Stimulus Update: 3 Reasons Why U.S. Poverty Levels Could Now Soar

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  • The U.S. economy has recovered nicely from the pandemic.
  • In spite of that, more Americans could be plunged into poverty this year.

Things could take a notable turn for the worse.

When the COVID-19 outbreak first hit U.S. soil, it spurred a massive wave of unemployment that was so extreme it prompted lawmakers to rush stimulus checks out to the public. Thankfully, though, the economy has come a long way since the spring of 2020. Not only has the jobless rate declined significantly, but the labor market is actually loaded with job opportunities for those wishing to seek them out.

In spite of that, the U.S. is still facing a major poverty crisis, and much of that boils down to a lack of aid. Here are a few specific reasons why poverty rates could climb in the near term.

1. Stimulus checks are off the table this year

The last round of stimulus checks to hit Americans' bank accounts went out about a year ago. But there are no plans for a follow-up round due to the progress the economy has made.

That's problematic, though, because many individuals have not yet recovered from the personal financial blow the pandemic dealt them. A lot of people still owe their landlords rent, are behind on their mortgage payments, and are desperate to dig out of credit card debt. And with stimulus checks being off the table, it's unclear as to how people in that boat are expected to not regress.

2. The boosted Child Tax Credit hasn't been expanded

Last year, the Child Tax Credit got a substantial boost. Its maximum value rose from $2,000 to $3,600 for children under age 6 and $3,000 for those aged 6 to 17.

The credit also changed to become fully refundable, allowing more low-income families to collect it in full. Just as importantly, half of the credit was paid out in the form of monthly installments, giving recipients access to that money sooner.

President Biden had hoped to keep the boosted Child Tax Credit in place for 2022. But lawmakers failed to approve the spending bill that would've made that happen. In the absence of that enhanced credit, many families with children are apt to struggle. In fact, the number of U.S. children living in poverty rose by 3.7 million in January alone due to the boosted credit being pulled.

3. Nothing's been done to address rampant inflation

Inflation is hardly a new concept in the context of economics. But the inflation we've seen over the past few months has been pretty much out of control.

In February, the Consumer Price Index rose 7.9% on an annual basis, marking a 40-year high. Compounding the issue more recently is a severe uptick in gas prices in the wake of the Ukraine conflict.

But despite a notable uptick in living costs, lawmakers haven't acted. A group of Congressional Democrats is proposing a gas-specific stimulus that would give Americans $100 a month to help compensate for higher prices at the pump. But the likelihood of that measure passing is low, despite the fact that it's expressly designed to address a very specific need.

The U.S. poverty crisis would've no doubt gotten much worse earlier on in the pandemic were it not for stimulus checks and a boosted credit that helped millions of families shore up their finances and make ends meet. In the absence of comparable aid, it won't be shocking to see poverty levels jump in the course of the year.

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