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    Cash Aid to Poor Mothers Increases Brain Activity in Babies, Study Finds

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    The research could have policy implications as President Biden pushes to revive his proposal to expand the child tax credit.WASHINGTON — A study that provided poor mothers with cash stipends for the first year of their children’s lives appears to have changed the babies’ brain activity in ways associated with stronger cognitive development, a finding with potential implications for safety net policy.The differences were modest — researchers likened them in statistical magnitude to moving to the 75th position in a line of 100 from the 81st — and it remains to be seen if changes in brain patterns will translate to higher skills, as other research offers reason to expect.Still, evidence that a single year of subsidies could alter something as profound as brain functioning highlights the role that money may play in child development and comes as President Biden is pushing for a much larger program of subsidies for families with children.“This is a big scientific finding,” said Martha J. Farah, a neuroscientist at the University of Pennsylvania, who conducted a review of the study for the Proceedings of the National Academies of Sciences, where it was published on Monday. “It’s proof that just giving the families more money, even a modest amount of more money, leads to better brain development.”The payments will continue until the children are at least 4 years old, and the researchers plan further tests.via Lauren Meyer/Baby’s First YearsAnother researcher, Charles A. Nelson III of Harvard, reacted more cautiously, noting the full effect of the payments — $333 a month — would not be clear until the children took cognitive tests. While the brain patterns documented in the study are often associated with higher cognitive skills, he said, that is not always the case.“It’s potentially a groundbreaking study,” said Dr. Nelson, who served as a consultant to the study. “If I was a policymaker, I’d pay attention to this, but it would be premature of me to pass a bill that gives every family $300 a month.”A temporary federal program of near-universal children’s subsidies — up to $300 a month per child through an expanded child tax credit — expired this month after Mr. Biden failed to unite Democrats behind a large social policy bill that would have extended it. Most Republicans oppose the monthly grants, citing the cost and warning that unconditional aid, which they describe as welfare, discourages parents from working.Sharing some of those concerns, Senator Joe Manchin III, Democrat of West Virginia, effectively blocked the Biden plan, though he has suggested that he might support payments limited to families of modest means and those with jobs. The payments in the research project, called Baby’s First Years, were provided regardless of whether the parents worked.Evidence abounds that poor children on average start school with weaker cognitive skills, and neuroscientists have shown that the differences extend to brain structure and function. But it has not been clear if those differences come directly from the shortage of money or from related factors like parental education or neighborhood influences.The study released on Monday offers evidence that poverty itself holds children back from their earliest moments.“This is the first study to show that money, in and of itself, has a causal impact on brain development,” said Dr. Kimberly G. Noble, a physician and neuroscientist at Teachers College, Columbia University, who helped lead the study.Dr. Noble and colleagues from six universities recruited a thousand mother-infant pairs within days of the babies’ birth and randomly divided the families into two groups. One group received a nominal $20 a month and another received $333.Using electroencephalograms, or EEG tests, to evaluate the children at age 1, the researchers found that those in the high-cash group had more of the fast brain activity other research has linked to cognitive development than those in the low-cash group. The differences were statistically significant by most, but not all, measures and were greatest in parts of the brain most associated with cognitive advancement.The payments will continue until the children are at least 4 years old, and the researchers plan further tests.Researchers are still trying to determine why the money altered brain development. It could have purchased better food or health care; reduced damaging levels of parental stress; or allowed mothers to work less and spend more time with their infants.The question of whether cash aid helps or hurts children is central to social policy. Progressives argue that poor children need an income floor, citing research that shows even brief periods of childhood poverty can lead to lower adult earnings and worse health. Conservatives say unconditional payments erode work and marriage, increasing poverty in the long run.President Bill Clinton changed the Democratic Party’s stance a quarter-century ago by abolishing welfare guarantees and shifting aid toward parents who work. Though child poverty subsequently fell to record lows, the reasons are in dispute, and rising inequality and volatility have revived Democratic support for subsidies.There are a variety of public and private programs underway in the United States to measure the effects of a guaranteed income on poor families, and many other rich countries offer broad children’s allowances without condition.The temporary expansion of the child tax credit, passed last year, offered subsidies to all but the richest parents at a one-year cost of more than $100 billion. Representative Suzan DelBene, Democrat of Washington, said the study strengthened the case for the aid by showing that “investing in our children has incredible long-term benefits.”Greg J. Duncan, an economist at the University of California, Irvine, who was one of nine co-authors of the study, said he hoped the research would refocus the debate, which he said was “almost always about the risks that parents might work less or use the money frivolously” toward the question of “whether the payments are good for kids.”But a conservative welfare critic, Robert Rector of the Heritage Foundation, argued that the study vindicated stringent welfare laws, which he credited with reducing child poverty by incentivizing parents to find and keep jobs.“If you actually believe that child poverty has these negative effects, then you should not be trying to restore unconditional cash aid,” he said. “You certainly don’t want to go in the business of reversing welfare reform.”Economists and psychologists once dominated studies of poor children, but neuroscientists have increasingly weighed in. Over the past 15 years, they have shown that poor children on average differ from others in brain structure and function, with the disparities greatest for the poorest children.EEG tests have found differences in electrical activity. Magnetic resonance imaging, or M.R.I.s, have shown differences in the size of the cerebral cortex, especially in areas linked to language development and executive functioning. One study found differences in cerebral cortex size may account for up to 44 percent of the achievement gap between high- and low-income adolescents.As with any group differences, averages do not predict individual outcomes. Many other factors beyond brain features influence cognitive development, and many low-income children thrive.To test the effects of cash aid, Baby’s First Years raised more than $20 million from public and private sources, including the National Institutes of Health. Researchers recruited participants from maternity wards in New York City, Minneapolis-St. Paul and the metro areas of New Orleans and Omaha, randomly assigning them to the high- and low-payment groups.The families had average incomes of about $20,000, below the official poverty line for an average-sized family, meaning those who received $333 a month experienced an income gain of approximately 20 percent. The mothers were told they could use the money as they wished.The researchers predicted that children in the high-cash group would show more high-frequency brain activity than those in the low-cash group and less low-frequency activity. Previous research has found such patterns are associated with higher cognitive skills and fewer attention problems.The results largely conformed to predictions, with the children who received the higher grants showing more of the fast brain activity (though no differences in slow brain activity).The scientists wrote that the money “appeared” to cause the changed brain patterns, though they were less equivocal in interviews. Dr. Noble said the evidence, though strong, was not “airtight,” in part because the coronavirus pandemic allowed them to test only 435 infants.Researchers are still trying to determine why the money altered brain development. It could have purchased better food or health care.Cody O’Loughlin for The New York TimesJohn Gabrieli, a neuroscientist at the Massachusetts Institute of Technology, said the evidence that cash aid altered brain activity was persuasive and “very important scientifically,” though he added, “We want to see if these differences result in improvements to cognition.”While the size of the recorded differences are modest (about a fifth of a standard deviation), the researchers said they were comparable to those produced by the average school experiment, like giving children tutors. While those services are often hard to administer, they added, cash can be distributed on a mass scale.Katherine Magnuson, a co-author of the study who directs the Institute for Research on Poverty at the University of Wisconsin, said she was surprised that only a year’s worth of aid made a difference. “It shows how sensitive the brain is to environments,” she said.Critics of unrestricted cash aid often warn that families will waste or abuse it. But Lisa A. Gennetian, an economist at Duke University and a co-author of the study, said the results indicated that parents could be trusted to make good decisions. “For one family, that might be food; for another, it might be housing,” she said. Additional research will examine how parents spent the money.Unlike last year’s expansion of the child tax credit, the experimental payments were narrowly targeted to poor newborns, which would make it less costly to replicate and possibly ease conservatives’ concerns about deterring work.One critic of the broader payments, Angela Rachidi of the American Enterprise Institute, said the study suggested the importance of infant bonding. Should the initial results hold up, she said, they could lend support for policies that help mothers spend more time with their newborns, including paid leave.But any cash aid, she said, should be “targeted to those with low incomes, time limited, and not erode work incentives in the long term.” More

