U.S. child poverty rates drop to record low

NIALA: Good morning! Welcome to Axios Today!

It’s Wednesday, September 14.

I’m Niala Boodhoo.

Here’s what you need to know today: cryptocurrency gets greener. Plus, Twitter’s legal versus moral obligations.

But first, can the US keep child poverty rates at a record low? That’s today’s One Big Thing.

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Inside U.S. child poverty rates and rising inflation

NIALA: America's child poverty rate plunged last year to a record low. That's according to census data released yesterday, but how much will current economic conditions affect America's poorest families and their kids? August inflation numbers also released yesterday show the price for essentials like food rent and medical care are still rapidly increasing. Here to help us dig deep into these two pieces of new economic data is Felix Salmon, Axios’ chief financial correspondent. Hey Felix.

FELIX SALMON: Good morning Niala.

NIALA: Felix so child poverty decreased by about 70% over the past decade. And experts say that thanks to government assistance programs. What kind of programs are we talking about?

FELIX: Medicaid, SNAP, refundable tax credits, the child tax credit that came in in 2021, the pandemic stimulus checks, all of those add up. And if the government gives you money, then that brings you up above the poverty line. It's as simple as that.

NIALA: But pandemic-era policies, like you've been talking about, the increase in the child tax credit, are no longer in place now. So will that reverse this trend or are other government aid programs strong enough to keep poverty low?

FELIX: Yes, it's true that the child tax credit or the increase in the child's tax credit ended in 2021. So I wouldn't be surprised to see the child poverty rate come back up a bit in 2022. As you say, inflation feeds into that too. There's these overall real numbers. But the big picture is that it has come down a huge amount over the past 10 years or 30 years or whatever time horizon you want to use. And that's just fantastic news.

NIALA: So, this is a tremendous success that lots of people are celebrating, but at the same time, we are seeing this decline in poverty. We know that looking at inflation year over year, what we've experienced all year is a price for essentials like food rent and medical care, still rising. And we saw that in yesterday's CPI numbers. How does that factor into this?

FELIX: The poverty rate accounts for inflation. So what's going to happen in 2022, this time next year when the 2022 figures come out, is that the poverty line is going to have gone up quite a lot in terms of dollars just because of an increased number of dollars that you need to pay for things like food and housing. As you bring the poverty line up, more people fall underneath it. So for that reason, yes, if you have high inflation like we do right now, that tends to increase the number of people in poverty.

NIALA: So how are you thinking about these two data sets that we got yesterday?

FELIX: So the very big picture about child poverty and poverty in general, like overall poverty going down into the right is incredibly heartening. If you take away the government support, if you just look at poverty in terms of earned income and you exclude government transfers, then it's looking flatter. It's looking less impressive. So it's quite clear that government programs were an important part of this. And yeah, maybe if we get a Republican president and Republican Congress, then some of that support might dissipate. But the big picture is that the government is doing a good job of addressing poverty in America. That's heartening. And ultimately I think we just need to trust the Fed to bring inflation down and make sure that that doesn't hurt this big win.

NIALA: Felix Salmon is Axios’ chief financial correspondent. Thanks Felix.

FELIX: Thanks Niala.

In a moment: what a big change in the world of cryptocurrency could mean for the environment.

Cryptocurrency gets greener

NIALA: Welcome back to Axios Today. I'm Niala Boodhoo.

Cryptocurrency may be virtual, but it still uses real world energy. For example, Bitcoin alone uses more electricity than the entire country of Argentina. But there's a big shift coming to the crypto world this week. Ethereum, the second biggest crypto network after Bitcoin will be switching to a new system that will be far less energy intensive, and it could mean Ethereum will be consuming as little as 1% of the energy that it now uses. Brady Dale, co-writer of the Axios crypto newsletter is here with why all of this matters. Hey, Brady.

BRADY DALE: Hey, how's it going?

NIALA: Brady. I think people might be confused about why crypto uses so much energy in the first place.

