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Child Poverty, Income Inequality Spike As COVID Safety Net Retreats

Income inequality and child poverty rose in 2022 as the temporary expansion of the social safety net the federal government unfurled during the early part of the COVID-19 epidemic contracted, according to a new report from the U.S. Census Bureau.

The bureau’s annual report found its broadest measure of poverty rose by 4.6 percentage points to 12.4%, the highest since 2018. Child poverty, measuring the percentage of kids under 15 living in low-income families, shot up to 12.4% in 2022 from 5.2% in 2021, mostly due to the expiration of the expanded child tax credit.

President Joe Biden put the blame firmly on the backs of Republicans, who uniformly opposed making the child tax credit included in COVID-era stimulus legislation permanent.

“The rise reported today in child poverty is no accident — it is the result of a deliberate policy choice congressional Republicans made to block help for families with children while advancing massive tax cuts for the wealthiest and largest corporations,” he said in a statement.

Biden’s view overlooks the role of Sen. Joe Manchin (D-W.V.), who, as the most moderate of the 50 Democrats then in the Senate, kept an extension of the Inflation Reduction Act, passed in the fall of 2022. Manchin’s opposition stemmed in part from his belief the payments were being misused

In response to a question on whether he had had second thoughts about opposing the credit, Manchin told a reporter from Semafor, “It’s deeper than that, we all have to do our part. The federal government can’t run everything.”

Sen. Joe Manchin (D-W.Va.) talks with reporters at the U.S. Capitol Wednesday. Manchin sided with Republicans in the Senate against extending a bigger child tax credit in pandemic-era aid bills.
Sen. Joe Manchin (D-W.Va.) talks with reporters at the U.S. Capitol Wednesday. Manchin sided with Republicans in the Senate against extending a bigger child tax credit in pandemic-era aid bills.

Sen. Joe Manchin (D-W.Va.) talks with reporters at the U.S. Capitol Wednesday. Manchin sided with Republicans in the Senate against extending a bigger child tax credit in pandemic-era aid bills.

“Today’s data offer a stark illustration of the impact of our tax policy choices: If Congress had continued the American Rescue Plan’s Child Tax Credit expansion in 2022, about 3 million additional children would have been kept out of poverty, preventing more than half of the 5.2 million increase in the number of children in poverty last year,” said Kris Cox, deputy director of federal tax policy at the liberal Center on Budget and Policy Priorities (CBPP).

The tax system also played a big role in increased inequality in the U.S. economy, according to the Census data. The Gini index, which measures how equally income is distributed, dropped by 1.2% before taxes, meaning inequality had fallen.

But once taxes were taken into account, including things like payments under the expanded child tax credit, the picture changed dramatically. The post-tax Gini index rose by 3.2% to its highest level since the bureau began tracking it in 2019.

Households in the lowest 10% by income saw their income fall by 14% after taxes in 2022, compared to smaller drops of 8.8% for households exactly in the middle of the population and 7.0% for households in the top 10% of earners.

Liana Fox, an assistant division chief in the Census Bureau, pointed directly to the expiration of the expanded child tax credit and earned income tax credits in 2022 for “the steep relative declines in post-tax income at the bottom and middle of the income distribution.”

The data also showed the impact of inflation on Americans. Median household income, adjusted for inflation, fell for a third straight year to $74,580. That’s down from a recent peak of $78,250 in the pre-pandemic year 2019. (The median income is precisely in the middle of the distribution of all incomes.)

Already, about 6 million people have lost Medicaid coverage since April 1, 2023, including many who are likely still eligible. And millions more will follow well into 2024.Gideon Lukens, senior fellow with the Center on Budget and Policy Priorities

“Despite nominal gains, historically high inflation resulted in a decline in real median household income,” Fox said, reflecting a 7.8% increase in inflation in 2022.

There were a few bright spots in the report, however.

The percentage of Americans without health insurance fell to 7.9%, the lowest level since 2017.

But even that silver lining came with a warning. The CBPP’s Gideon Lukens, a senior fellow with the think tank, said the numbers don’t reflect the impact of states’ disenrolling some Medicaid recipients after federal protections against that lapsed in March.

“Already, about 6 million people have lost Medicaid coverage since April 1, 2023, including many who are likely still eligible. And millions more will follow well into 2024,” he said in a blog post.

The data also showed some encouraging signs on the jobs front. As the economy reopened and bounced back from the sharp but short COVID downturn, unemployment has been 4% or below for 21 months through August, according to the Labor Department.

In the Census data out Tuesday, the increase in full-time workers in 2022, 3.4%, was twice the size of the gain in part-time ones. The percentage of working women with full-time employment rose to 65.6%, a record high.

Overall, Fox said, it was the second year in a row the composition of the workforce had moved toward more full-time work and away from part-time jobs.

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