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    Child Tax Credit’s Extra Help Ends, Just as Covid Surges Anew

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    A pandemic benefit that many progressives hoped to make permanent has lapsed in a congressional standoff. Researchers say it spared many from poverty.For millions of American families with children, the 15th of the month took on a special significance in 2021: It was the day they received their monthly child benefit, part of the Biden administration’s response to the pandemic.The payments, which started in July and amounted to hundreds of dollars a month for most families, have helped millions of American families pay for food, rent and child care; kept millions of children out of poverty; and injected billions of dollars into the U.S. economy, according to government data and independent research.Now, the benefit — an expansion of the existing child tax credit — is ending, just as the latest wave of coronavirus cases is keeping people home from work and threatening to set off a new round of furloughs. Economists warn that the one-two punch of expiring aid and rising cases could put a chill on the once red-hot economic recovery and cause severe hardship for millions of families already living close to the poverty line.“It’s going to be hard next month, and just thinking about it, it really makes me want to bite my nails to the quick,” said Anna Lara, a mother of two young children in Huntington, W.Va. “Honestly, it’s going to be scary. It’s gong to be hard going back to not having it.”Ms. Lara, 32, lost her job in the pandemic, and with the cost of child care rising, she has not been able to return to work. Her partner kept his job, but the child benefit helped the couple make ends meet at a time of reduced income and rising prices.“Your children watch you, and if you worry, they catch on to that,” she said. “With that extra cushion, we didn’t have to worry all the time.”The end of the extra assistance for parents is the latest in a long line of benefits “cliffs” that Americans have encountered as pandemic aid programs have expired. The Paycheck Protection Program, which supported hundreds of thousands of small businesses, ended in March. Expanded unemployment benefits ended in September, and earlier in some states. The federal eviction moratorium expired last summer. The last round of stimulus payments landed in Americans’ bank accounts last spring.Relative to those programs, the rollback in the child tax credit is small. The Treasury Department paid out about $80 billion over six months in the form of checks and direct deposits of up to $300 per child each month. That is far less than the more than $240 billion in stimulus payments issued on a single day last March.Unlike most other programs created in response to the pandemic, the child benefit was never intended to be temporary, at least according to many of its backers. Congress approved it for a single year as part of the $1.9 trillion American Rescue Plan, but many progressives hoped that the payments, once started, would prove too popular to stop.That didn’t happen. Polls found the public roughly divided over whether the program should be extended, with opinions splitting along partisan and generational lines. And the expanded tax credit failed to win over the individual whose opinion mattered most: Senator Joe Manchin III, Democrat of West Virginia, who cited concerns over the cost and structure of the program in his decision to oppose Mr. Biden’s climate, tax and social policy bill. The bill, known as the Build Back Better Act, cannot proceed in the evenly divided Senate without Mr. Manchin’s support.To supporters of the child benefit, the failure to extend it is especially frustrating because, according to most analyses, the program itself has been a remarkable success. Researchers at Columbia University estimate that the payments kept 3.8 million children out of poverty in November, a nearly 30 percent reduction in the child poverty rate. Other studies have found that the benefit reduced hunger, lowered financial stress among recipients and increased overall consumer spending, especially in rural states that received the most money per capita.Congress last spring expanded the existing child tax credit in three ways. First, it made the benefit more generous, providing as much as $3,600 per child, up from $2,000. Second, it began paying the credit in monthly installments, usually deposited directly into recipients’ bank accounts, turning the once-yearly windfall into something closer to the children’s allowances common in Europe.Finally, the bill made the full benefit available to millions who had previously been unable to take full advantage of the credit because they earned too little to qualify. Poverty experts say that change, known in tax jargon as “full refundability,” was particularly significant because without it, a third of children — including half of all Black and Hispanic children, and 70 percent of children being raised by single mothers — did not receive the full credit. Mr. Biden’s plan would have made that provision permanent.“What we’ve seen with the child tax credit is a policy success story that was unfolding, but it’s a success story that we risk stoping in its tracks just as it was getting started,” said Megan Curran, director of policy at Columbia’s Center on Poverty and Social Policy. “The weight of the evidence is clear here in terms of what the policy is doing. It’s reducing child poverty and food insufficiency.”But the expanded tax credit doesn’t just go to the poor. Couples earning as much as $150,000 a year could receive the full $3,600 benefit — $3,000 for children 6 and older — and even wealthier families qualify for the original $2,000 credit. Critics of the policy, including Mr. Manchin, have argued that it makes little sense to provide aid to relatively well-off families. Many supporters of the credit say they’d happily limit its availability to wealthier households in return for maintaining it for poorer ones.Mr. Manchin has also publicly questioned the wisdom of unconditional cash payments, and has privately voiced concerns that recipients could spend the money on opioids, comments that were first reported by The Wall Street Journal and confirmed by a person familiar with the discussion. But a survey conducted by the Census Bureau found that most recipients used the money to buy food, clothing or other necessities, and many saved some of the money or paid down debt. Other surveys have found similar results.For one of Mr. Manchin’s constituents, Ms. Lara, the first monthly check last year arrived at an opportune moment. Her dishwasher had broken days earlier, and the $550 a month that she and her family received from the federal government meant they could replace it.Ms. Lara, who has a 6-year-old daughter and a 3-year-old son and whose partner earns about $40,000 a year, said the family had long lived “right on the edge of need” — not poor, but never able to save enough to withstand more than a modest setback.The monthly child benefit, she said, let them step a bit further back from the edge. It allowed her to get new shoes and a new car seat for her daughter, stock up on laundry detergent when she found it on sale and fix the brakes on her car.A line at a Covid testing site in Atlanta on Friday. The child tax benefit is ending just as the latest wave of coronavirus cases is keeping people home from work.Nicole Craine for The New York Times“None of the dash lights are on, which is amazing,” she said.Some researchers have questioned the policy’s effectiveness, particularly over the long term. Bruce D. Meyer, an economist at the University of Chicago who studies poverty, said that whatever the merits of direct cash payments at the height of the pandemic-induced disruptions, a permanent policy of providing unconditional cash to parents could have unintended consequences. He and several co-authors recently published a working paper finding that the child benefit could discourage people from working, in part because it eliminated the work incentives built into the previous version of the tax credit.“Early on, we just wanted to get cash in people’s hands — we were worried about a recession, we were worried about people being able to pay for their groceries,” Mr. Meyer said. Now, he said, “we certainly should be more focused on the longer-term effects, which include likely larger effects on labor supply.”Analyses of the data since the new child benefit took effect, however, have found no evidence that it has done much to discourage people from working, and some researchers say it could actually lead more people to work by making it easier for parents of young children to afford child care.“There’s every reason to believe that in the current labor market, the child tax credit is work-enabling, and no evidence to the contrary has been presented,” said Samuel Hammond, director of poverty and welfare policy at the Niskanen Center, a research organization in Washington.Mr. Hammond said the child benefit should also have broader economic benefits. In a report last summer, he estimated that the expansion would increase consumer spending by $27 billion nationally and create the equivalent of 500,000 full-time jobs. The biggest impact, on a percentage basis, would come in rural, mostly Republican-voting states where families are larger and incomes are lower, on average.Some Republican critics of the expanded child tax credit, including Senator Roy Blunt of Missouri, have argued that it has essentially done too much to increase spending — that by giving people more money to spend when the supply chain is already strained, the government is contributing to faster inflation.But many economists are skeptical that the tax credit has played much of a role in causing high inflation, in part because it is small compared with both the economy and the earlier rounds of aid distributed during the pandemic.“That’s a noninflationary program,” said Joe Brusuelas, chief economist at the accounting firm RSM. “That’s dedicated toward necessities, not luxuries.”For those receiving the benefit, inflation is an argument for maintaining it. Ms. Lara said she had noticed prices going up for groceries, utilities and especially gas, stretching her budget even thinner.“Right now, both of my vehicles need gas and I can’t put gas in the car,” she said. “But it’s OK, because I’ve got groceries in the house and the kids can play outside.”Emily Cochrane More

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    How Tech Is Helping Poor People Get Government Aid

