2021 Was a Year of Bold Economic Policy That Must Be Extended

At the beginning of 2021, the new Biden administration shared plans to offer immediate supports to struggling Americans, followed by strategies to grow the economy through investments in infrastructure and families.1 The first two legislative packages created to encompass these supports—the American Rescue Plan (ARP) and the Infrastructure Investment and Jobs Act (IIJA)—were passed in 2021.2 Enhanced assistance programs that were either implemented or extended during this time led to significant changes for low-income individuals and families, demonstrating the power of policymaking to reduce poverty and improve millions of Americans’ financial security. Proposals that would not have come close to passing Congress just a few years ago were suddenly headlining stimulus bills. Critical elements of the Build Back Better Act (BBB) approved by the House should emerge in a Senate package that prioritizes long-term investments in an equitable economy.3 Turning temporary expansions in the social safety net into permanent ones would create a stronger, more equitable, and more resilient economy. Doing so as soon as possible would ensure that all families are able to take part in an economic recovery.

American Rescue Plan provides a variety of limited stimulus provisions

The American Rescue Plan was signed into law on March 11, 2021, and became the first landmark piece of legislation passed during the Biden administration. Designed as a stimulus bill to kick-start the economic recovery, this package contained many provisions geared toward helping low-income individuals and families who were still suffering during the second year of the COVID-19 pandemic.

A round of $1,400 economic impact payments were sent out to every adult under certain income requirements, as well as all people listed as their dependents.4 Unemployment insurance programs started under the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 were extended through September 6, 2021.5 This included the weekly $300 supplemental benefit, the Pandemic Unemployment Assistance (PUA) program that expanded benefit access to traditionally ineligible jobless workers, and the Pandemic Emergency Unemployment Compensation (PEUC) program that provided additional benefits after state benefits were exhausted.6These policies kept more than 17 million people out of poverty in 2020,7 and recent projections suggest the results were similar in 2021.8

These policies kept more than 17 million people out of poverty in 2020, and recent projections suggest the results were similar in 2021.

The ARP also contained historic changes to tax credits targeted to low-income families and families with children. It increased the child tax credit (CTC) from $2,000 to a maximum of $3,600 per child under age 6, or $3,000 for children ages 6 to 17, and made it fully refundable to ensure struggling parents who made too little to pay significant income taxes could gain access to the full credit.9 In addition, the credit’s structure was altered so that starting in July 2021, payments were sent out on a monthly basis as opposed to all at once.10 These changes lifted an estimated 3 million children out of poverty when payments first began11 and decreased food scarcity among households with children.12 Meanwhile, the ARP increased the earned income tax credit (EITC) for workers without qualifying children, and the eligible age range to receive the credit was expanded to include millions of workers previously taxed into poverty.13 Despite the potential impact of these changes to the CTC and EITC, they have been scheduled to last only a year.14

The ARP also included multiple provisions regarding nutrition. The most notable of these are the extension of a temporary 15 percent increase in benefits from the Supplemental Nutrition Assistance Program (SNAP) through September 202115 and the extension of the Pandemic Electronic Benefit Transfer (P-EBT) program, which provides families with money for groceries to make up for missed school meals during school closures for the duration of the pandemic.16

Additionally, a $21.55 billion investment was made in the Emergency Rental Assistance program designed to alleviate housing insecurity for those who lost income during the pandemic or are at risk of homelessness,17 although it has taken time for states and localities to begin dispersing the funds on a large scale since the program’s inception in late 2020.18 Home and community-based services saw a 10 percent increase in the share of payments from the federal government through Medicaid for one year starting April 1, 2021.19 The tax credits given to employers to reimburse the costs of voluntarily providing workers with paid leave were extended from March 31 through September 30.20 Lastly, colleges and universities were provided with $36 billion to ensure that learning continued during the pandemic.21 About half of this funding was to be given as financial aid to students, prioritizing those who needed it most.22 Separately, a pause in student loan repayment was extended via executive action, providing borrowers additional time to weather financial shocks, and is scheduled to end by May 2022.23

An increase in the federal minimum wage to $15 per hour by 2025 and an elimination of subminimum wages, which would have pulled 1.8 million to 3.7 million people out of poverty,24 passed the House of Representatives but were taken out of the ARP due to the Senate parliamentarian ruling that they did not meet the requirements needed for inclusion in a budget reconciliation bill.25 The minimum wage has not been increased since 2009, losing significant purchasing power during the intervening 12 years. Federal action to raise wages for the lowest-wage workers is a necessary and long-overdue component of building a fairer economy.26

By taking a multifaceted approach to providing assistance, the ARP was able to target multiple groups of people who were struggling during the pandemic, from students to families with children to older workers. While not all of its proposed provisions were included in the final package, it still represents a historic level of assistance that would have proved beneficial even outside the context of a pandemic-related economic recovery.

