CBPP Report Finds Additional Federal Spending is Needed to Aid U.S. Households

The Center on Budget and Policy Priorities (CBPP) released a report in early July, Failed Reopenings Highlight Urgent Need to Build on Federal Fiscal Support for Households and States, that illustrates how federal coronavirus spending has helped American families, and why continued spending is crucial to alleviate financial hardship. Funding from the CARES Act, despite its limitations, significantly aided low- and moderate-income families from falling into poverty. Conversely, state reopenings have not led to marked economic improvement. As federal benefits begin to run out, CBPP calls for a strong federal stimulus that includes expansion of unemployment insurance, growing SNAP benefits, and rental assistance.

The report includes original analysis of data on food security, rental payments, and employment from the Census Household Pulse Survey, a weekly questionnaire of U.S. households. The authors also highlight key findings from recent research by governmental offices such as the Congressional Budget Office (CBO) and Bureau of Labor Statistics, as well as academic institutions and research firms.

The report finds that initial federal coronavirus spending, allocated largely through the CARES Act, has helped low- and moderate-income families maintain their spending and avoid falling into poverty. As a result of federal spending, including one-time CARES stimulus payments, disposable incomes in April and May were higher than pre-pandemic months. One study found that due to the stimulus payments and unemployment insurance expansion, the poverty rate fell slightly in April and May by about 2 percentage points. Recent research also indicates that CARES Act spending could ensure that 12 million to 16 million people avoid falling below the poverty line in 2020.

Despite these successes, many low-income households face significant hardship. By the end of June, one in five renters reported being behind on rent payments. This burden disproportionately fell on Black and Latino renters, 29% and 26% of whom, respectively, reported being behind on rent. Households are also experiencing food insecurity at a rate nearly three times higher than pre-pandemic rates. The share of households with children reporting lacking enough to eat has increased by nearly 16 percent.

These hardships highlight the shortcomings of the CARES Act. Individuals, for example, who do not file federal tax returns are unable to automatically receive a stimulus check. These households are disproportionately low-income and Black or Latino and are more likely to lack secure housing. Additional outreach is necessary to ensure that eligible households receive the stimulus payments. The CARES Act also did not increase the maximum SNAP benefit amount, which could have mitigated the sharp rise in food insecurity. Additionally, federal funding did little to expand health insurance coverage or offer affordable COVID-19 treatment for uninsured populations.

While some states have begun reopening to spur state and local economies, evidence suggests that many households will decide to stay home to reduce their risk of infection (especially as coronavirus have begun to surge in many states). The CBO predicts long-lasting unemployment – averaging 8.4% in 2021 – if no further federal stimulus is enacted. While proponents of reopening argue that doing so would jumpstart the economy, this evidence suggests otherwise.

The shortcomings of the CARES act and failed state reopenings underline the need for future federal funding. Given these data, CBPP advocates for a strong federal funding package to provide fiscal relief to families and states and to fund measures to prevent the spread of the coronavirus. CBPP’s recommended fiscal relief measures are targeted at households most in need, and include expanded unemployment benefits, SNAP allowances, rental assistance, homelessness prevention, emergency grants for those at risk for the most serious hardships, and expansion of the Earned Income Tax Credit (EITC).

Aligned with CBPP’s recommendations, NLIHC has advocated additional federal spending, including $11.5 billion in Emergency Solutions Grants and $100 billion for emergency rental assistance and eviction prevention funds.

CBPP’s report can be found at: https://bit.ly/30cJEJB