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    Even as the government expanded aid programs, many people faced barriers to using them. That problem is now being addressed with apps and streamlined websites.WASHINGTON — In making his case that safety net programs should be easier to use, Jimmy Chen, a tech entrepreneur, recalled visiting a welfare office where people on food stamps endured long waits to submit routine paperwork.They passed the time as people in lines do, staring at their phones — which had the potential to do the work online with greater convenience, accuracy and speed.The image of aid-seekers wasting time with a solution literally in hand captures what critics call an overlooked challenge for people in poverty: Administrative burdens make benefits hard to obtain and tax the time and emotional resources of those who need help.“Too much bureaucracy prevents people from getting the help they need,” said Mr. Chen, whose start-up, Propel, offers a free app that five million households now use to manage their food stamp benefits.Barriers to aid are as old as aid itself, and they exist for reasons as varied as concerns about fraud, the bureaucratic tension between accuracy and speed, and hostility toward people in need. But the perils of red tape have drawn new attention since the coronavirus pandemic left millions of Americans seeking government help, many for the first time.The government approved vast increases in spending but often struggled to deliver the assistance. While some programs reached most households quickly (stimulus checks), others buckled under soaring demand (unemployment benefits) or daunting complexity (emergency rental aid).“The pandemic highlighted how difficult these programs can be to access,” said Pamela Herd, a professor at Georgetown and an author, with Donald P. Moynihan, of “Administrative Burden,” which argues that excessive bureaucracy deepens poverty and inequality.The share of eligible people receiving benefits varies greatly by program: It is about 82 percent for food stamps, 78 percent for the earned-income tax credit and 24 percent for Temporary Assistance to Needy Families, or cash welfare, according to government estimates. That means billions of dollars go unclaimed.On his first day in office, President Biden issued an executive order asking agencies to identify “systemic barriers in accessing benefits,” with the results due in January.Shaped by forces as diverse as the tech revolution, welfare rights and behavioral psychology, the movement to create a more user-friendly safety net was underway before the pandemic underscored the perils of bureaucracy.Code for America, a nonprofit group, spent years devising a portal that makes it easier for Californians to apply for food stamps. Civilla, a Detroit-based nonprofit, helped Michigan shrink its 42-page application by 60 percent.In an age of ambitious social movements, the cry of civic tech — power to the portals — may seem obscure, but Mr. Chen, 34, says democratizing technology’s rewards is essential to social justice.“For someone like me, a phone is like a magic wand,” he said. “If I want to call a cab, there’s an app; if I want to book a hotel, there’s an app; if I want to get a date, there’s an app. It’s just incredibly unfair that we don’t apply more of this sophisticated knowledge to the problems of lower-income Americans.”Among those drawn to the app — recently renamed Providers, from Fresh EBT — is Kimberly Wilson, a single mother in Spindale, N.C., who has a 7-year-old son and cleans vacation rental homes. With her work interrupted by the pandemic, she turned to food stamps, which is also known as the Supplemental Nutrition Assistance Program, or SNAP.Kimberly Wilson, a single mother in Spindale, N.C., said the app’s most appealing feature is that it gives her the ability to check her food stamp balance.Mike Belleme for The New York TimesWhat Ms. Wilson said she likes most about the SNAP app is the ability to instantly check her balance, which she does almost daily. “It’s a comfort knowing I’m going to be able to feed my kid,” she said.The app also explains the timing and amounts of her payments better than the state, she said, and it steered her to a broadband subsidy that saved $50 a month.But the app’s rewards transcend the particulars, Ms. Wilson said: It leaves her feeling respected.“It makes you feel like it’s normal to need help,” she said, which is especially welcome because she has relatives who post memes depicting people on SNAP as lazy and overfed. “It’s like somebody behind the screen is looking out for us. You feel like they care.”Andrea Young, a Providers user in Charlotte, N.C., goes as far as to say the app “makes us feel like we’re Americans, too.”Propel offers an account that can also receive paychecks and other government benefits with the same balance-checking features, in recognition that most low-income households have multiple sources of income and need stable banking.PropelWith 42 million Americans receiving SNAP, many conservatives dispute the notion that aid is elusive. They see dependency as a greater concern than red tape and argue that administrative contact serves important goals, like deterring people who do not really need help or letting caseworkers encourage the jobless to find work.