The good jobs shortage proves the labor market lacked sufficient worker power

In May 2021, fears about a severe labor shortage began to emerge after the monthly jobs report failed to meet economists’ expectations by a large margin, while at the same time a survey showed that April had a record number of job openings.27 Since then, research has shown that the labor shortage was more of a “good jobs shortage” that can be largely attributed to workers having a lack of access to child care; fears over the ongoing pandemic; difficulties in matching job seekers with employers in the right fields; and poor pay and working conditions in the industries that have suffered the most during the economic downturn: leisure, hospitality, and retail.28 Employers who responded by increasing pay and benefits during this period had fewer issues attracting workers.29

At the time, however, the blame was quickly put on the enhanced unemployment benefits that were extended until September. This caused 26 states to end benefits early in an attempt to get more people back to work,30 resulting in decreases in consumer spending because the increase in total earned income could not offset the loss of benefits.31 The supposed labor shortage continued late into 2021 after the enhanced benefits ended in the remaining states on Labor Day,32 though the massive upward corrections in job reports throughout the year demonstrated the fast pace of job growth.33

While the ARP did not include provisions that outright made it easier for workers to collectively organize, the assistance it provided proved beneficial to worker power. By providing enough relief to live without having to work unsafe, low-paying jobs all the time, the legislation ended up increasing the power many workers had in the labor market. The high level of demand for labor during the economic recovery meant that if businesses did not provide adequate working conditions, wages, or benefits, employees could quit with the confidence that they could find better opportunities elsewhere, and potential applicants could take extra time to look for positions that met their needs while relying on a strong safety net to keep them afloat.34 As ARP provisions expire, however, pressure to accept lower-quality jobs could return.

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The end of the eviction moratorium puts more families at risk

The Centers for Disease Control and Prevention (CDC) issued a national eviction moratorium in 2020 to keep people safely housed as the pandemic caused millions of people to lose their jobs, and subsequently, their ability to pay rent.35 It was originally set to expire at the end of 2020 but was extended three times in 2021 before expiring on July 31.36 A revised moratorium targeted to areas with high rates of COVID-19 transmissions was announced on August 3 that was scheduled to last for two months but was ultimately struck down by the U.S. Supreme Court on August 26.37

The eviction moratorium had a substantial impact for those who lost income during the pandemic or saw their household costs rise and could not afford their rent. An estimated 1.55 million eviction filings were prevented during the 11 months that it was in effect,38 keeping people housed while also protecting them from increased risks of COVID-19 transmission.39 Since the federal moratorium lapsed, eviction filings have been rising. Filings increased by 24 percent from August to October, but they would have been much higher if not for renter protections that are still in place in some states and localities, such as smaller-scale eviction moratoria and guaranteed access to legal counsel for renters, along with the federal Emergency Rental Assistance dollars that reached more families in the latter part of 2021.40

A permanent SNAP increase ensures continued relief among temporary programs

In April, the temporary monthly SNAP emergency allotments that had been in effect since 2020 for most states were expanded to include households that had already reached the previously capped maximum benefit.41 Considering this group is made up of the poorest households that are the most in need of nutrition assistance, this move from the U.S. Department of Agriculture (USDA) to provide extra payments to more families was essential. The ARP’s extension of the P-EBT program also provided much-needed assistance during the summer and regular school year for schools that had not yet reopened—crucial, as many students often rely on their schools for meals—reducing food insufficiency in SNAP households by 28 percent.42

There was more good news for SNAP households in October when the USDA updated the Thrifty Food Plan, a measure the department uses to determine the lowest cost of a healthy diet.43 This changed the way benefits are calculated and resulted in an increase of roughly 25 percent—or a modest $36.24 per person, on average, each month—compared with pre-pandemic levels, marking the food assistance program’s largest increase in its history.44 The modernization came just as the temporary 15 percent increase extended by the ARP expired on September 30.45 During this time, the average monthly benefit per person was estimated to reach $251, more than double the average in 2019 when factoring in the emergency allotments.46 These policies helped more than 42 million people enrolled in the SNAP program weather the turbulent economic recovery.47

Turning temporary assistance into a permanent safety net

The economic hardship highlighted and exacerbated by the COVID-19 pandemic inspired significant changes to the country’s safety net. However, many of these changes were temporary. For America to recover fully and progress, lawmakers need to acknowledge that much of the assistance provided throughout 2021 was vital to keeping families afloat. This assistance filled gaps and weaknesses in the social safety net that Americans needed, even absent a pandemic.

Urging the Senate to invest in low-income children and adults, women, and people of color would be a good place to start, considering the need for policies complementary to the enacted Infrastructure Investment and Jobs Act. While the IIJA focuses on creating jobs in male-dominated occupations, investments in affordable child care and the CTC would build widespread financial security by investing in parents who are primary caregivers—overwhelmingly women—and would be particularly crucial for women of color.48

Despite having achieved substantial progress toward alleviating poverty, fights for a $15 federal minimum wage, permanent tax credit expansions, a guaranteed paid family and medical leave program, affordable and accessible care for children and adults, unemployment insurance reform, and more still lie ahead in 2022 and beyond. It is essential to act on these efforts as quickly as possible, as allowing the expanded safety net from 2021 to fade away will only create more room for low-income families and workers to fall in the future.

2021 Was a Year of Bold Economic Policy That Must Be Extended

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