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The debt and climate crises are escalating—it is time to tackle both

A big debt crisis is brewing in the Global South. The IMF had sounded alarm over growing debt sustainability problems in many low-income countries already…

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By Ulrich Volz

A big debt crisis is brewing in the Global South. The IMF had sounded alarm over growing debt sustainability problems in many low-income countries already prior to the coronavirus crisis. More than two years into the pandemic, the debt situation has deteriorated significantly. According to the IMF, 60 percent of low-income countries are now at high risk of or already in debt distress. Moreover, a growing number of middle-income countries is also suffering from high debt service burdens. The number of emerging markets with sovereign debt that trades at distressed levels—with yields more than 10 percentage points above those on similar maturity U.S. Treasuries—has more than doubled in the past six months. Monetary tightening in the U.S. and other advanced economies is driving up the cost of debt and making international refinancing ever harder for those countries that still maintain access to international capital markets. The composition of financing is continuing to evolve toward new, more expensive sources.

The Russian invasion of Ukraine has further escalated the situation, creating a perfect storm. The war has sent shockwaves through the global economy and caused the largest commodity shock since the 1970s. Whereas oil, gas, and grain exporters may get temporary relief in the short term, many developing and emerging market countries—including in sub-Saharan Africa—are net fossil fuel and grain importers. The effects of the war in Ukraine are likely to significantly worsen the social and economic situation in many developing and emerging market countries, further undermining debt sustainability.

High levels of public debt service and insufficient fiscal and monetary space have already constrained the crisis responses of most low and middle-income economies. While advanced countries were able to implement extremely expansionary fiscal and monetary policies in response to the pandemic crisis, few countries in the Global South had this option.

The precarious debt situation has not only been threatening recoveries. It has also impeded much-needed investments in climate resilience. These investments are indispensable and urgent: Governments must climate-proof their economies and public finances or face an ever-worsening spiral of climate vulnerability and unsustainable debt burdens. In several empirical studies that were replicated by the IMF and others, we showed that physical climate vulnerability is driving up the cost of capital of climate-vulnerable developing countries. As financial markets increasingly price climate risks, and global warming accelerates, the risk premia of these countries, which are already high, are likely to increase further. There is a danger that vulnerable developing countries will enter a vicious circle in which greater climate vulnerability raises the cost of debt and diminishes the fiscal space for investment in climate resilience.

Figure 1. The vicious circle of climate vulnerability and the cost of capital

Source: Volz, “Climate Change and the Cost of capital in Developing Countries”, Presentation at the Understanding Risk Finance Pacific Forum organized by the Government of Vanuatu and the World Bank Group’s Disaster Risk Financing and Insurance Program in Port Vila from 16-19 October 2018.

The impact of COVID-19 on public finances risks reinforcing this vicious circle. In many countries, including many Small Island Developing States, high public debt service is crowding out critical investment that is needed for climate-proofing economies and enabling a green, resilient, and equitable recovery. With the impacts of the climate crisis becoming evermore damaging economically, there is a great urgency to address sovereign debt problems head-on and put countries in a position to not only respond to short term needs posed by the pandemic and the engulfing food price crisis, but also invest in much-needed climate resilience.

There is a danger that vulnerable developing countries will enter a vicious circle in which greater climate vulnerability raises the cost of debt and diminishes the fiscal space for investment in climate resilience.

In 2020 we put forward a proposal for Debt Relief for a Green and Inclusive Recovery as an ambitious, concerted, and comprehensive debt relief initiative that frees up resources to support recoveries in a sustainable way and allow governments to invest in strategic areas of development, including climate-resilient infrastructure, health, education, digitization, and cheap and sustainable energy. A key tenet of this proposal is that debt relief should not only provide temporary breathing space. It should empower governments to lay the foundations for sustainable, climate-resilient development. As part of our proposal, debtor countries that receive debt relief would commit to reforms that align their policies and budgets with Agenda 2030 and the Paris Agreement. The country commitments would be designed by country governments under the involvement of the parliaments and in consultation with the relevant stakeholders.

