The CARES Act could reduce poverty to pre-crisis levels if access is adequate
In response to rapidly rising unemployment rates, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which included nearly $500 billion in direct income transfers for families across the country. In this brief, we apply new forecasting methods to project the effect of the CARES Act’s income transfers on poverty rates using the Supplemental Poverty Measure (SPM) framework.
In the absence of the CARES Act, we project that poverty rates would rise to 16.3 percent given the composition of April 2020. With the CARES Act, however, we project that poverty rates may return to pre-crisis levels if access to the benefits is adequate. However, the CARES Act also features many shortcomings that threaten to weaken its poverty reduction potential. First, many eligible families have struggled to actually receive their CARES Act benefits. As a result, the CARES Act’s effect on annual poverty rates likely understates the immediate hardship that many families are experiencing, especially those waiting to receive their CARES Act benefits. Second, key components of the CARES Act are scheduled to expire after July 2020, leaving many families with little to no income support in the second half of the year. Third, many families, such as those with undocumented immigrants, are explicitly left out of the CARES Act.
We conclude that if high unemployment rates persist beyond July 2020, additional income support will be needed to prevent subsequent increases in economic insecurity and hardship.
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