Urban Institute Projects American Rescue Plan Act Will Significantly Reduce U.S. Poverty Rates

The Income and Benefits Policy Center at the Urban Institute has released an estimate of the extent to which key provisions in the American Rescue Plan Act will affect the poverty rate in 2021. The report estimates that expanded unemployment insurance benefits, SNAP benefits, child tax credits, and additional stimulus checks will reduce poverty by more than one third. The provisions could reduce poverty by as much as 42% for Black households and 39% for Latino households and have pronounced benefits for households with children or households who have experienced job loss.

The authors used the Urban Institute’s Analysis of Transfers, Taxes, and Income Security (ATTIS) model to create these projections. The ATTIS model takes into account expected levels of employment and income in 2021, as well as anticipated benefits and taxes. The model was designed to estimate the effect of changes to eligibility, enrollment, and benefits for important programs like the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and Supplemental Security Income (SSI). The authors use this model to project changes in the Supplemental Poverty Measure (SPM) poverty rates after passage of the American Rescue Plan Act. SPM poverty rates include consideration of family income, tax payments, tax credits, in-kind benefits, and rebate checks (see Memo, 9/21/2020 on the Supplemental Poverty Measure).

To estimate the impact of the American Rescue Plan Act, the authors first project a “baseline” scenario without passage of the Act, drawing on 2018 American Community Survey data. Under the baseline scenario, the 2021 annual SPM poverty rate would be 13.1%. The authors then model the effects of four provisions in the American Rescue Plan Act:

  • $300 supplement to unemployment insurance benefits through September 2021
  • Extension of higher SNAP benefits through September 2021
  • Stimulus check or recovery rebate payments of up to $1,400 per person
  • One-year expansion of the child tax credit up to $3,000 or $3,600 per child

In the aggregate, these four provisions are projected to reduce the SPM poverty rate in 2021 from 13.1% to 8.7%, reducing the projected number of people in poverty by about 16 million. The projected SPM poverty rate among white households falls from 9.6% to 6.4%. For Black households, it falls from 18.1% to 10.5%. For Latino households, it falls from 21.9% to 13.3%.

The American Rescue Plan Act provisions are projected to have a significant effect on child poverty. The child poverty rate is projected to be cut in half, falling from 13.7% to 6.5%. The authors also estimate the Act will have a deep impact on poverty among households that have lost jobs due to the pandemic. In their model, the authors project the SPM poverty rate for such households to be 29.9% in 2021 before the American Rescue Plan Act, and just 13% after the plan is enacted.

The brief can be accessed at: https://urbn.is/38warWg