Ahead of the 2021 United Nations Climate Change Conference in Glasgow, the V20 Finance Ministers—which represent 55 climate-vulnerable nations with a total population of 1.4 billion people—issued a Statement on Debt Restructuring for Climate-Vulnerable Nations, drawing on our proposal. In the statement, the V20 Finance Ministers called for “a major debt restructuring initiative for countries overburdened by debt—a sort of grand-scale climate-debt swap where the debts and debt servicing of developing countries are reduced on the basis of their own plans to achieve climate resilience and prosperity”.

With the debt and climate crises escalating, it is time that these calls are heard. The Common Framework for Debt Treatment that the G20 established in November 2020 to address insolvency and protracted liquidity problems has not delivered. Not only does it exclude middle income countries, it also lacks incentives and mechanisms to bring debtor governments and private creditors together. As pointed out by the World Bank, “[t]he lack of measures to encourage private sector participation may limit the effectiveness of any negotiated agreement and raises the risk of a migration of private sector debt to official creditors.”

To incentivize participation of private creditors—which hold more than 60 percent of all debt claims on countries in the Global South—in debt restructurings, a combination of positive incentives (“carrots”) and pressure (“sticks”) is needed. In terms of incentives, we propose the creation of a new Guarantee Facility for Green and Inclusive Recovery that is designed to entice the commercial sector to engage in debt restructurings. The facility, which could be established relatively quickly at the World Bank, would back the payments of newly issued sovereign bonds that would be swapped with a significant “haircut” for old, unsustainable, and privately held debt. Private creditors would benefit from a partial guarantee of the principal, as well as a guarantee on 18 months’ worth of interest payments, analogous to the Brady Plan that helped to overcome the stalemate of debt crisis of the 1980s.

In terms of pressure, the financial authorities of the jurisdictions in which the major private creditors (both banks and asset managers) reside and that govern the majority of sovereign debt contracts—most importantly the United States, the United Kingdom, and China—could use strong moral suasion and regulations on accounting, banking supervision, and taxation to improve creditors’ willingness to participate in debt restructuring.

Economic history teaches us that delaying the resolution of debt distress is very costly for debtor countries. In the absence of an appropriate international sovereign debt restructuring mechanism, creditors and borrowers alike keep kicking the can down the road. This has been a long-standing problem that has time and again caused lost decades of development and avoidable human suffering. What is making things worse now is that the stakes are even higher in the face of an evolving climate crisis.

The international community—especially the major advanced economies and China—needs to overcome the current deadlock and work toward a solution of the debt crisis that will enable all countries to respond to the multiple crises confronting them. The consequences will be dire if they fail to do so.

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American Prometheus

The tragic story of J. Robert Oppenheimer encompasses far more than science and politics. It is a cautionary tale of human nature that holds timeless …

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In the spring of 1954, a scientist’s loyalty to his country was questioned in a hearing orchestrated by a powerful enemy. Five years later, the tables were turned and the scientist’s enemy was exposed and publicly humiliated in another hearing. The tragic story of J. Robert Oppenheimer encompasses far more than science and politics. It is a cautionary tale of human nature that holds timeless lessons.


Few Americans recall the 1950s which made Christopher Nolan’s task very difficult when he took on the challenge of portraying the life of J. Robert Oppenheimer, a controversial genius who played a key role in the development of atomic weapons during the Second World War. Nolan created a film that generated over $945 million in box-office ticket sales over a three month run in theaters. This is a tremendous achievement in an age of limited attention spans, especially given the subject matter.

When the film was released in July, I was skeptical that I would be able to follow the storyline given my limited knowledge of the Manhattan Project that resulted in the first atomic weapons. I was also unfamiliar with the intricacies of the postwar debate regarding further development of nuclear weapons. It seemed doubtful that a three hour movie could adequately convey what I knew was an extremely complex topic.

I decided to purchase American Prometheus, the definitive Oppenheimer biography that provided much of the source material for the film, and I finally got around to reading it this month. Fortunately, I finished the book just as the movie was about to disappear from theaters. Reading the book prior to going to the theater was definitely the right call. I wonder how those who have seen the film with limited background of the story are able to fully interpret the complex plot and dialog.

It would be impossible to cover a book spanning six hundred pages in a three hour film, at least without being quite dull. Nolan chose to omit Oppenheimer’s childhood and the vast majority of his early years in favor of a focus on his academic life in the 1930s and the Manhattan Project which began in mid-1942. With the Oppenheimer and Strauss hearings as points of departure, the film consists of a series of flashbacks to earlier years. This forms the basis for a very effective narrative arc.

