We have long appreciated that Social Security relieves poverty among seniors. And why not? We venerate our old folks—plus they vote.
But COVID-19 underscores our failure at the other end of the spectrum: our shameful rate of child poverty. In 2019, over 14 percent of American children under the age of 18 were in families living under the federally defined poverty line, a figure that is no doubt worse today. Applying the OECD definition of poverty, the child poverty rate in the United States is 21 percent—worse than in Greece, Russia, or Mexico.
Numerous studies illuminate this disgrace—and its costs. According to the Census Bureau, 63 percent of U.S. households with children reported some degree of difficulty meeting expenses in late January, with 18 percent reporting it was “very difficult.” Black and Hispanic families were more acutely affected. In 2014, the National Center on Family Homelessness reported that 2.5 million kids were homeless for at least part of the previous year.
Unsurprisingly, the National Academies of Science, Engineering, and Medicine found that “poor children develop weaker language, memory, and self-regulation skills”; that, as adults, “they have lower earnings and income, are more dependent on public assistance, have more health problems, and are more likely to commit crimes”; and that “low income itself, rather than other conditions poor children face, is responsible for much of these negative impacts.”
The Academies study also reports that child poverty costs us about $1 trillion annually in reduced adult productivity, increased crime, and higher healthcare costs. Other byproducts, as Mona Charen has noted in The Bulwark, include decreased family stability and lower birth rates—which, in turn, retards social and economic dynamism and jeopardizes the viability of Social Security and Medicare. A society concerned with self-preservation should attack these conditions head on.
Instead our tardy and deficient response leans on smuggling expenditures through the tax code—a child tax credit (CTC) wherein parents of modest income receive an annual tax benefit of $2,000 per child.
Parsimony aside, design flaws abound. The CTC does nothing to help families cope month-to-month. To receive the full proceeds, one must make almost $12,500 annually—and at least $2,500 to benefit at all. The CTC excludes unemployed parents, punishing their kids while simplistically equating joblessness with sloth.
To remedy this, Senators Sherrod Brown and Michael Bennet introduced the American Family Act. As amended in 2019, the AFA provides $300 per month tax credit for kids under 6, and $250 a month for children under 17. Critically, it is distributed monthly, enabling recipients to feed, clothe, and house their kids, and includes the unemployed while providing relief for the middle class. By effectively converting a tax credit into a direct child allowance for all who need it, the AFA would revolutionize our approach to kids in economic distress.
If enacted, researchers from Columbia found, it could reduce child poverty by almost 40 percent—what Vox called “the biggest step on behalf of poor children that Congress has taken in a generation.” Little wonder that in the last Congress, 38 of 47 Democratic senators became cosponsors, as did 188 of 232 House Democrats.
Indeed, some conservatives have embraced the concept as a means of stabilizing families while relieving child poverty. But the AFA garnered no discernible Republican support among lawmakers, and Mitch McConnell prevented it from ever coming to a vote.
Then came COVID, a Democratic president and Congress, and Joe Biden’s $1.9 trillion relief package—including a provision which replicates the AFA. But because the tax credit is financed by deficit spending, under the budget reconciliation rule which Democrats anticipate using to pass the relief bill, its protections are confined to a single year.
Moreover, because the AFA aims to relieve long-term poverty, some Republicans bridle at its inclusion in an emergency relief package. Conversely, child advocates object to its expiration. Says Chuck Marr of the Center on Budget and Policy Priorities, “you don’t want to reduce poverty, then increase it.”
Nonetheless, temporary expansion of the CTC would immediately help parents who lost jobs, or are stuck at home for lack of childcare or to effectuate online schooling. Moreover, with virtually unanimous support within the party, Democrats plan to introduce a separate bill making the AFA permanent.
Here, some conservatives assert that the law would disincentivize work and marriage. Other critics, including progressives, prefer a universal monthly benefit paid by the Social Security Administration. Aside from questioning the administrative capacity of the IRS, they worry that many poor families don’t file tax returns and/or won’t know about the benefit—and that recipients would need to provide advance notice of their income; or might be compelled to refund some of the benefit should they underestimate their earnings.
To address some of these concerns, the Democrats’ proposal gives the IRS an additional $2 billion to fortify its distribution efforts; bases eligibility on family income in the prior year; creates an online portal for families to update income; directly deposits benefits in recipients’ bank accounts; and provides that benefits would not be deducted from a taxpayers’ existing tax liability. And as a matter of practical politics an expanded child tax credit is way more likely to pass than a large new entitlement program.
The growing prospect of legislation to relieve child poverty is reflected by a surprising new entrant—Senator Mitt Romney. His plan creates a direct allowance of $4,000, or $350 per month, for kids under 6; and 3000 per child aged 6 to 17. Moreover, it proposes to be revenue-neutral—in contrast to the estimated $120 billion annual price tag for the Democrats’ program.
One problem is that Romney accomplishes this, in part, by eliminating several anti-poverty programs. The CPBB’s Marr calls this “completely unproductive” because, in his estimate, it erases two thirds of the benefit to poor families by eliminating other assistance.
The rest of Romney’s offset comes from eliminating the $10,000 annual deduction from federal taxes for state and local taxes. This is downright mischievous: That deduction’s biggest beneficiaries, of course, are taxpayers in high-tax blue states like New York, California, New Jersey, and Massachusetts who are willing to support more government services—including those for children and the poor.
These terms are non-starters for the Democrats, and it is notable that to date no other Republican has signed on to Romney’s plan. Still, his initiative opens room for legislative discussions which both Romney and the Democrats seem to welcome. Less so partisan Republicans, for reasons both ideological and cynical—eyeing 2022, some no doubt fear handing Biden a success, whatever its benefit to children or society writ large.
Notwithstanding the GOP’s hypocrisy in decrying deficits under Democratic presidents, cost will be an issue—along with the logistical difficulties posed by the filibuster or fitting legislation into future reconciliation efforts. But the immediate congressional priority is passing Biden’s one-year expansion of the CTC.
Amidst a pandemic which has inflicted disproportionate misery on minorities and the poor, there is little excuse for failure. And passage will establish a template for how the AFA helps relieve child poverty in practice—and therefore for the desirability of a permanent solution.
No doubt the GOP will resist financing it through increasing taxes on the most fortunate Americans. But it is well to remember that the ten-year cost of the AFA would barely exceed the $1 trillion added to the deficit by Donald Trump’s 2017 tax cuts for corporations and the wealthy. Before Republican legislators try to stonewall a program to relieve the misery of children, they should do the societal calculus—and the moral math.