Economy · June 23, 2022

Congress found an easy way to solve child poverty. Then he left.

Imagine that the federal government could lift millions of American children out of poverty with just one program. That program would help parents put nutritious meals on the table, pay for school fees, and even save for their kids’ college – all with no negative impact on the economy.

You don’t have to imagine. We only had it last year … and not now.

By nearly every empirical measure, the expansion of the Child Tax Credit (CTC) – the policy passed in 2021 that gave parents a few hundred dollars a month for every child in their family – has been a huge success, reducing child poverty drastically and making it easier for families to buy food and pay for housing and services. Combined with other COVID-19 related relief measures, most notably the stimulus payments made to Americans in April 2020, January 2021, and March 2021, the CTC has helped protect families from the economic upheaval of the pandemic.

Researchers can rarely say with certainty that a program like CTC actually worked. Politicians usually look at policies abstractly and hypothetically, knowing that a piece of legislation may not achieve its goals. But when Congress was considering extending the CTC, there was a mountain of stiff and cold data showing that this program has done a lot to help children and families.

Yet it was not enough to save him. The expanded tax credit ended in December 2021 and the chances are low that it will be renewed. This tells you everything you need to know about what’s most powerful in Washington: the bias of politicians or the actual evidence.

When the pandemic hit, reformers had been pushing for years for the United States to establish a universal allowance for families with children. Many other rich countries offer some sort of global financial support to parents and, not surprisingly, these countries also have lower child poverty rates.

But it took the ultimate upheaval – a global pandemic – to push American lawmakers to action. In the spring of 2021, Democrats in Congress turned the CTC, an anti-poverty measure that has been part of the tax code since 1997, into a kind of emergency child allowance. Unlike the original version, which parents received as a single lump sum when filing taxes, the expanded CTC was distributed in monthly payments. From July to December last year, most parents of children under the age of 6 received $ 300 per month per child, and most parents of children aged 6-17 received $ 250 per child. month per child. The new payment was more generous: Families received up to $ 3,600 per child per year with the expanded CTC, compared to just $ 2,000 in the original version. And while the original CTC was primarily available to middle-class families, many more parents were eligible under the expanded program.

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Government programs are often flawed at first, but the fact that most families were eligible for payments meant they were fairly easy to administer. The IRS already had all the information they needed for anyone who had requested children about the previous year’s taxes, with no further questions or forms to fill out. Payments went directly to recipients’ bank accounts or received a check in the mail, with minimal effort.

And the money helped, a lot. As of July 15, the vast majority (88%) of families with children have received a payment of $ 300 or $ 250 per child. Researchers at the Columbia University Center on Poverty and Social Policy found that the July payment kept some 3 million children out of poverty. At the end of 2021, researchers estimated that the program was keeping 3.7 million children out of poverty.

“The families lived in very precarious economic circumstances,” said Megan Curran, one of the researchers on the Columbia team. “Those $ 300 or $ 600 a month – it might not seem like a lot, but when you’re earning very little, it can be enough to give you a financial cushion.”

Reducing child poverty was the big breakthrough that made headlines. But the payments also helped in other ways. Numerous surveys have found that most parents have spent the money on essentials like food, rent, and utility bills.

Low-income parents were particularly likely to spend the money on basic needs. Several studies have found that once the money started coming in, fewer families reported not having enough to eat. “The most commonly reported expense was food,” Curran said. “After that, it was the essential bills – these very basic things that families need.” But the money was also used for other things. When the school year started, about a third of parents who received a CTC payment spent at least a portion of it on school supplies. Another study found that most parents planned to save some of the money for a rainy day. Some said they would spend the money on tutors for their children, perhaps helping to compensate for some of the learning loss caused by more than a year of school interruptions. The payments have helped some families to evade debt or escape eviction.

The results were particularly surprising because there were no money constraints. Parents could spend the payments however they wanted. And despite politicians’ longstanding suspicion that if we simply gave people money, they would run off to buy drugs or cigarettes, families had an overwhelming chance of spending it in ways that directly benefited their children.

Of course, it was possible that expanded payments also had disadvantages. For years, some economists had worried that a child allowance for all families, regardless of whether the parents had a job or not, would give some people a reason not to work. A study published a few months after the CTC expansion estimated the relocation would have prompted 1.5 million workers to quit their jobs and leave the workforce, negating some of the benefits of the payments. In an October opinion column, two co-authors of the study said that, based on their findings, extending the expanded CTC would do more harm than good.

It doesn’t seem to be what happened. When other economists looked at real-life data for when monthly payments were about to expire, they found that only a small fraction of parents said they quit their jobs. And those people were balanced by another group of parents who started working after the expanded CTC went into effect, perhaps because they suddenly had enough money to pay for childcare.

The researchers sliced ​​and diced the data, looking for any negative effects on the economy. There was not. “In any case, we don’t see an impact on parental work,” said Elizabeth Ananat, an economics professor at Barnard College and co-author of one of the studies. “And this is in contrast to all the work on poverty and material hardship, where we see huge, huge effects.”

But the evidence didn’t seem convincing to the one person who controlled the fate of the enlarged CTC: Democratic Senator Joe Manchin. In the fall of 2021, when Democrats were considering a renewal of payments as part of a large social policy bill, it was clear that it wasn’t going to get bipartisan support. This meant that if a moderate Democrat defected, the expanded payments would expire at the end of the year. Some thought the payments were too large. He thought parents shouldn’t be eligible unless they had jobs and he wanted a much lower income ceiling for parents who qualified.

There is some logic to his reasoning: payments shouldn’t discourage people from working and should only go to the most needy families. But the experts told me these changes wouldn’t actually translate into better money. A complicated formula for determining eligibility can prevent people who need the money most from getting it. And aside from the fact that parents weren’t quitting their jobs due to payments, the job requirements could be counterproductive. “It’s the equivalent of kicking someone when they’re down,” Ananat said. “You may have a sick child and have to stay home for a day and lose your job. So you can’t pay for childcare to go out and interview for a lot of new jobs. ”

Some disagreed. By the end of 2021, she would tell other senators that without strict restrictions, parents would spend the money on drugs, despite a mountain of evidence to the contrary. The Democrats’ social policy bill died in the Senate in December, and the latest round of expanded payments went to families that same month, with no sign of renewal in sight.

The impact of losing the money was as dramatic as the gain. In January and February, families with children were more likely to say they were struggling to cover household expenses. Child poverty has increased. Parents reported struggling to pay for diapers and childcare. A Politico / Morning Consult poll conducted in February found that 75% of people who benefited from the expanded CTC said losing their money would affect their financial security.

Meanwhile, researchers like Anat have been frustrated on the sidelines, wondering how such a successful program had gone up in smoke. “The thing that is so heartbreaking to me is that we were able to actually find out what politics did,” Ananat said. “And now we have an answer. Just help the children. That’s all it does. And then they let her go. “