Rather than attempt to summarize the book or the film, I will focus on a few key lessons that I think we can learn from the life of J. Robert Oppenheimer. Since it is likely that more readers of this article have seen the film than read the book, I will try to highlight nuances of the controversy based on events that were covered in more depth in print than on the screen.



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Context Matters

“The items of so-called ‘derogatory information’ set forth in your letter cannot be fairly understood except in the context of my life and my work.”

— J. Robert Oppenheimer

At the age of seven, Robert Oppenheimer was enrolled in a private school run by a group called the Ethical Culture Society. The society was dedicated to social action and humanitarianism. According to American Prometheus, Ethical Culture was a reformist Judaic sect born in an environment in which Jewish businessmen in New York were grappling with anti-Semitism. Unlike members of the early Zionist movement, Ethical Culture members wanted Jews to lead “emancipated” lives within the diaspora. The society was not explicitly socialist but the founder had an affinity with certain elements of Marxism that dealt with the plight of the working class.1

Due to Oppenheimer’s early exposure to the beliefs of the Ethical Culture Society, which aligned closely to the beliefs of his parents, it was natural for him to drift toward the left side of the political spectrum. Although he is not portrayed as very political in his early years, an individual’s political views are often formed early.2 When the Great Depression began, Oppenheimer apparently felt some discomfort with the relative wealth he enjoyed due to his father’s business success and took an interest in advocating for those who fell into poverty.

In the film, we see the first signs of Oppenheimer’s political activity when he was at Berkeley as a young academic in the 1930s. At the time, the labor movement was very active with the Communist Party of the USA (CPUSA) taking a leading role in organized labor. With knowledge of Oppenheimer’s background from the book, it is clear that he fell into social groups at Berkeley primarily because of his family and early educational background in the Ethical Culture Society.

In the years leading up to the outbreak of World War II, the Spanish Civil War raged from 1936 to 1939. This conflict was between fascist forces loyal to General Francisco Franco and the Popular Front government of the Spanish Republic. The Popular Front was a left wing movement of anarchists, socialists, and communists who had allies within the CPUSA. Oppenheimer’s social circle included CPUSA party members determined to assist the Popular Front in the fight against fascism. Since Hitler was assisting Franco, the Spanish Civil War was thought of as an extension of the larger battle against fascism spreading through the rest of prewar Europe.

While Oppenheimer insisted that he never became a member of the CPUSA, he acknowledged funneling financial support to the forces fighting Franco via CPUSA. He also provided resources for the party to print pamphlets for other causes within the United States. Oppenheimer’s brother and sister-in-law were, at least for a period of time, CPUSA members. Jean Tatlock, Oppenheimer’s primary romantic interest during the late 1930s, and later his mistress, was also a dedicated CPUSA member.

Given Oppenheimer’s social circle, it comes as no surprise that he ended up marrying a woman with communist ties. Kitty Puening suffered directly due to the Spanish Civil War when her husband volunteered to fight and was quickly killed in action. Kitty acknowledged being a CPUSA member for a period of time but always insisted that Robert was never an official member.

Without understanding Oppenheimer’s early life and the influence of the Ethical Culture Society, it is difficult to understand his political activities. My impression, primarily from the book, is that most of the communists Oppenheimer associated with during the 1930s were idealists who had little comprehension of the tyranny that inevitably goes hand-in-hand with totalitarian communism. From an ideological perspective, these people seem not too different from current far left progressives.

There is no solid proof that Oppenheimer himself was ever a CPUSA party member, but this seems to be a distinction without a real difference given his close association with party members. Indeed, many of his closest friends thought that he was a party member. The bottom line, however, is that it meant one thing to associate with communists in the 1930s than it did to associate with communists in the 1950s.

Context matters and we should avoid retroactively applying later knowledge to judge the actions of people during another time. It seems that most of Oppenheimer’s social circle thought that they were helping the poor within the United States and assisting forces in Europe opposed to fascism. The Soviet Union was not yet a sworn enemy of the United States and indeed would become a wartime ally instrumental in taking on Hitler’s regime on the eastern front and suffering heavy losses.