BRADY: Well, so cryptocurrencies need to have what's called consensus mechanisms. Like there's no leaders in crypto, right? So you have to come up with some clever strategy such that you can make sure no one's spending money they don't have. And basically you have to make it expensive. So, Bitcoin and the original version of Ethereum made it expensive by requiring lots of electricity to participate in the network and to log the transactions people make. Ethereum is switching to this new system called proof of stake that will simply make it expensive with money. If you perform poorly as a validator of the network or you misuse the network, you'll just loose some of the money that you've put up at stake.

NIALA: What do you mean by validating the network? Can you explain what that means?

BRADY: Sure. So there are the people who take in all the transactions people are sending to the internet and say, this transaction's real. They verify that like you have this much money and you've only sent it to one person. And they call it a consensus mechanism because all the other people doing that work verify your work and say, we agree. They all come to consensus.

NIALA: And so how is this new system Ethereum is using…how will that change things?

BRADY: So because it's just based on money. So you put some money at stake, you know, several thousand dollars. then you can run the system on normal computers. I mean, they'll need to be good computers and need to have really great connections to the internet and they'll need to have really high reliability, but It's just normal computing now it's just like anything else. So, with Bitcoin and proof of work, it was very specialized computers it was solving these really complex problems to make it, you know, expensive to post things to the network. So it was a whole different setup.

NIALA: And so did Ethereum do this solely for environmental reasons?

BRADY: Pretty much it seems like, I mean, this has been a thing it's wanted to do from the start. The truth is nothing else will really change about Ethereum after this shift happens, it'll still be just as expensive to use. It'll have roughly the same speed, really nothing will shift other than the energy load of the network. That really is the main difference here. So you know, if you're using it at the time the switch happens, you will notice no difference. Your wallet will work just as it had before.

NIALA: Do we expect Bitcoin to follow suit then?

BRADY: I can't express how surprised I would be if Bitcoin ever followed Ethereum into this. You know, Bitcoin is the most valuable network of its kind in the world. And this system has worked for 13 years, under the most stunningly adversarial environments that can be imagined. They're not interested in trying something else that's still kind of new.

NIALA: All right if you wanna learn more about this, you should sign up for Brady's Axios Crypto Newsletter. Brady Dale is one of the authors. Thank you.

BRADY: Thank you.

Twitter’s legal versus moral obligations

NIALA: Twitter’s former head of security testified before the Senate Judiciary Committee, yesterday – Peiter Zatko, also known by his hacker name ‘Mudge’, claims Twitter puts profits before security, leaving the platform vulnerable to hackers.

This came as shareholders yesterday voted to approve Elon Musk’s acquisition of Twitter a deal Musk is trying to scrap. Axios’ Business Editor Dan Primack sent us his thoughts.

DAN PRIMACK: So two big takeaways from yesterday's hearing. First this didn't help Elon Musk almost at all with his efforts to get out of buying Twitter. The issue of bots wasn't really discussed nor even was much as severance package from Twitter. And those are the two things that Musk so far is using to try to terminate the deal.

And even on Mudge’s claims that Twitter violated its 2011 settlements with the DOJ and FTC, he didn't really have any new information nor was he really asked for any new information. Second, it was fascinating to me how often senators really of both parties talked less about Twitter's legal obligations and more about its moral obligations. Some of that was about user privacy, some was about pornography and it's notable because how many politicians, particularly Republicans have been pushing hard against corporate ESG. And the middle letter of that refers to social responsibility. The bottom line here is we didn't learn much. But that's kind of par for the course when it comes to congressional hearings involving big tech.

NIALA: Dan Primack is a business editor for Axios.

That’s it for us today! By the way, make sure you “follow us” on Apple podcasts – search for Axios Today and then click the plus sign up in the right hand corner, so that it turns into a checkmark and that way you won’t miss an episode.

I’m Niala Boodhoo - thanks for listening - stay safe and we’ll see you back here tomorrow morning.