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• According to the Penn Wharton Budget Model, low- and middle-income households paid around 7% more in 2021 for the identical things they purchased in 2020 or 2019, an average of $3,500. This equates to around $3,500 for the average household. In comparison, rich households’ spending increased by only 6%. Experts now predict that poverty will soar in early 2022 when pandemic-related federal benefits expire and President Joe Biden’s massive social spending bill languishes in Congress. 
• There is one ray of hope for low-wage workers: When compared to a year earlier, median salaries in the bottom quartile increased by more than 5% in November. Economists fear that the coronavirus epidemic has ushered in a new age of inflation disparity, with poor people bearing the brunt of growing prices.
• This is because a larger amount of their budget is allocated to cost-increasing areas. Food, for example, has increased by 6.4 percent in the last year, but fuel has increased by a stunning 58 percent. And now, as government stimulus programmes wind down, many Americans are experiencing increased prices. 

Worry over ending tax credits

The benefit, according to Columbia, kept roughly 4 million children out of poverty. The most recent monthly cheque was mailed on December 15th. 

You can see a definite impact of such payments. We’re all concerned about January. 

Republicans, on the other hand, are concerned that additional money from Washington may lead to even higher inflation, putting an even greater burden on the poor. 

“There are certain aspects in this plan that we might be able to get a bipartisan consensus on until inflation settles down,” Sen. Lindsey Graham, R-South Carolina, told reporters earlier this month. “However, this is not the moment to increase federal expenditure, so expanding the government and increasing the risk of inflation.”

That argument appears to have influenced Sen. Joe Manchin, D-W.Va., who has expressed concern about the expense of extending the child tax credit over a decade. He has campaigned for tougher limitations on benefit and work requirements for the package’s other social services. Democrats cannot pass the bill without his vote in the Senate, which is equally divided. 

“There’s an argument to be made that tax credits are really vital — that if we weren’t dealing with inflation, they are definitely a method to help the disadvantaged,” said Gustavo Flores-Macias, an associate professor at Cornell University. “However, the political timing is unfavourable due to inflation.”

There is one ray of hope for low-wage workers: They have gotten some of the largest pay hikes of the epidemic, which has helped to cushion the price surge. According to the Federal Reserve Bank of Atlanta, median pay growth over the last year has averaged more than 5% for the bottom quartile as of November. Meanwhile, pay growth for the top 25% has slowed this year to only 2.7 percent as of November.

“This is not a shortage crisis.” “It’s an issue of everyone having more than the market can now offer,” says Samuel Hammond, the Niskanen Center’s head of poverty and welfare policy.

“If we want robust economic development, we’ll undoubtedly have to accept greater inflation and rising commodity prices as a by product of soaring consumer spending and investment.”