Federal Programs Fueled 2021 Drop in Poverty—Particularly for Children

Washington, DC, September 13, 2022—Thanks to powerful federal investments in programs that support people seeking economic security, the child poverty rate in 2021 as measured by the Supplemental Poverty Measure (SPM) dropped by nearly half, from 9.7 percent in 2020 to 5.2 percent in 2021, the lowest level measured. The overall poverty rate using the SPM also dropped, but not as significantly as among children. These gains were largely driven by the expanded Child Tax Credit (CTC), part of the American Rescue Plan in 2021, which effectively created a child allowance by making the credit fully available to families with low incomes for the first time, increasing the credit’s value—especially for children under age 6—and delivering it in monthly installments of up to $300 per child. According to the Census Bureau, the CTC and other refundable tax credits kept 9.6 million people out of poverty in 2021, with the CTC accounting for 5.3 million of that total.

This news came today in data from the U.S. Census Bureau on poverty, income, and health insurance coverage that provided indisputable evidence of the critical role of federal programs in fostering economic security and closing harmful racial gaps. Based on the SPM, which takes taxes and near-cash transfers into account, the gap in the poverty rate between non-Hispanic white children and Black children fell by 51 percent, and the gap in the poverty rate between non-Hispanic white children and Hispanic children fell by 37 percent.

“We’re pleased to see unprecedented declines in child poverty—although that drop was the result of temporary investments. That’s why we’re redoubling our efforts to encourage policymakers to reinstate and make permanent the enhanced Child Tax Credit,” said Indivar Dutta-Gupta, president and executive director of the Center for Law and Social Policy (CLASP). “We just released findings from a national survey showing that families with low and moderate incomes depended on the CTC’s monthly payments in 2021, and, without them, reported significant hardship this year. This survey makes clear that because Congress failed to extend these still-needed supports, families are now suffering as they struggle to pay their bills and buy food, which is throwing children back into poverty. The enhanced CTC was an unequivocal success—contributing little to economy-wide price increases while helping families, regardless of race, and beginning to redress our history of denying support to children of color.” 

CLASP will release a brief examining the Census Bureau’s data and outlining how Congress can keep the country from backsliding on poverty, which is a certain result without changes in policy. The brief will also discuss how communities of color are disproportionately more likely to experience poverty and economic distress because of longstanding and ongoing systemic racism in public policy that has hindered access to economic opportunity throughout our nation’s history.

“With Congress back in session, CLASP urges federal policymakers to build on the foundation created by the American Rescue Plan and prioritize the urgent needs of children, youth, families, and communities. In a single year, child poverty in the United States fell from one of the highest rates among wealthy countries to one of the very lowest. Policymakers risk reversing those gains if they fail to act soon. Our nation can sustain 2021’s gains by investing in caregiving, targeted jobs for youth, and tax credits for families. We have definitive evidence that federal investments work. Now we need the public and political will to keep at it and adopt other policy strategies to reduce and, ultimately, eliminate poverty,” said Dutta-Gupta.