The worldwide pandemic was unpredictable, but its ensuing economic crisis in Maine and across the country was not.
In the spring of 2019, the Federal Reserve released a study that should have raised alarms: Nearly 40 percent of Americans did not have enough savings to cover an unexpected expense of just $400. With a booming economy and record-low unemployment, it was easier to characterize this as a problem for those households to figure out – they should save more or get a better-paying job – than the systemic problem it really was.
That report should have prompted several urgent questions: Why are so few households able to put money away? What inequities are leading to disproportionately low incomes and savings for people of color? What barriers keep low-wage workers from accessing better opportunities? And, most importantly, what are the changes we need to make in financial, government and other systems to improve results?
With loss of jobs and income, the pandemic has cost millions of Americans – and tens of thousands of Mainers – much more than $400 of unexpected expenses. While some have had the savings and assets needed to weather the pandemic’s financial fallout, others have been absolutely devastated. Their financial situation is even more fragile than before, slowing our overall economic recovery and leaving it more vulnerable to future threats.
Regardless of how you feel about the $1.9 trillion American Rescue Plan and its broad scope, the package offers many different lifelines for families and the economy. One piece in particular stands out as a way to help us recover from this current storm and better prepare us for the next – Child Tax Credits.
Aside from the needs of this moment, the scourge of child poverty is one that must be addressed. Children remain the poorest age group in America. In 2019, 14.4 percent of kids under age 18 in this country – 10.46 million children – were living in poverty. (In Maine, our child poverty rate statewide is almost 14 percent, but it varies highly by county, with Washington County at nearly 27 percent.) Research shows that children who experience poverty are at greater risk of chronic illnesses, a shortened life expectancy and drastically fewer opportunities.
In greatly increasing the eligibility for and amount of Child Tax Credits, the stimulus is estimated to cut child poverty in half over the next year. While that’s an incredible feat, it has the potential to create an even longer lasting impact. Whether or not the expanded credits are made permanent, they represent the best opportunity in decades to help parents and families create financial stability and overcome barriers on the steep path out of poverty – if we can multiply their impact by tapping into policies and practices that help families turn short-term gains into long-term success.
In Maine, there are many powerful examples of families moving from poverty to economic stability by receiving targeted supports to build savings and invest in their futures. For instance, New Ventures Maine partners with free tax prep sites to ensure families can access their federal Earned Income Tax Credit, while capitalizing on those benefits with matched savings accounts, financial literacy classes and even business-planning support. In Bangor, the local housing authority and partners have built on a federal Housing and Urban Development program to help families achieve employment and education goals while offering them opportunities to save money through interest-bearing escrow accounts. Families who start the program with little income are now leaving public housing, because their increased incomes and savings have allowed them to make down payments on their own homes.
These examples offer a glimpse of what is possible when government policies and private partners work in concert to address a family’s comprehensive needs. The latest tax credit expansions offer an incredible opportunity to turn an emergency lifeline into a ladder out of poverty. Many of the resources needed already exist but aren’t coordinated. We can change that. Some policies may need to come into better alignment. We can do that. When it comes to making a dent in child poverty and putting millions of Americans on better financial footing, the opportunity before us is undeniable. Taking advantage of it will leave us much better off for when the next storm comes
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