Know Who Your Friends Are

Robert Oppenheimer is portrayed as the protagonist in the book and the film, but like all human beings, he was not without flaws. In an effort to protect one of his good friends, Oppenheimer made a grave mistake that directly led to his later troubles. 

Oppenheimer was a brilliant physicist but was also a man of culture with a wide range of intellectual interests including literature. So it comes as no surprise that Oppenheimer found it interesting to talk to Haakon Chevalier, a specialist in French literature. Oppenheimer and Chevalier became close friends after they met at Berkeley in 1937. Chevalier’s membership in the CPUSA was nothing unusual.

At some point during the winter of 1942-43, while the Manhattan Project was underway, Oppenheimer and Chevalier had a brief discussion about a mutual acquaintance, George C. Eltenton, a physicist employed by the Shell Oil Company who offered to pass scientific information to a contact at the Soviet consulate.

Both Oppenheimer and Chevalier were concerned that the United States was not sharing information with allies during the war, including with the Soviet Union. While Chevalier did not know exactly what Oppenheimer was working on, he seemed willing to cross the line to espionage. Oppenheimer was not. He flatly rejected the approach while making martinis, and the men joined their wives for dinner.3

By this point, Oppenheimer was the head of the Los Alamos site and it is clear that he had a duty to report the approach and name Eltenton as a potential spy. However, it would be difficult to do so without implicating Chevalier in the matter. As a result, Oppenheimer waited several months before reporting the incident, and when he did, he invented what he later called a “cock and bull story” to protect his friend.4

In a fateful interview with Army officials in August 1943, Oppenheimer named Eltenton as a potential spy while also expressing his personal opinion that he was “friendly to the idea” of the United States providing the Russians with more information on the project. He stressed that he did not want it to move out “the back door”, meaning through Eltenton. However, apparently in an effort to protect Chevalier, he referred to approaches through multiple people and refused to specify any names unless ordered to do so. Several months later, Oppenheimer did provide Chevalier’s name when ordered to do so. This created an impression of evasion.

During this period of time, Oppenheimer was undergoing a period of rapid personal evolution as he assumed responsibility for a large organization at Los Alamos. Prior to the Manhattan Project, Oppenheimer was not known for his management capabilities and few could see him in an official military role. In the six months after the approach from Chevalier, Oppenheimer’s biographers note that he had become a “changed man”, yet he continued to feel qualified to decide on his own who was a security risk and who was not. In his view, Eltenton was a risk but Chevalier was not.


Understanding Politics

It is natural that Robert Oppenheimer felt a sense of personal responsibility for how atomic weapons would be used. After all, his leadership at Los Alamos was critical. Under Oppenheimer’s direction, the United States successfully built atomic bombs that changed the course of history. However, the terrible nature of nuclear weapons weighed heavily on Oppenheimer for the rest of his life.

Oppenheimer celebrated with his team at Los Alamos when Hiroshima and Nagasaki were bombed in August 1945, but the reality is that he was conflicted about whether the use of nuclear weapons was necessary to end the war. He came to believe that Japan was already defeated and that Truman’s use of the bomb was more related to preventing the Soviet Union from incursions into Japan in the final days of the war.

In a meeting with Truman in late 1945, Oppenheimer told the President that he, Oppenheimer, felt that he had “blood on his hands” due to the use of the bomb on civilian populations. Predictably, this was highly offensive to President Truman and Oppenheimer had no further influence at the White House.

Oppenheimer was shocked that the President did not think that the Soviets would be able to develop their own nuclear weapons and he continued to advocate for a policy of openness and international control of the technology. He correctly foresaw the arms race that commenced immediately after the war and predicted that the Soviets would rapidly develop their own weapons. There is no evidence that Oppenheimer was, at any point, disloyal or tried to provide information to the Soviets “out the back door” but the impression that he disagreed with Truman’s policies hurt him politically.

Oppenheimer was a brilliant scientist but quite tone-deaf when it came to politics. He continued to speak his mind, understanding that he had a unique perspective to share and feeling a sense of responsibility to do so, yet he did not seem to comprehend that he was stepping on some powerful toes in the process.


