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Lessons in Conquering Child Poverty

September 17, 2023
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Lessons in Conquering Child Poverty
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In January, it will be sixty years since Lyndon Johnson, in his first State of the Union address, announced an “unconditional war on poverty.” Johnson’s goal was to eliminate acute economic need among Americans of all ages, but he would go on to emphasize the negative effects of child poverty, including restricted access to “the skills demanded by a complex society” and a “mounting sense of despair which drains initiative and ambition and energy.”

Research carried out in the past half century has supported Johnson’s point. People who grow up in poverty tend to have fewer academic qualifications, higher dropout rates, lower incomes, and more physical and mental health problems. Some individuals, of course, emerge from a background of childhood deprivation and lead highly successful lives. But, in general, as was the case in Johnson’s day, poverty is associated with human misery and a closure of “the gates of opportunity.”

The good news is that we now know how to reduce child poverty dramatically, and it’s not very complicated: provide more financial resources to impoverished families with children. The bad news is that we’ve also learned how to greatly increase child poverty: eliminate prior poverty-reduction efforts that were working. During the past three years, a dramatic policy reversal has demonstrated just how potent both of these approaches can be.

In early 2021, when the Biden Administration and congressional Democrats passed the $1.9-trillion American Rescue Plan without a single Republican vote, they expanded the child tax credit, a pro-family tax relief that has long been on the books in a limited form. The Rescue Act not only boosted the maximum tax credit for each child in a family from two thousand dollars to three thousand (or thirty-six hundred for children under six) but also made the credit accessible to low-income households that previously didn’t qualify because they paid little or no federal income tax. The act also converted a portion of the credit from one that families could claim from the I.R.S. at the end of the tax year into a cash payment that the government sent out every month.

The expansion of the child tax credit lasted until the end of 2021. Then it expired because Democrats couldn’t get fifty votes in the Senate to pass Biden’s Build Back Better plan, which would have extended it. In August, 2022, when the passage of the Inflation Reduction Act salvaged some of Biden’s domestic agenda, another expansion of the child tax credit got left out, and Democratic efforts to include it in a subsequent spending bill failed. So the policy didn’t exist in 2020, went into effect in early 2021, and was eliminated for 2022. This unusually clean time line presented a unique opportunity for officials and researchers to gauge the policy’s effects.

How did things turn out? According to the Census Bureau’s Supplemental Poverty Measure, which, unlike the regular poverty measure, includes the impact of government tax and spending programs, the child poverty rate in 2020 was 9.7 per cent. In 2021, the rate fell to 5.2 per cent, a decline of nearly half. In 2022, it shot up to 12.4 per cent—the measure’s biggest one-year increase on record. In terms of raw figures, the turnaround was equally dramatic. The number of children living in households under the poverty line went from 7.2 million in 2020 to 3.8 million in 2021 to nine million in 2022.

The Census Bureau, when it published the 2022 child-poverty figures earlier this week, was careful to point out that the huge increase can’t be entirely attributed to the end of the expanded child tax credit. There were other policy changes last year that affected poverty rates, including the expiration of pandemic-era stimulus payments and changes to the earned-income tax credit, another program designed to help people with low incomes. But, even as the bureau sounded this cautionary note, it emphasized the impact of eliminating the expanded child tax credit: “In 2021, the fully refundable Child Tax Credit kept over twice as many people out of poverty (5.3 million individuals) as it did in 2022.”

The bureau didn’t spell out precisely what effect the policy reversal had on the child poverty rate, but the Center on Budget and Policy Priorities, a liberal think tank, did the math. If the 2021 expansion had still been in effect last year, Sharon Parrott, the center’s president, wrote in a statement, “about 3 million additional children would have been kept out of poverty,” and “the child poverty rate would have been about 8.4 percent rather than 12.4 percent.” That’s a huge difference.

Many of the victims of the policy about-face were children in households that didn’t earn enough to be eligible for the credit before 2021, were then able to access it for a year, and are now ineligible again. “Those left behind were disproportionately children of color, young children, and children in single parent families, larger families, rural areas,” researchers at Columbia University’s Center on Poverty and Social Policy found. While the expansion was in effect, the researchers added, “families used the credit to buy food, pay bills, and invest in child-related items and services, including education and child care.” Now many of these gains are being reversed.

To be sure, the one-year expansion wasn’t cheap. According to the Joint Committee on Taxation, it cost taxpayers $109.5 billion. That’s a large sum, but the federal budget is full of large sums, including about $1.2 trillion for Social Security this year, $1.1 trillion for national defense, and more than thirty billion dollars in subsidies to the nation’s 2.6 million farmers and ranchers. (By comparison, there are more than seventy million Americans under the age of eighteen.)

Moreover, if Congress did expand the child tax credit again, it could take some steps to lower the cost. Earlier this year, for example, the economists Wendy Edelberg and Melissa Kearney published a proposal that would trim the credit for families with no or very low taxable incomes and start to phase it out at a lower household-income level. The economists said that this plan would “reduce child poverty rates almost as much as a policy similar to a permanent continuation of the 2021 CTC,” at an additional annual cost of nearly ninety billion dollars.

With the budget deficit now running at more than $1.5 trillion, and interest payments on the national debt totalling more than six hundred and fifty billion dollars this year, according to the Congressional Budget Office, permanently expanding the child tax credit would generate political pressure to make spending cuts in other areas, but that shouldn’t rule it out as an option. The essence of a properly functioning political system is drawing up priorities and making policy choices that reflect them. For a variety of reasons, including the fact that people under the age of eighteen can’t vote, the U.S. polity hasn’t assigned a very high priority to achieving Johnson’s goal of greatly reducing child poverty. The period since 2020 shows that it’s eminently doable if the political will is there. Of course, that’s a big if. ♦

>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : The New Yorker – https://www.newyorker.com/news/our-columnists/lessons-in-conquering-child-poverty

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