“The system should be striving to help individuals achieve self-sufficiency through employment” rather than maximize benefits, said Jason Turner, who runs the Secretaries Innovation Group, which advises conservative states on aid policy. “When you pile benefit on top of benefit, you make it harder to break free.”Poverty has long been linked to oppressive bureaucracy. “Little Dorrit,” the 1857 novel by Charles Dickens, lampoons the omnipotent “Department of Circumlocution,” whose stupefying procedures keep the heroine down. The 1975 documentary film “Welfare” offers a modern parallel with footage that one critic called “unbearable in its depictions of frustration and anger” among caseworkers and clients.Sometimes barriers to aid are created deliberately. When Florida’s unemployment system proved unresponsive at the start of the pandemic, Gov. Ron DeSantis told CBS Miami last year that his predecessor’s administration devised it to drive people away. “It was, ‘Let’s put as many kind of pointless roadblocks along the way, so people just say, oh, the hell with it, I’m not going to do that,’” he said. (Mr. DeSantis and his predecessor, Rick Scott, are both Republicans.)Other programs are hindered by inadequate staffing and technology simply because the poor people they serve lack political clout. Historically, administrative hurdles have been tools of racial discrimination. And federal oversight can instill caution because states risk greater penalties for aiding the ineligible than failing to help those who qualify.To show that Michigan’s application was overly complex, Civilla essentially turned to theater, walking officials through an exhibit with fake clients and piped-in office sounds meant to trace an application’s bureaucratic journey. Working with the state, the company created a new application with 80 percent fewer words; the firm is now working in Missouri.Michael Brennan, Civilla’s co-founder, emphasized that the Michigan work was bipartisan — it began under a Republican governor and continued under a Democrat — and saves time for the client and the state.“Change is possible,” he said.With its California portal, Code for America cut the time it took to apply for food stamps by three-quarters or more. The portal was optimized for mobile phones, which is how many poor people use the internet, and it offers chat functions in English, Spanish and Chinese. In counties with the technology, applications increased by 11 percent, while elsewhere the number fell slightly.During the pandemic, Code for America built portals to help poor households claim stimulus checks and the expanded child tax credit. The latter alone delivered nearly $400 million. David Newville, who oversaw the work, quoted a colleague to explain why web design matters: “Implementation is justice.”Mr. Chen, right, and Propel’s chief operating officer, Jeff Kaiser, at the company’s office in Brooklyn. Propel has landed investments from the venture capital firm Andreessen Horowitz and the sports stars Kevin Durant and Serena Williams.Karsten Moran for The New York TimesAs the son of struggling immigrants from China, Mr. Chen, the founder of Propel, understood hardship before he understood technology. “There wasn’t always enough to eat” in an otherwise happy Kansas City childhood, he said. (The family did not receive SNAP, though Mr. Chen does not know why.) He graduated from Stanford, worked at Facebook and left at 26 for a fellowship in New York, hoping to produce software for people in poverty.Mr. Chen founded Propel in 2014 with $11,000 from a Kickstarter campaign, pitched about 60 investors without success and went two years without a salary. After planning to work on SNAP applications, he shifted to focus on people who were already enrolled and developed the balance display.The existing technology did allow people to check their balances, but it did not work well on mobile phones, and a phone line required a 16-digit number. While studying how poor people shop, Mr. Chen saw them buy cheap items — often a banana — to check the balance on their receipts. It struck him as “disrespectful,” one more hassle that they did not need.In tech terms, a balance display was no special feat, but reaching SNAP recipients was. Mr. Chen said the app’s users checked it on average 17 times a month. Ms. Young, 54, said she checked it more frequently than that.“I check it all day, every day,” she said. “It makes me reassured, knowing that I’m going to have food.” Ms. Young, who gets by on a disability payment of about $800 a month after injuring her back, said she had run out of funds at the register; discarding items while others watched “makes you feel like you’re just pitiful.”Ms. Wilson said the app created a sense of belonging among people used to feeling stigmatized.Mike Belleme for The New York TimesMs. Wilson is so concerned about her balance that she keeps it in her head: It was $14.02 the other day.While the app does not let users talk to each other, she said it still created a sense of belonging among those who felt stigmatized. “It just made me see there were a whole group of people out there in the same circumstance,” she said.The app also tells people how much they have spent and where they spent it; offers recipes and budgeting tools; and provides news about other benefits. It generates revenue by selling ads, often to grocers offering discounts or employers offering jobs; Mr. Chen said the goal was to align the company’s financial interests with those of its users.In early 2016, the app had a few thousand users. A year later, it had about 200,000. Propel landed investments from Andreessen Horowitz, a top venture capital firm, and the sports stars Kevin Durant and Serena Williams. Forbes estimated that the company was worth $100 million, a sum that Mr. Chen called “not far off.”Partnering with a charity, Give Directly, during the pandemic, Propel distributed $180 million to randomly selected app users, offering them $1,000 each. It also moved into advocacy, adding a feature that lets users ask their members of Congress to extend the temporary child tax credit expansion. The app now offers an account that can receive paychecks and other government benefits, prompted in part by the difficulties that the poorest households experienced in collecting stimulus checks, because they often lack stable bank accounts.However they make ends meet, Mr. Chen said, poor people should know where they stand without having to buy a banana.“We pay hundreds of billions of dollars to fund these programs,” he said. “Why not make them work well?” More