Identify Your Enemies

The Atomic Energy Commission was created in 1946 to oversee development of atomic energy and technology during peacetime. Oppenheimer chaired the General Advisory Committee of the AEC which was comprised of nuclear scientists. The first Chairman of the AEC was David Lilienthal who saw eye-to-eye with Oppenheimer on the contentious issue of establishing international controls over atomic energy

The most important debate of the early atomic age centered on the degree to which the United States should acknowledge the inevitability of other countries developing nuclear technology and take proactive steps to control proliferation. Oppenheimer was firmly on the side of arms control and opposed development of hydrogen thermonuclear weapons of far greater power than first generation atomic weapons.

Lewis Strauss saw the situation very differently. As a member of the AEC, Strauss was a strong proponent of aggressive development of the H-bomb. As a conservative Republican, Strauss and Oppenheimer were at polar ends of the ideological spectrum. 

Despite these differences, in his capacity as a trustee for The Institute for Advanced Study at Princeton, Strauss recruited Oppenheimer to serve as the Institute’s director in 1947. Throughout the late 1940s and early 1950s, Strauss and Oppenheimer found themselves in disputes both at the Institute and at the AEC. It is not clear whether it was intentional, but Oppenheimer publicly humiliated Strauss on a technical matter and Strauss held on to this grudge which eventually evolved into outright hatred.

Strauss rarely allowed his antipathy toward Oppenheimer to rise to the surface. However, looking past the polite veneer, Strauss worked relentlessly to marginalize Oppenheimer in the debate over the H-bomb and arms control. In July 1953, Strauss was appointed as Chairman of the AEC. At a time when fear of communist infiltration of the government was near its peak, Strauss had a perfect opening to use his power to permanently sideline Oppenheimer. 


Due Process — Theory and Practice

The Oppenheimer security hearing was held in a shabby conference room behind closed doors. Spanning four weeks during the spring of 1954, the purpose was to consider whether Oppenheimer’s security clearance should be renewed. Although Strauss was not in attendance, he was the invisible hand directing the proceedings.

The book and the film both depict the hearings as a kangaroo court that had no respect for basic tenets of due process and fairness. The AEC panel formed to decide the issue had access to Oppenheimer’s massive FBI file, much of which contained evidence that had been collected without proper warrants. Crucially, Oppenheimer’s 1943 interview with Army officials over the Chevalier incident was secretly recorded and Oppenheimer’s attorney was never even furnished with a transcript.

In a trial, evidentiary rules exist to determine admissibility and to guarantee full disclosure, in advance, to both sides in a case. Such rules did not apply to the security hearing. Oppenheimer’s attorneys found themselves playing against a stacked deck week after week, constantly being blindsided by evidence that they did not even know existed. By holding the inquiry behind closed doors, Strauss was able to avoid creating a martyr for the scientific community which overwhelmingly backed Oppenheimer. 

Through the course of the hearing, Oppenheimer’s relationships with CPUSA members during the 1930s were scrutinized, not in the context of the times, but with a Cold War mindset. Obviously, being a CPUSA member in the 1930s meant something very different than being a CPUSA member in the 1950s in the midst of the Cold War. Oppenheimer was not alone in this 1950s version of “cancel culture.” 

It is difficult to point to a single reason for Oppenheimer’s security clearance being revoked, but the Chevalier incident was certainly a factor. By creating an impression of evasiveness during his interview in 1943, not knowing that he was being secretly recorded, Oppenheimer found himself contradicting prior statements eleven years later. 


Hatred Destroys the Hater

The story of Lewis Strauss is yet another example of the futility of hatred. Strauss emerged victorious in 1954 by removing a powerful political opponent from his official role. But despite his attempts, Strauss could not remove Oppenheimer from his position at the Institute. Gradually, Oppenheimer’s reputation was rehabilitated. 

Like many midterm elections, particularly during a president’s second term, the opposition gained seats in November 1958. In the Senate, the Democrats picked up thirteen seats previously held by Republicans and gained two additional seats from the new state of Alaska. When the Senate convened in early 1959, there were sixty-four Democrats and thirty-four Republicans. The election of 1960 was less than two years away and the Democrats were naturally looking for political advantage.

