WASHINGTON ― Rising prices have crushed consumer sentiment and become a major political story as President Joe BidenHe is unable to implement the social policy broadening agenda which helped him win last year’s White House election.

However, inflation is only one major economic story right now. There has also been a big reduction in child poverty ― and Congress could make it permanent.

These fiscal policies, which are partially to blame for the high inflation rate, also contributed to a 40 percent reduction in child poverty between July and August. according to researchers at Columbia University’s Center on Poverty and Social Policy. This one-month decrease was greater than any change year-over-year in child poverty between 1967 and 2020. Congress created it. sent out stimulus checks and boosted unemployment benefitsAs a response to the pandemic coronavirus.

Monthly payments in the amount of $300 per child are what have sustained family poverty reduction since July. Each month, the payments lifted 3 to 4 million children from poverty.

“The sheer magnitude of just that number is not what we normally see on a regular basis, especially from a single policy,” Megan Curran, director of policy at Columbia’s Center on Poverty, said in an interview.

Democrats plan to keep the payments in place through next year under the Build Back Better social expenditure bill, which they expect to pass within the next few weeks. The policy would make a major shift to the benefit of families in the American welfare system if it is enacted by Democrats.

One of Democrats’ biggest obstacles is inflation, with news that prices rose 6.2% since last October prompting fresh warnings from Republicans and even some Democrats that Build Back Better is a bad idea.

“From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day,” Sen. Joe Manchin (D-W.Va.), a pivotal Senate vote, said in a tweet last week.

While higher prices reduce the purchasing power of all paychecks, most children’s families find that the child tax credit payments make up the difference. This October: Moody’s Analytics estimatedHigher inflation can cost households making $70,000/year, which is about $175/month. Children under the age of 6 have to pay $300, and children below 18 receive $250. These payments come on top wage growth that has already outpaced inflation in lower income households.

Washington has a policy of reducing poverty by increasing family incomes over a threshold proportional to the number in the household. The extra cash can save the lives of the people who are most affected. Low-income families have reported using child payments. mostly for necessities like food, clothing and shelter. The U.S. Census provides monthly survey data has also foundHouseholds with children experienced significant decreases in their ability to obtain food and meet basic expenses, compared to those without children. Research suggestsPeople who grow up poorer tend to have lower incomes, worse health and are more likely to be in legal trouble.

In short, the new child tax credit payments are cutting down on real human misery by partially making up for the labor market’s indifference to parents, who have more expenses and less flexibility to work at whatever jobs might be available.

Sen. Sherrod brown (D-Ohio), listens as he attends a meeting on Capitol Hill with the Senate Committee on Veteran Affairs on Oct. 20, in Washington, D.C.
Anna Moneymaker via Getty Images

Sen. Sherrod Brown (D-Ohio) said the new policy isn’t getting its due in the national conversation about the economy.

“We don’t talk about it enough, and, not to tell you what to do, but you guys don’t cover it enough,” Brown said, referring to the press. “The discussion is, ‘Democrats can’t pass these next two bills,’ instead of the discussion being, ‘Look what the child tax credit has done.’”

Brown said that “90% of families in my state who have kids under 18 have gotten at least a $3,000 a year tax cut. And that should be said over and over and over.”

Since July, Ally Rykiel received $550 each month for her children aged 5 and 11. She had another baby in October, though she has not yet been able to update her family’s information with the IRS to get another $300 for the new child.

Rykiel, 33, said her family hasn’t particularly noticed inflation, partly because she and her husband don’t drive, partly because they recently moved to Richland, Washington, to be with her family, and partly because they shop for food at different grocery stores and are used to finding different prices for similar goods.

Still, the cost of food has been a burden ― especially after her husband took off four weeks from work to help with the baby and received no pay from his employer. It has been a great help to have the child tax credit.

“If we didn’t have that, we would have had nothing,” Rykiel said. “Counting on that $550 in the middle of the month has been huge. We just expect it now.”

Democrats might be wrong to believe that the child benefit program will deliver in all its potential. It was supposed to slash poverty by 40% annually, but because they structured the payments as advance refunds of the child tax credit, and because low-income households aren’t required to file federal tax returns, the Internal Revenue Service has been unable to reach millions of eligible households. As a result, the poverty reduction from the child tax credit has ranged between 25% and 29% each month since July, according to estimates from Columbia’s Center on Poverty and Social Policy.

Official poverty rates are determined by the federal government on an annual basis. The center calculates monthly poverty estimates using household budgets and comparing them to the poverty threshold. The monthly poverty level for a household with two children and two parents is approximately $2,300. If Democrats continue the benefits through next year as planned, the monthly poverty reduction could translate to a similar annual impact, at least according to the federal government’s supplemental poverty measure that accounts for cash payments from the IRS.

A political problem for the child tax credit is that because economists say inflation has been caused partly by increased consumer spending colliding with supply problems ― with the increased consumer demand resulting partly from Congress giving everyone more money ― Republicans can skewer the child tax credit as just another thing causing inflation, rather than something that mitigates its impact for most households.

“The economy has an inflationary problem ― this makes it worse,” Sen. Lindsey Graham (R-S.C.) told HuffPost earlier this month, referring to the child tax credit. “The more you expand government, the more money you put in the system, the more inflation you’re gonna have. Now’s not the time to do these policies.”

The cash payments do boost aggregate demand, said economist Dean Baker, co-founder of the Center for Economic and Policy Research, but to such a small extent that it shouldn’t contribute much to inflation. Baker has arguedThe current year will see a decrease in inflation as supply chains are improved and demand for durable goods is reduced.

“I see this as a story where people are actually doing pretty well with higher pay and many getting the CTC, but they are hearing about inflation in the media 24-7, so they think the economy is going to hell,” Baker said in an email.

Many believe the economy will go to hell. In November, consumer sentiment fell to its lowest point in 10 years. according to the University of Michigan’s surveys of consumers. And people’s moods could be consequential for what happens with inflation, because if consumers expect higher prices and in return demand higher wages, a self-perpetuating cycle could develop. The University of Michigan’s Richard Curtin said his consumer surveys show people believing their own income gains will be wiped out if inflation continues.

“Nominal income gains were widely reported but when asked about inflation-adjusted gains, half of all families anticipated reduced real incomes next year,” Curtin wrote. “The reactions of consumers to surging inflation should be no surprise, as it has been reported during the past several months.”

Tara Golshan contributed reporting.



Source: HuffPost.com.

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