National report: ‘Robust’ pandemic relief helped economy rebound quickly

Aid programs didn’t deter workers and aren’t driving inflation, economist says

By: - February 25, 2022 6:00 am
Picture of US dollar bill Washington wearing a face mask

Image by Anton Petrus | Getty

Federal relief programs, the first enacted early in the COVID-19 pandemic and the most recent about a year later, helped power a swift economic recovery and ward off poverty for millions, according to a new report issued Thursday.

The report, prepared by the Center on Budget and Policy Priorities (CBPP) in Washington, D.C., found that relief to U.S. households through the federal programs “helped make the COVID-19 recession the shortest on record” — just six months.

“These measures provided relief to individuals, to workers who lost jobs, to households and to businesses,” said CBPP President Sharon Parrot in a virtual press conference Thursday. “They included significant fiscal aid for state and local governments, territories and tribal nations, which helped them avoid cutting services and laying off staff.”

Government aid reduced the number of people living below the federal poverty guideline by 8 million, the report states; without that aid, the number would have increased by 9 million.

These measures provided relief to individuals, to workers who lost jobs, to households and to businesses.

– Sharon Parrot, CBPP president, on federal pandemic relief

The report examines the economic and social impact of relief efforts built into the 2020 Coronavirus Aid, Relief and Economic Security (CARES) Act enacted in March 2020 as well as the American Rescue Plan Act (ARPA), enacted in March 2021.

The CARES Act and four other 2020 relief measures provided $3.3 trillion in relief funds, while ARPA added another $1.8 trillion, according to the CBPP.

“This robust policy response helped make the COVID-19 recession the shortest on record and helped fuel an economic recovery that has brought the unemployment rate, which peaked at 14.8 percent in April 2020, down to 4.0 percent,” the report states.

According to the report, thanks to the federal measures, for the first time government:

  • Paid cash directly to people regardless of tax status or income and delivered it automatically.
  • Expanded unemployment benefits to include part-time, self-employed and ‘gig economy’ workers and paid jobless people more. Jobless benefits “kept 5.5 million out of poverty in 2020,” the report states.
  • Kept health coverage stable as millions lost their work-based health plans. Medicaid recipients got continuous coverage, and people buying through the Affordable Care Act (ACA) marketplace were able to pay lower premiums or, in some cases, no premiums.
  • Temporarily halted evictions. 
  • Provided funds to help shore up child care providers and assist families in paying for child care.

During the 2007-2009 Great Recession, federal relief measures were less than one-third the size of the COVID-19 pandemic response. They “were undersized and ended too soon,” the report states. “As a result, the economy remained weak for longer than was necessary — and families suffered avoidable hardship.”

Mark Zandi of Moody Analytics, also speaking on the press call, said that without the federal pandemic response, “there would have been many more business failures, personal bankruptcies … a lot more scarring in the labor market — it would just be very difficult for the economy to get back to where it was, at least anytime in the near future.”

Low-wage workers were hit “harder than anyone else during the pandemic,” Zandi said, but without the federal support, it would have been worse. “We would have seen low-wage workers, low-income workers, get nailed disproportionately.” would just be very difficult for the economy to get back to where it was, at least anytime in the near future.

– Mark Zandi, economist, on the outcome without federal support for households in the pandemic.

Zandi rejects the claim that expanded unemployment insurance was to blame for the problems that employers have had hiring workers.

The No. 1 reason “is the pandemic,” he said: People who were not working told federal surveys that was because they were sick, caring for sick family members or were afraid they would get sick.

Parents went back to work when schools returned to in-person classes, Zandi added, while those with children younger than 5 who can’t get child care still aren’t able to work. And for people in their 60s who might have been postponing retirement, pandemic layoffs and job losses have motivated them to change their plans and retire now.

“At the margins,” the higher UI payments might have enabled lower wage workers to postpone returning to the labor market, making it harder for employers to fill some jobs, he acknowledged.

“But there’s benefits to that as well,” Zandi said. “It allows the workers to find better jobs and jobs more suited to their particular circumstance — commute times, child care needs, those kinds of things.” But overall, the effect was minimal, he said.

After the federal supplemental unemployment pay was extended in ARPA until September 2021, some states ended it early. Comparisons of those states with states that did not end the extra pay early showed no impact on the job market. “You can’t see it,” Zandi said. “It’s just not there. There’s no evidence of it.”

(In Wisconsin, Gov. Tony Evers vetoed a bill passed by Republicans in the Legislature that would have cut off the federal supplements.)

ARPA included an expanded federal child tax credit that for the first time paid families directly each month — up to $250 to $300 per child.

Michelle Rhone-Collins CEO of LIFT, a nonprofit that works with families to provide support and resources to help break intergenerational poverty, said that when the child tax credit payments began in July, it helped more LIFT participants rejoin the workforce and pursue education needed for higher paying  jobs.

“Parents reinvest in themselves, their children and their goals when they have access to funds” like the child tax credit, she said, “dismantling the tired tropes and notions that people living in poverty make poor decisions or don’t know how to manage their money.”

The expanded credit ended after December. “Families teetering on the edge of poverty have had the rug pulled out from them again, as the lapse of benefits sends millions back into crisis mode,” Rhone-Collins said.

Parents reinvest in themselves, their children and their goals when they have access to funds.

– Michelle Rhone-Williams, CEO of LIFT

The CBPP advocates reviving the stalled Build Back Better budget reconciliation bill, which included a provision to extend the child tax credit and make it permanent. Parrot said the group’s report on the role of pandemic relief funds offered a lesson that could be applied to advancing a compromise version of the budget bill.

Zandi said the current jump in U.S. inflation isn’t the fault of ARPA.

When it passed a year ago as the COVID-19 vaccines were being rolled out and the economy was opening more widely, consumer demand was rising. ARPA helped fuel consumer spending that lifted the economy. “That did add to inflation, but that quickly abated,” Zandi said.

But the more recent and more severe increase in prices is related to the COVID-19 delta variant that emerged in the summer of 2021 and prompted a surge in the fall, he said. The “delta wave” hit Asia “very badly,” disrupting supply chains worldwide and leading to shortages that drove price hikes.

Erroneously blaming ARPA for the current inflation may have weakened support in Congress for the Build Back Better budget legislation, Zandi acknowledged. But the claim that the budget bill would drive more inflation “is a specious argument.”

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Erik Gunn
Erik Gunn

Deputy Editor Erik Gunn reports and writes on work and the economy, health policy and related subjects, for the Wisconsin Examiner. He spent 24 years as a freelance writer for Milwaukee Magazine, Isthmus, The Progressive, BNA Inc., and other publications, winning awards for investigative reporting, feature writing, beat coverage, business writing, and commentary. An East Coast native, he previously covered labor for The Milwaukee Journal after reporting for newspapers in upstate New York and northern Illinois. He's a graduate of Beloit College (English Comp.) and the Columbia School of Journalism. Off hours he is the Examiner's resident Springsteen and Jackson Browne fanboy and model railroad nerd.