Two weeks before the midterm elections in 1958, President Eisenhower appointed Lewis Strauss as secretary of commerce. No cabinet official had been rejected by the Senate in over four decades, so Strauss felt confident in his chances when the Senate took up his nomination in 1959. However, the tables were about to turn. 

The Strauss confirmation hearings centered on fairness of the Oppenheimer hearings. When Strauss recruited Oppenheimer to join the Institute in 1947, Oppenheimer had volunteered that there was “derogatory information” in his past. Strauss was aware of Oppenheimer’s history in left-wing politics and did not raise objections until the two men clashed over policy matters, with the H-bomb being the most important example. In his testimony during the hearing, Strauss often appeared evasive and disingenuous. He was publicly humiliated in a very close vote rejecting his nomination.


Conclusion

It is clear that J. Robert Oppenheimer was treated very poorly during the 1954 security hearing and that it was primarily driven by personal animus and policy disagreements rather than genuine questions about his patriotism and loyalty to the United States. Oppenheimer’s association with communists during the 1930s and early 1940s took place at a time when geopolitical alignments were far different than in 1954. However, his behavior was judged by the standards of a later period and he was “cancelled.” 

This does not mean that Oppenheimer bears no responsibility for the situation. He clearly should have reported Chevalier’s approach immediately given his crucial role at Los Alamos and it should not have required a direct order to reveal the name. Inventing a “cock and bull” story to protect a friend was inappropriate and justifiably raised suspicions. However, the totality of the man’s record and accomplishments seem to far outweigh his misjudgments, and this should have been clear in 1954.

Although Robert Oppenheimer was partially rehabilitated from a political perspective in the 1960s, his security clearance was never reinstated and he never resumed his role in government. His death in 1967 at the age of sixty-two closed the book on the complex life of a brilliant man. It seems likely that a longer life might have brought greater vindication as the country moved into the 1970s and the United States and Soviet Union entered into arms control agreements. 

Times change but human nature remains constant. The tragedy of J. Robert Oppenheimer should serve as a cautionary tale that we can still learn from today.


Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC. The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.


  1. American Prometheus, Chapter One, contains details on the Ethical Culture Society.
  2. Depending on personality, it seems like young people either drift strongly toward the politics of their parents or rebel by going in the opposite direction. In Oppenheimer’s case, his close relationship with his parents appears to have resulted in political alignment.
  3. American Prometheus, Chapter 14, covers the Chevalier incident in 1942-43 in detail.
  4. American Prometheus, Chapter 17.

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International

CORRECTION: The expiration of pandemic-era public assistance measures fueled poverty increases in the majority of states

Updated October 24, Poverty in the U.S. is a choice directly reflecting federal, state, and local policies. The expansion of safety net programs in response…

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Updated October 24, 2023

Poverty in the U.S. is a choice directly reflecting federal, state, and local policies. The expansion of safety net programs in response to the pandemic-driven recession reduced poverty rates nationally in 2021 to below pre-pandemic levels. However, because policymakers ended many of these programs—including expanded unemployment insurance, the expanded Child Tax Credit, and economic impact/stimulus payments—poverty rates rose from 7.8% in 2021 to 12.4% in 2022. Child poverty, which had fallen to record lows in 2021, increased from 5.2% to 12.4% in 2022.

In this post, we show poverty rates in each state. Data for the official poverty measure—the one most often quoted in media—are compared with the Supplemental Poverty Measure (SPM), which provides a more complete picture of the well-being of families in the states. When using the more comprehensive measure of poverty, we see that poverty rates increased in the majority of states after programs like the expanded Child Tax Credit were allowed to expire.

The official poverty rate fails to capture the true level of economic hardships faced by families

The official poverty measure classifies a family as being below the poverty line if their pre-tax cash income is lower than the official poverty threshold for their family’s size and the age of family members. The SPM, however, is more reflective of the typical expenses families face. This measure considers family income as well as noncash benefits families receive, including Supplemental Nutrition Assistance Program (SNAP) benefits, housing assistance, and tax credits. This measure further adjusts for taxes that families pay, child care expenses, health care costs, and geographical differences in the cost of housing.

Figure A shows the official and SPM rates for all 50 states and the District of Columbia.1 Southern states make up 13 of the 15 jurisdictions with the highest official rates of poverty.2 Mississippi and Louisiana have the second- and third-highest poverty rates at 17.8% and 16.9%, respectively. They are followed by Arkansas (15.9%), Oklahoma (15.8%), Kentucky (15.8%), and West Virginia (15.6%), all with poverty rates above 15%.