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    Higher Food Prices Hit the Poor and Those Who Help Them

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    Many households are being forced to adjust their shopping lists or seek assistance. But food banks, too, are feeling the pinch.With food prices surging, many Americans have found their household budgets upended, forcing difficult choices at the supermarket and putting new demands on programs intended to help.Food banks and pantries, too, are struggling with the increase in costs, substituting or pulling the most expensive products, like beef, from offerings. What’s more, donations of food are down, even as the number of people seeking help remains elevated.Even well-off Americans have noticed that many items are commanding higher prices, but they can still manage. It’s different for people with limited means.“Any time someone is low income, that means they’re spending a higher percentage on needs like food and housing,” said Diane Whitmore Schanzenbach, director of the Institute for Policy Research at Northwestern University. “When prices go up, they have less slack in their budgets to offset and they are quick to fall into hardship.”Before the run-up in prices — driven by supply-chain knots and rising labor costs — Robin Mueller would buy ground beef for meatloaf or hamburgers to serve once or twice a week for her family in Indianapolis. Now she can afford to cook it only once or twice a month.“You have to pick and choose,” said Ms. Mueller, who is 52 and disabled and lives with her daughter and her husband. “Before, you didn’t have to do that. You could just go in and buy a week or two’s worth of food. Now I can barely buy a week’s worth.”She has turned to food banks in Indianapolis for help, but they, too, are feeling the pinch.A case of peanut butter that was $13 to $14 before the pandemic now costs $16 to $19, according to Alexandra McMahon, director of food strategy for the Gleaners Food Bank of Indianapolis. Green beans that used to retail for $9 a case now sell for $14.“It has a big impact,” said Joseph Slater, chief operating officer of Gleaners. “It’s on our minds and it’s on the minds of our hungry neighbors as well.”In New York, Tynicole Lewis and her daughter, Lanese, depend on food stamps, but Ms. Lewis said that the aid runs out well before the end of the month now. Lanese is diabetic and Ms. Lewis serves as much protein and vegetables as possible — foodstuffs that have become especially pricey.“Food is expensive, and when the food stamps are gone, they’re gone,” said Ms. Lewis, who lives on the Lower East Side of Manhattan and earns $12,000 a year as a grocery store worker. “I have to wait.”She, too, depends on food pantries and has given up buying meat for the most part. “I eat a lot from the pantry, whatever they get,” Ms. Lewis said. “I like fish and I’ll treat myself when I get the food stamps.”While overall consumer prices in September were up 5.4 percent from a year ago, the cost of meat is up slightly more than that. Prices of staples like dairy products, fruits, grains and oils are also rising.Prices of meat, poultry, fish and eggs in U.S. cities are up 15 percent since the start of 2020, according to the Bureau of Labor Statistics.The run-up in costs at the supermarket comes even as gasoline prices have risen and natural gas and heating oil prices are predicted to be higher this winter, putting further pressure on those with low incomes.In addition, the mammoth assistance programs rolled out by the federal government in response to the pandemic in 2020 have largely lapsed. While some households built up savings from government payments, others have little room for extra expenses.The forces behind higher food prices have been building for some time and aren’t going away anytime soon, said Michael Swanson, chief agricultural economist at Wells Fargo.“People are shocked, but this is a slow-motion train wreck,” he said. “The scary thing is that food companies haven’t passed along all of their costs yet.”The warehouse at the Gleaners Food Bank.Kaiti Sullivan for The New York TimesHigher transportation and warehousing expenses lead the list of causes, along with rising labor costs at meat processing centers and other nodes in the food supply chain.To be sure, there are some winners as a result of the cost squeeze. While meat prices are up sharply for consumers, prices for cattle and other livestock haven’t moved as much. The result is buoyant profits for beef processors, Mr. Swanson said.“This is not going to go backwards anytime soon,” he added. “As soon as producers and retailers get these price increases, they are very sticky.”Behind the scenes, logistics expenses have jumped even more sharply than prices for foodstuffs, along with the costs of unglamorous items that few gave much thought to a few years ago.Understand the Supply Chain CrisisCard 1 of 5Covid’s impact on the supply chain continues. More

