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Five Years of Impact

Strengthening the Cash Safety Net to Reduce Poverty and Hardship


Back to the 2021 impact report

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In March 2021, Congress passed the American Rescue Plan Act, which included an expansion of the Child Tax Credit that increased the amount of the credit, made it available to more families, and distributed it in monthly payments.

Poverty Solutions Director H. Luke Shaefer and his colleagues contributed to this legislation through significant research demonstrating the poverty-reduction potential of the expanded tax credit, which mirrors the design of a near-universal child allowance used in other countries. This policy change is estimated to have already lifted millions of children out of poverty.

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$2.00 a day book coverShaefer’s interest in this kind of policy emerged from his work with Princeton Professor Kathryn Edin on their 2015 book, “$2 a Day: Living on Almost Nothing in America.” The book traces the policy decisions that contributed to a sharp rise in the number of families with children who endured periods with virtually no cash income, and it profiled several families living in this kind of extreme poverty. After listening to the stories of these families, Shaefer and Edin made the case for major policy reforms including strengthening the cash safety net. The New York Times and Time Magazine have credited the book with helping to change the narrative about child poverty in a way that opened the door for an expanded Child Tax Credit.


A 2018 journal article authored by Shaefer, Edin, and eight colleagues laid out a vision for how the U.S. could transform the Child Tax Credit into a near-universal child allowance of up to $300 per child per month. Informed by this research, the American Families Act was first introduced in the U.S. Senate in 2017, setting the table for the current expanded Child Tax Credit.

During the pandemic, federal policymakers used other kinds of cash transfers to reduce poverty and buffer families against hardship during a time of unprecedented job loss. These included Economic Impact Payments and expanded unemployment assistance. Poverty Solutions researchers found that material hardship and adverse mental health symptoms fell following cash transfers from the federal government and rose in the absence of government action.

“We can see in the data the ways in which these payments are impacting families across the country: helping them pay for food, bills, and other household expenses,” said Patrick Cooney, assistant director of policy impact at Poverty Solutions. “But we can also see that there’s more work to do to ensure all eligible families receive the help they need.”

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Luke Shaefer at a podium

Luke Shaefer

The New York Times featured Poverty Solutions’ analysis of material hardship levels over the course of the pandemic in a front page story, leading to stories in dozens of other news outlets, an appearance on PBS NewsHour, and a White House press release. In September 2021, Shaefer testified about the impact of pandemic cash transfer programs at a hearing before the U.S. House Select Subcommittee on the Coronavirus Crisis.

“The social safety net response ushered in by the bipartisan CARES Act and continued in the December COVID relief bill and American Rescue Plan is truly historic. A wealth of evidence now shows it has proven incredibly effective,” Shaefer said during his testimony. “I believe the success is due in large part to the speed and flexibility of a broad-based approach that prioritized putting money in people’s pockets.” The major expansion of the child tax credit follows this approach.

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To realize the full poverty-reduction potential of the federal safety net cash transfers during the COVID-19 era, eligible families need to claim them. Poverty Solutions worked closely with a coalition of Detroit leaders and collaborated with the Michigan Department of Health and Human Services to raise awareness of the expanded tax credit. In addition, in the spring of 2020, Poverty Solutions launched a website answering questions about Economic Impact Payments. By the summer of 2021, it had generated more than 658,000 visitors. A similar website on the Child Tax Credit generated well over 13,000 views.

Outreach efforts resulted in news coverage raising awareness of how to claim the credit from Spanish NPR podcast ¿Que Onda Michigan?, the American Public Human Services Association, MLive, Detroit News, Detroit Free Press, Michigan Radio, and Mid-Michigan Now, among others.

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Census Bureau research shows the expanded Child Tax Credit has already contributed to a decline in food hardship among families with children. Additionally, Poverty Solutions researchers partnered with Propel, which runs the Providers mobile app used by more than 5 million families receiving food assistance, to survey families with low incomes about their receipt and usage of the initial Child Tax Credit payments. The survey responses guided ongoing outreach efforts and received news coverage from CNN, WHYY Philadelphia, the Detroit Free Press, and other media outlets across the country.

However, the expanded Child Tax Credit expired at the end of 2021. Academic research will play a key role in informing decisions to extend the Child Tax Credit or make it permanent.