When ranked by the SPM, the District of Columbia (14.8%), California (13.2%), and Florida (12.7%) rise to become the jurisdictions with the highest poverty rates—reflecting high costs of living, particularly the cost of housing. Mississippi (12.5%) falls to the fourth-highest poverty rate, followed by New York (11.9%), Texas (11.3%), and Louisiana (10.9%).

Overall, 17 states have SPM rates higher than the 9.8% national rate and 12 of these are in the South.

Figure A

Poverty increased in states across the country

Figure B focuses exclusively on SPM rates in 2021 and 2022. This data shows that poverty rates increased in 27 states once many of the safety net supports ended in 2021. Eleven of these states are in the South. Some of the states with the largest increases, however, include Nevada, Kansas, Washington, Texas, and New Jersey.

Figure B
Figure B

It is difficult to see any clear regional or political patterns that might explain the varied changes in SPM poverty rates across the states. The published SPM data do not allow us to see how the loss of federal pandemic aid programs affected individual states. Further complicating any analysis, the state-level SPM estimates are calculated using three years of data; the 2021 values reflect average conditions from 2019 through 2021 and the 2022 values reflect average conditions from 2020. This means that both year’s estimates include a period when the federal aid programs were in effect and when they were not.

Nevertheless, it is the case that the states that experienced an increase in their SPM rates also tended to experience an increase in their official poverty rate from 2021 to 2022, and Southern states are overrepresented among the states with larger-than-average increases in SPM poverty.3 Of the 22 states where SPM poverty rose more than the overall national increase, nine are in the South. This suggests that conditions that led to higher poverty rates prior to the pandemic—in some cases, state and local policies that fail to protect families from poverty and higher than average housing costs in others—are likely driving the increase in poverty in the most recent state data. Unfortunately, the data we have here do not allow us to identify to what extent each of these contributes to the rise in poverty in specific states.

State lawmakers can pass policies to expand the safety net for vulnerable Americans

The large increase in poverty as pandemic aid programs ended clearly shows that social policy matters for the well-being of Americans and their families. During the pandemic, the federal government moved to ensure that workers, the unemployed, and families across the nation had the resources they needed to make ends meet. But after policymakers let many of these programs expire, 2022 poverty rates increased nationally and across more than half of U.S. states. Policymakers at the state level should heed the lessons of the economic response to the pandemic and implement policies to lift their residents out of poverty and provide them with a path to prosperity.

Notes

1. Calculating the Supplemental Poverty Measure at the state level requires the use of 3-year averages to ensure adequate sample sizes. Both the official poverty rate and the supplemental poverty rate here use the 3-year average to ensure they are comparable.

2. The District of Columbia is not a state but is referred to as a state in this blog post for simplicity.

3. Exceptions to this are Mississippi, Hawaii, New York, Idaho, North Dakota, Delaware, and New Mexico. In Mississippi, the official poverty rate declined but the SPM increased. In the remaining states, the official poverty rate went up but the SPM declined.

Correction: This post has been updated to include state poverty data comparing 2022 with 2021. The previous post incorrectly compared 2022 data with 2019 data. 

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CORRECTION: The expiration of pandemic-era public assistance measures fueled poverty increases in the majority of states

Updated October 24, Poverty in the U.S. is a choice directly reflecting federal, state, and local policies. The expansion of safety net programs in response…

Published

on

Updated October 24, 2023

Poverty in the U.S. is a choice directly reflecting federal, state, and local policies. The expansion of safety net programs in response to the pandemic-driven recession reduced poverty rates nationally in 2021 to below pre-pandemic levels. However, because policymakers ended many of these programs—including expanded unemployment insurance, the expanded Child Tax Credit, and economic impact/stimulus payments—poverty rates rose from 7.8% in 2021 to 12.4% in 2022. Child poverty, which had fallen to record lows in 2021, increased from 5.2% to 12.4% in 2022.