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    Debate Looms Over I.M.F.: Should It Do More Than Put Out Fires?

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    As the International Monetary Fund gets set for its annual meeting, economists ask if it’s time to update its mandate as the world’s financial crisis responder.Lopsided access to vaccinations, extreme economic inequality, rising food prices and staggering debt are on the agenda when the International Monetary Fund and the World Bank gather for their annual meetings in Washington next week.A pressing issue not in the official program is the controversy that has been swirling for weeks around the chief of the I.M.F., Kristalina Georgieva, threatening her leadership.An investigation last month accused Ms. Georgieva of rigging data to paint China as more business friendly in a 2018 report when she was chief executive at the World Bank. Ms. Georgieva has denied any wrongdoing.The scandal has focused on the bank’s credibility — billion-dollar decisions can be made on the basis of its information — as well as Ms. Georgieva’s culpability.But lurking behind the debate over her future are foundational questions about the shifting role of the I.M.F., which has helped guide the planet’s economic and financial system since the end of World War II.Once narrowly viewed as a financial watchdog and a first responder to countries in financial crises, the I.M.F. has more recently helped manage two of the biggest risks to the worldwide economy: the extreme inequality and climate change.Some stakeholders, though, have chafed at the scope of the fund’s ambitions, and how much it should venture onto the World Bank’s turf of long-term development and social projects. And they object to what’s perceived as a progressive tilt.“There is a modernizing streak here running through major financial institutions which is creating a kind of tension,” said Adam Tooze, a historian at Columbia University and the author of “Shutdown: How Covid Shook the World’s Economy.”Other pressures weigh on the agency as well. Washington is still home to the I.M.F.’s headquarters, and the United States is the only one of the 190 member countries with veto power, because it contributes more money than any other. But its dominance has been increasingly challenged by China — straining relations further tested by trade and other tensions — and emerging nations.The willingness of the Federal Reserve and other central banks to flush trillions of dollars into the global economy to limit downturns also means that other lenders, aside from the I.M.F., have enough surplus cash on hand to lend money to strapped nations. China has also greatly expanded its lending to foreign governments for infrastructure projects under its ambitious Belt and Road Initiative.At the same time, long-held beliefs like the single-minded focus on how much an economy grows, without regard to problems like inequality and environmental damage, are widely considered outdated. And the preferred cocktail for helping debt-ridden nations that was popular in the 1990s and early 2000s — austerity, privatization of government services and deregulation — has lost favor in many circles as punitive and often counterproductive.The debate about the role of the I.M.F. was bubbling before the appointment of Ms. Georgieva, who this month started the third year of her five-year term. But she has embraced an expanded role for the agency. A Bulgarian economist and the first from an emerging economy to head the fund, she stepped up her predecessors’ attention to the widening inequality and made climate change a priority, calling for an end to all fossil fuel subsidies, for a tax on carbon and for significant investment in green technology.She has argued that however efficient and rational the market is, governments must step in to fix built-in flaws that could lead to environmental devastation and grossly inequitable opportunity. Sustainable debt replaced austerity as the catchword.When the coronavirus pandemic brutally intensified the slate of problems — malnourishment, inadequate health care, rising poverty and an interconnected world vulnerable to environmental disaster — Ms. Georgieva urged action.Here was “a once in a lifetime opportunity,” she said, “to support a transformation in the economy,” one that is greener and fairer.The I.M.F. opposed the hard line taken by some Wall Street creditors in 2020 toward Argentina, emphasizing instead the need to protect “society’s most vulnerable” and to forgive debt that exceeds a country’s ability to repay.I.M.F. headquarters in Washington, where Republicans have bristled at Ms. Georgieva’s agenda.Daniel Slim/Agence France-Presse — Getty ImagesThis year, Ms. Georgieva managed to create a special reserve fund of $650 billion to help struggling nations finance health care, buy vaccines and pay down debt during the pandemic.That approach has not always sat well with conservatives in Washington and on Wall Street.Former President Donald J. Trump immediately objected to the new reserve funds — known as special drawing rights — when they were proposed in 2020, and congressional Republicans have continued the criticism. They argue that the funds mostly help American adversaries like China, Russia, Syria and Iran while doing little for poor nations.Ms. Georgieva’s activist climate agenda has also run afoul of Republicans in Congress, who have opposed carbon pricing and pushed to withdraw from multinational efforts like the United Nations Framework Convention on Climate Change and the Paris climate agreement.So has her advocacy for a minimum global corporate tax like the one that more than 130 nations signed on Friday.In July, Laurence D. Fink, who runs BlackRock, the world’s largest investment management company, and was at odds with the I.M.F.’s stance on Argentina, called the fund and the World Bank outdated and said they needed “to rethink their roles.”The investigation into data rigging at the World Bank focused on what is known as the Doing Business Report, which contains an influential index of business-friendly countries. WilmerHale, the law firm that conducted the inquiry, said various top officials had exerted pressure to raise the rankings of China, Saudi Arabia, the United Arab Emirates or Azerbaijan in the 2018 and 2020 editions.The law firm reported that Ms. Georgieva was “directly involved” with efforts to improve China’s rating for the 2018 edition. She said WilmerHale’s report was inaccurate and rejected its accusations. The I.M.F. executive board is reviewing the findings.The United States, which is the fund’s largest shareholder, has declined to express support for her after the allegations. Ahead of a meeting of the I.M.F. board on Friday, Ms. Georgieva maintained strong support from many of the fund’s shareholders, including France, which had lobbied hard for her to get the job in 2019. Late Friday, the I.M.F. released a statement saying the board would “request more clarifying details with a view to very soon concluding its consideration of the matter.”In Congress, Republicans and Democrats called for the Treasury Department to undertake its own investigations. A letter from three Republicans said the WilmerHale inquiry “raises serious questions about Director Georgieva’s ability to lead the International Monetary Fund.”Several people sprang to her defense, including Shanta Devarajan, an economist who helped oversee the 2018 Doing Business Report and a key witness in the investigation. He wrote on Twitter that the law firm’s conclusions did not reflect his full statements, and that the notion that Ms. Georgieva had “put her thumb on the scale to benefit one nation is beyond credulity.”“It was her job to ensure the final report was accurate and credible — and that’s what she did,” Mr. Devarajan added.In an interview, he said critics had used the investigation to discredit Ms. Georgieva. The problem, he said, is “how people may have chosen to read the findings of the report and use that to criticize Kristalina’s credibility and leadership.”Mr. Devarajan was not the only one to make the case that the controversy was functioning in some ways as a proxy for the contest over the I.M.F.’s direction. Jeffrey Sachs, director of the Center for Sustainable Development at Columbia, wrote in The Financial Times that Ms. Georgieva was receiving “McCarthyite treatment” by “anti-China forces” in Congress.Whatever role one might prefer for the I.M.F. — traditional, expanded or something else entirely — the scandal is both a distraction and a threat.Nicholas Stern, a British economist who formerly served as the chief economist and senior vice president of the World Bank, said this controversy could not come at a worse moment.“The coming few years are of vital importance to the future stability of the world economy and environment,” he wrote in a letter to the I.M.F. board in support of Ms. Georgieva. “This is as decisive a period as we have seen since the Second World War.”Alan Rappeport More

