retail would prevent a recession. Now, with virtually zero fanfare, two studies have shown that — even in a time of rising inflation — lower-income Americans arguably gained more last year than any time since LBJ’s “War on Poverty” in the 1960s.
Researchers have discovered the combination of the booming job market and the impact of occasionally bipartisan federal relief that started under Donald Trump in 2020 and grew with 2021′s Biden-backed $1.9-trillion relief package have meant sweeping and unexpected economic gains for the Americans who’d been so often left behind during four decades of rising income inequality.
“This has been a success story for middle-class families,” said Shaefer, whose UM center this month reported that lower-income Americans have on average 50% more money in the bank (even adjusted for inflation) than at the start of the pandemic and that 2021′s expanded Child Tax Credit brought a notable reduction in food insecurity. The number of Americans with bad credit scores is at the lowest in 16 years, possibly ever.
Now, nearly a third of the way into 2022, it’s hard to say what’s more remarkable about last year’s epic victory in this mini-”War on Poverty” — that most U.S. voters don’t even know that this happened, or that this brief flourishing of an America where fewer kids were going to bed hungry and where retail clerks suddenly had a rainy-day fund for an emergency is already disappearing thanks to our nation’s bitter, cynical politics.
Researchers like Shaefer are already finding evidence to support a recent Columbia University finding that last winter’s abrupt end to 2021′s expansion of Child Tax Credits — a brief period in which middle-class parents were getting direct payments of as much as $300 per child every month — has already increased food insecurity, with as many as 3.7 million U.S. children falling back under the poverty line in January after the checks stopped. “Now,” said Shaefer with blunt resignation, “they’re headed in the wrong direction.”
This sudden reversal of fortune has been appalling. Imagine, if you will, that the Ukrainian resistance, having driven Russian troops from the outskirts of Kyiv all the way back to border, then shrugged and allowed Putin’s goons to march back into the capital. That‘s how quickly defeat in this anti-poverty battle was snatched from the jaws of victory.
On Capitol Hill, Team Biden and Democratic lawmakers who thought the success and popularity of the Child Tax Credit boost would drive momentum for a longer-term or permanent extension hadn’t counted on the stubborn and — we now know — ill-informed objections of the likes of West Virginia’s conservative Democrat-in-name-only Sen. Joe Manchin, who reportedly told colleagues he thought his constituents were using government cash to buy drugs.
Manchin should be listening to the kind of source that a Chamber-of-Commerce type like him could trust: the Bank of America. Its new research arm came out with a report this month finding that lower-income Americans who started doing better in the second half of the pandemic weren’t putting extra cash into their veins, but into their bankbooks.
The Bank of America Institute’s Consumer Checkpoint report for April found that rising consumer confidence appears to be greatest in U.S. households earning less than $50,000 annually, with debit and credit-card spending in this group up 33.3% over three years. It found those households also have, on average, $1,500 more in the bank than in 2019. Some of that stems from the government’s pandemic relief but analysts also tagged the red-hot job market; traditional lower-wage positions like leisure and hospitality have seen an annual jump in wages of 11.8%, or greater than any pain from rising inflation.
“It’s very rare, very unusual for the gap [in gains] for the highest and lowest earners to be so wide in favor of the lowest,” David Tinsley, senior economist for the Bank of America Institute, told me this week. “I don’t think it’s occurred to this extent in this century.” In an earlier news release, Tinsley had added that “our data does not support all the gloom” about the U.S. economy in the Biden era.
And yet gloom prevails, with a CNBC poll earlier this month finding that 47% of Americans rate the economy as “poor” — the worst number since 2012 — which in turn has driven President Biden’s approval rating to its all-time low. The sour politics isn’t a complete surprise. Higher prices at the supermarket and the gas station means the economy is objectively worse for the millions who didn’t get a new job or a raise in 2021. That’s helped right-wing tropes about the undeserving poor. It’s also boosting conservative economists who claim the government’s largesse caused high inflation, even though rising prices are a global phenomenon.
Never mind that the United States should have learned during the 1950s and ‘60s that the nation is most prosperous when the working class is doing well — as seemed to be getting started again in 2021. Instead, the slow-motion end of the pandemic is causing American politicians to revert to a mean where guns are essential but butter is a luxury. Now, Biden is asking for an $813 billion defense budget, or $30 billion more than the current outlays of a nation that spends more on the military than the 10 next biggest nations combined. The yearly cost of the 2021-sized expansion of the Child Tax Credit is just about $100 billion, but to fund that would mean prioritizing hungry kids over the Pentagon’s overpriced toys.
“This is why we talk about the need for a moral revolution of values,” Nijmie Dzurinko, a co-chair of the Pennsylvania Poor People’s Campaign, said of their movement and why its protests are about more than just the logic of sound fiscal policy. “We have a distorted moral narrative ... that’s more about killing than about healing and support and making life livable.”
The failure of America to make this attitude adjustment is why Dzurinko and others from the Poor People’s Campaign will be outside City Hall for a protest march on Monday at 5 p.m., ahead of a mass meeting at First Unitarian Church meant to rally support for a national Poor People’s Campaign mass march on Washington on June 18. Activists hope that Congress will find the extra one or two votes to bring back the expanded Child Tax Credit. They also seek a bigger change in direction that will treat an estimated 250,000 annual deaths due to poverty as an urgent national crisis, and not background noise.
That’s going to take a lot. It’s going to take a less lazy news media where journalists talk to folks who don’t look like them — the Americans who got a raise to $15-an-hour and opened their first savings account — and not just to their upscale neighbors whining about filling up their SUV. It means a bold Democratic Party that doesn’t run away from a rare success story. And it’s going to take everyday people demanding that this time America won’t unconditionally surrender in a war on poverty.
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