In this post, we show poverty rates in each state. Data for the official poverty measure—the one most often quoted in media—are compared with the Supplemental Poverty Measure (SPM), which provides a more complete picture of the well-being of families in the states. When using the more comprehensive measure of poverty, we see that poverty rates increased in the majority of states after programs like the expanded Child Tax Credit were allowed to expire.

The official poverty rate fails to capture the true level of economic hardships faced by families

The official poverty measure classifies a family as being below the poverty line if their pre-tax cash income is lower than the official poverty threshold for their family’s size and the age of family members. The SPM, however, is more reflective of the typical expenses families face. This measure considers family income as well as noncash benefits families receive, including Supplemental Nutrition Assistance Program (SNAP) benefits, housing assistance, and tax credits. This measure further adjusts for taxes that families pay, child care expenses, health care costs, and geographical differences in the cost of housing.

Figure A shows the official and SPM rates for all 50 states and the District of Columbia.1 Southern states make up 13 of the 15 jurisdictions with the highest official rates of poverty.2 Mississippi and Louisiana have the second- and third-highest poverty rates at 17.8% and 16.9%, respectively. They are followed by Arkansas (15.9%), Oklahoma (15.8%), Kentucky (15.8%), and West Virginia (15.6%), all with poverty rates above 15%.

When ranked by the SPM, the District of Columbia (14.8%), California (13.2%), and Florida (12.7%) rise to become the jurisdictions with the highest poverty rates—reflecting high costs of living, particularly the cost of housing. Mississippi (12.5%) falls to the fourth-highest poverty rate, followed by New York (11.9%), Texas (11.3%), and Louisiana (10.9%).

Overall, 17 states have SPM rates higher than the 9.8% national rate and 12 of these are in the South.

Figure A

Poverty increased in states across the country

Figure B focuses exclusively on SPM rates in 2021 and 2022. This data shows that poverty rates increased in 27 states once many of the safety net supports ended in 2021. Eleven of these states are in the South. Some of the states with the largest increases, however, include Nevada, Kansas, Washington, Texas, and New Jersey.

Figure B
Figure B

It is difficult to see any clear regional or political patterns that might explain the varied changes in SPM poverty rates across the states. The published SPM data do not allow us to see how the loss of federal pandemic aid programs affected individual states. Further complicating any analysis, the state-level SPM estimates are calculated using three years of data; the 2021 values reflect average conditions from 2019 through 2021 and the 2022 values reflect average conditions from 2020. This means that both year’s estimates include a period when the federal aid programs were in effect and when they were not.

Nevertheless, it is the case that the states that experienced an increase in their SPM rates also tended to experience an increase in their official poverty rate from 2021 to 2022, and Southern states are overrepresented among the states with larger-than-average increases in SPM poverty.3 Of the 22 states where SPM poverty rose more than the overall national increase, nine are in the South. This suggests that conditions that led to higher poverty rates prior to the pandemic—in some cases, state and local policies that fail to protect families from poverty and higher than average housing costs in others—are likely driving the increase in poverty in the most recent state data. Unfortunately, the data we have here do not allow us to identify to what extent each of these contributes to the rise in poverty in specific states.

State lawmakers can pass policies to expand the safety net for vulnerable Americans

The large increase in poverty as pandemic aid programs ended clearly shows that social policy matters for the well-being of Americans and their families. During the pandemic, the federal government moved to ensure that workers, the unemployed, and families across the nation had the resources they needed to make ends meet. But after policymakers let many of these programs expire, 2022 poverty rates increased nationally and across more than half of U.S. states. Policymakers at the state level should heed the lessons of the economic response to the pandemic and implement policies to lift their residents out of poverty and provide them with a path to prosperity.

Notes

1. Calculating the Supplemental Poverty Measure at the state level requires the use of 3-year averages to ensure adequate sample sizes. Both the official poverty rate and the supplemental poverty rate here use the 3-year average to ensure they are comparable.

2. The District of Columbia is not a state but is referred to as a state in this blog post for simplicity.

3. Exceptions to this are Mississippi, Hawaii, New York, Idaho, North Dakota, Delaware, and New Mexico. In Mississippi, the official poverty rate declined but the SPM increased. In the remaining states, the official poverty rate went up but the SPM declined.

Correction: This post has been updated to include state poverty data comparing 2022 with 2021. The previous post incorrectly compared 2022 data with 2019 data. 

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