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    Poverty in U.S. Declined Thanks to Government Aid, Census Report Shows

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    When government benefits are taken into account, a smaller share of the population was living in poverty in 2020 even as the pandemic eliminated millions of jobs.The share of people living in poverty in the United States fell to a record low last year as an enormous government relief effort helped offset the worst economic contraction since the Great Depression.In the latest and most conclusive evidence that poverty fell because of the aid, the Census Bureau reported on Tuesday that 9.1 percent of Americans were living below the poverty line last year, down from 11.8 percent in 2019. That figure — the lowest since records began in 1967, according to calculations from researchers at Columbia University — is based on a measure that accounts for the impact of government programs. The official measure of poverty, which leaves out some major aid programs, rose to 11.4 percent of the population.The new data will almost surely feed into a debate in Washington about efforts by President Biden and congressional leaders to enact a more lasting expansion of the safety net that would extend well beyond the pandemic. Democrats’ $3.5 trillion plan, which is still taking shape, could include paid family and medical leave, government-supported child care and a permanent expansion of the Child Tax Credit.Liberals cited the success of relief programs, which were also highlighted in an Agriculture Department report last week that showed that hunger did not rise in 2020, to argue that such policies ought to be expanded. But conservatives argue that higher federal spending is not needed and would increase the federal debt while discouraging people from working.The fact that poverty did not rise more during an enormous economic disruption reflects the equally enormous response. Congress expanded unemployment benefits and food aid, doled out hundreds of billions of dollars to small businesses and sent direct checks to most Americans. The Census Bureau estimated that the direct checks alone lifted 11.7 million people out of poverty last year; unemployment benefits and nutrition assistance prevented an additional 10.3 million people from falling into poverty, according to an analysis of the data by The New York Times.“It all points toward the historic income support that was delivered in response to the pandemic and how successful it was at blunting what could have been a historic rise in poverty,” said Christopher Wimer, a co-director of the Center on Poverty and Social Policy at the Columbia University School of Social Work. “I imagine the momentum from 2020 will continue into 2021.”Poverty rose much more after the previous recession, peaking at 16.1 percent in 2011, by the measure that takes fuller account of government assistance, and improving only slowly after that. Many economists have argued that the federal government did not do enough back then and pulled back aid too quickly.Despite the more aggressive response this time, however, median household income last year fell 2.9 percent, adjusted for inflation, to about $68,000. That figure includes unemployment benefits but not stimulus checks or noncash benefits such as food stamps. The decline reflects the pandemic’s toll on jobs: About 13.7 million fewer people worked full time year-round compared with 2019. More

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    Why the Taliban Desperately Need Cash to Run Afghanistan

