Context: The COVID-19 pandemic has caused enormous damage to physiological health and economic security, especially among racial and ethnic minorities. We examine downstream effects on mental health, how effects vary by race and ethnicity, and the role of existing state-level social policies in softening the pandemic’s impact.

Methods: We analyze an online, multi-wave Census Bureau survey fielded to nearly a million respondents between late April and July 2020. The survey includes questions measuring psychological distress as well as indirect measures of experience with the pandemic. We combine these data with state-level measures of COVID cases, lock-down orders, unemployment filings, and safety net policy.

Findings: We find significant mental stress among all respondents and a sizeable gap between non-white and white respondents. Adjusting for pandemic experiences eliminates this gap. The effect of losing work due to the pandemic is slightly offset by state policies such as unemployment benefit size and Medicaid expansion. The magnitude of these offsetting effects is similar across racial/ethnic groups.

Conclusions: The racialized impacts of the pandemic are exacerbated by inequalities in state policy exemplifying structural racism. If the least generous states matched the policies of the most generous, inequalities caused by the pandemic would be diminished.

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Supplementary data