Estimates vary about the degree to which fiscal stimulus overall drove the inflation that began soaring a year ago — supply chain snarls and the war in Ukraine also played a role. But much of the aid went to people who were not poor. And because low-income people tend to spend any subsidies quickly, while those with the wherewithal to save the money when it came in probably spent it over time, which fueled price increases into 2022.
“The idea was that pandemic insurance would find and fill the holes. The problem is, you painted a full wall to fill in a few cracks,” said Jonathan Parker, head of the finance department at the M.I.T. Sloan School of Management. Had pandemic aid been aimed only at those in real need, he said, any inflationary impact would have been “much, much less.”
Refundable tax credits, including the expanded child tax credit and the earned-income tax credit, removed 9.6 million from poverty.
Some conservatives argue that the falling poverty rates carry few lessons for the future.
“OK, great, like poverty went down a lot, but it didn’t, really — not on a sustained basis,” said Michael R. Strain, director of economic policy studies at the American Enterprise Institute. “If you think of poverty in a broader sense related to issues around self-sufficiency and earnings and upward mobility, then I think a huge reduction in poverty based on a one-time temporary income transfer isn’t really a reduction in poverty at all.”
But for many recipients, the aid served as a springboard to a better life.
Among those who escaped poverty with government help is Kristina Ennis, 29, a restaurant server in Pittsburgh, who had her first child last year. Maternity leave reduced her income, and the pandemic led to a reduction in hours for her fiancé.
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Their income, after taxes and work expenses, would have left them below the poverty line of $25,000. But the safety net provided them with help worth more than $18,000, accounting for stimulus payments, tax credits and food stamps. About a third of the assistance, including the expanded child tax credit, consisted of pandemic-related aid, while the rest came from the permanent safety net.