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    The group has long tapped underground banks and opium to fund Afghanistan’s insurgency. Fixing the nation’s problems will require a lot more than that.As Afghans pay surging prices for eggs and flour and stand in long lines at the bank, money changers like Enayatullah and his underground financial lifeline have found themselves in desperate demand.Enayatullah — his family name withheld — holds down a tiny point in a sprawling global network of informal lenders and back-room bankers called hawala. The Taliban used hawala to help fund their ultimately successful insurgency. Many households use it to get help from relatives in Istanbul, London and Doha. Without cash from hawala, economic life in whole swaths of Afghanistan would come to a crashing halt.That is now a very real possibility. Foreign aid has dried up. Prices are surging. The value of the afghani currency is tumbling. The country’s $9.4 billion in reserves have been frozen.And hawala won’t be enough, said Enayatullah, who says people’s need for money has become so desperate in the last week he raised his commission to 4 percent per transaction, about eight times his usual rate. The system is now struggling with a lack of money, leading the Taliban and dealers themselves to rein in activity to preserve cash.“The demand,” Enayatullah said, “is too much.”The Taliban won the war in Afghanistan, and an economic crisis may be their prize. They have been cut off from the international banking system and from the country’s previous funding sources, like the International Monetary Fund, the World Bank and the United States government. Foreign aid makes up nearly half of economic output.Without other sources of money, millions of Afghan people could lose the gains they made, in fits and starts, over the past two decades. Already, drought conditions have created a real risk of hunger.“We have conflict. We have war. This is another misery,” said Shah Mehrabi, a board member of Afghanistan’s central bank. “You will have a financial crisis and it will push families further into poverty.”Food prices soared last week after the Taliban took over, at a market in Kabul, Afghanistan.Jim Huylebroek for The New York TimesLong before Afghanistan had formal institutions like banks, it had the hawala system. Millions of Afghans, shut out from formal banking, used it to send and receive remittances, as have migrant workers and others around the world.The system functions on the premise that people want to send equivalent amounts of money between two locations. Loans and transfers are recorded on ledgers, but money doesn’t have to change hands. Those features make it useful for evading taxes, paying bribes and laundering ill-gotten gains.Hawala was a necessity under the Taliban-led Afghanistan of two decades ago, before the American invasion in 2001, when money from illicit sources greased the country’s financial wheels. In addition to hawala, opium from the country’s vast poppy fields and smuggling brought the country money from the rest of the world, offsetting weak trade. As insurgents, the Taliban funded themselves by taxing smuggled goods like televisions and fuel, in transactions often financed through hawala, and through the drug trade.But the Afghanistan of 2021 is a country transformed. The economy, though its growth has been unsteady over the past decade, is five times the size it was in the early 2000s. Once scarce in most places, electricity is now widely available. Smartphones and internet access are common.Foreign money helped. Over the two decades, the United States spent more than $145 billion on reconstruction activities in Afghanistan, according to the U.S. government. Much of it was used to build the Afghan security forces, but funds also went toward large-scale infrastructure projects and an economic support fund. More than three quarters of the Afghan government’s $11 billion annual public expenditures was paid for by donor funding.The Taliban will be hard-pressed to make up that shortfall.Since taking over Afghanistan, the Taliban have said they will stop production of opium. But for the hawala system to work, Afghanistan must ultimately find sources of hard currency to lubricate the lines of credit that would snake back into the country. With exports in 2019 of about $870 million — mostly carpets, plus figs, licorice and other agricultural products — Afghanistan has little to offer on a large scale that is as lucrative as opium.The Taliban could see support from governments like Pakistan, Iran and China that might have their own reasons for keeping relations with Afghanistan warm. Trade has already started up again with Iran, said David Mansfield, an independent consultant and an expert on rural Afghanistan, citing satellite imagery of fuel tankers and transit trucks moving across the border. He has estimated that during its insurgency, the Taliban was able to raise more than $100 million a year from informally taxing goods from Iran and southern Afghanistan.Even if the Taliban raised several multiples more than that, it would mean a return to the minimalist state like the 1990s.“Economic crisis, humanitarian disaster, more refugees,” Mr. Mansfield said. “The other side of this is we have an Afghan population in the past 20 years who have seen some degree of transformation. Their livelihoods have improved.”People stood in line outside Azizi bank in Kabul on Sunday, the first day banks reopened in Afghanistan’s capital.Jim Huylebroek for The New York TimesThe hawala system, though central to life in Afghanistan, won’t be enough on its own. While many hawala transactions exist only on ledgers, they are ultimately backed by cold, hard cash often held by hawala dealers called hawaladars. In Afghanistan, say experts, hawaladars regularly use the local currency, the afghani, to buy American dollars from Afghanistan’s central bank, a transaction that can help stabilize the afghani’s value.Understand the Taliban Takeover in AfghanistanCard 1 of 6Who are the Taliban? More

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    Covid Aid Programs Spur Record Drop in Poverty

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    WASHINGTON — The huge increase in government aid prompted by the coronavirus pandemic will cut poverty nearly in half this year from prepandemic levels and push the share of Americans in poverty to the lowest level on record, according to the most comprehensive analysis yet of a vast but temporary expansion of the safety net.The number of poor Americans is expected to fall by nearly 20 million from 2018 levels, a decline of almost 45 percent. The country has never cut poverty so much in such a short period of time, and the development is especially notable since it defies economic headwinds — the economy has nearly seven million fewer jobs than it did before the pandemic.The extraordinary reduction in poverty has come at extraordinary cost, with annual spending on major programs projected to rise fourfold to more than $1 trillion. Yet without further expensive new measures, millions of families may find the escape from poverty brief. The three programs that cut poverty most — stimulus checks, increased food stamps and expanded unemployment insurance — have ended or are scheduled to soon revert to their prepandemic size.While poverty has fallen most among children, its retreat is remarkably broad: It has dropped among Americans who are white, Black, Latino and Asian, and among Americans of every age group and residents of every state.Poverty Rates Have Fallen for Every Demographic Group More