It is rare to read that the better performance of the US economy compared to the European economy is due to the policies to support the reduction of poverty during the pandemic, under the presidency of Trump and continued by Biden. However, it is always readable a part of inflation and the rapid recovery from the pandemic crisis due to US fiscal policy. Both statements are the same, but the most important thing in my opinion is the reduction of poverty achieved.
Clearly The European economy took longer to recover of the pandemic crisis, and part of the explanation lies in different fiscal policies. It is true that in 2022 The United States was less affected by the energy shock recovered from the invasion of Ukraine, but it is not so true that American consumption recovered the level more quickly after the pandemic. Indeedthe 2020 recession will be the deepestis the shortest and it is clearly explained in the financial poverty reduction policies of that year, although many of the measures taken are not realized until 2021, due to delays in tax payments. It didn’t happen in Europe, where, in the face of the pandemic crisis, Europe’s response as such has focused on promoting long-term investment in climate change and digitalization, abandoning the focus on protecting the poorest in each member country.
It is remarkable that the country with the lowest welfare state among the major OECD countries is the one that achieved the best results I will say the Keynesian need and at the same time reduce poverty in 2020 and 2021 at the level of European countries before the pandemic for the first time in its history.
Amazing, right? This support of need through assistance to the poorest allows a Get well soon. All the numbers I will discuss are from the American census and the official supplementary poverty statistics of the USA, and most of the data and analysis included here I have taken from the American Center on Budget and Policy Priorities (CBPP) founded by Robert Greenstein in 1981 for analyzing federal budget prioritieswith particular attention to how budget choices affect low-income people.
The main measures taken are direct payments to people below a given income, assistance or tax credits for each child, which are also paid in full regardless of the taxes paid, improve unemployment insurance and ensure that the number of people with health does not decrease. insurance.
Today these measures are almost never implemented and the rest, such as tax assistance per child, is less for those who do not pay almost no taxes. however The economic recovery should allow the increase in poverty to be less strong in 2022and that poverty data will never return to pre-crisis levels.
To put the numbers in perspective, government aid in 2020 turned a near-record increase in poverty into that year’s historic decline. Without considering government aid or taxes, the proportion of people in poverty will rise in 2020 to the second largest amount on record: 8 million people, but if government aid and tax policies are included , the proportion of people with an annual income below poverty. The line fell in 2020 to 10 million people, the largest number recorded in the data since 1967.
The strong policy response brought the US poverty rate in 2020 to its lowest level on record since 1967, and then to a new record low of 7.8 percent in 2021. If not considered government aid or taxes, Poverty has improved little over the past five decadeswhich fell from 28.0 percent to 23.8 percent between 1967 and 2021. Economic security programs kept 53 million people above the poverty line in 2020 and 2021.
But I think the most important thing is the one-year decrease in child poverty, which in 2021 will be the largest in history. The rate in 2021 reached a historic low of 5.2 percent. Without government support the rate would be 22%. To understand what this figure means, we can compare it with data from European countries in the years before the pandemic. In 2015, the rate in Germany was 10%, in France it was 12% and in the US it was 20%. Economic security programs have reduced child poverty by 60 percent by 2020 and 76 percent by 2021. data since 1967.
And why don’t we talk about the economic situation, because next week the central banks will meet and face a different situation on both sides of the Atlantic. In the USA The data on the advance services sector showed great stabilitydomestic consumption is gradually slowing down, and inflation is moderating, especially the underlying inflation due to the increase in fuel prices.
In Europe, on the other hand, the main PMI indicators shows that the euro zone economy is in recession, and all the latest economic data points in the same direction, inflation seems to be falling more slowly but clearly not due to excess demand pressure. So let’s talk about what the central banks are doing and above all and most importantly, what is happening to US poverty in 2022. And you know, God created meteorologists so that we economists don’t feel which is bad in our predictions.