“We said we would not accept the levels of child poverty that we had as a permanent factor in our democracy,” Democratic Senator Michael Bennett told me. “Not only did the world not end, but the families I spoke to — who spent their money on everything from school uniforms to bicycles — had their tension reduced. That was the word they used. They got rid of a crushing weight.”
Bennett spoke of the best public policy adopted in the Joe Biden era, which he himself helped to design: the expansion of the children’s tax credit. The measure gave US$3,000 (R$14,000) to parents for each child between the ages of 6 and 17 and US$3,600 (R$16,700) per child up to 6 years old.
It was unconditional help, just cash. It could be used to pay for day care, food, clothes, anything. The measure treated parents, even the poor, as experts in family finances — a discreetly radical idea in American social policy. It was a huge experiment, studied extensively, and now we can declare: it worked.
A Columbia University study found that the policy reduced child poverty by more than 25%, lifting 3.4 million children above the poverty line despite the rampant pandemic. Census data shows that the number of parents who said their children didn’t have enough to eat has dropped by more than 3 million.
Conservatives warned that the benefit would discourage parents from working, but economists have watched closely and there is no evidence that this has happened. The poor, like the rich, want to live on more than US$3,000 per child per year.
Spending by families that received the incentive was tracked and studied because Americans harbor a deep suspicion that if you give money to the poor, they will spend it on luxuries and booze. But among low-income families, more than 90% of the money was spent on food, water and electricity, clothing or education.
For people who have trouble paying their bills, there is no luxury as great as being able to worry a little less about money. As far as I know, it was the first public policy to go viral on TikTok: people dancing, laughing, happy because it was easier to pay the rent or take the car to the repair shop.
All this was data for just two months. The real influence of financial aid of this kind manifests itself over time. Another research, also from Columbia, looks at a series of studies on the benefits of cash payments for families with young children. The conclusion: a benefit of US$ 3,000 (R$ 14 thousand) per child would pay itself tenfold.
These programs bring higher long-term earnings, higher educational attainment, higher birth weight, lower neonatal mortality, better physical and mental health in adulthood. They result in less crime, higher tax revenue, longer life expectancy.
“It worked,” says Bennett. “That’s why it’s so difficult to understand the situation we find ourselves in now.”
The situation: the expansion of the tax incentive is over. The American Rescue Plan allocated the extra money for one year. The theory was that the policy would be well received and Congress would not let it go. But the theory was wrong, the project died and there is no immediate hope of a resurrection. Once again, we accept pre-pandemic levels of child poverty as a permanent feature of our democracy.
And so the Biden administration’s greatest success has, for the time being, turned into a political failure. What went wrong? How can politics be rescued or, at least, how can failure not be repeated? I’ve been asking these questions of politicians, analysts and activists. Some theories stand out. One is that the Democrats were wrong when they let the measure expire after a year — not enough time to create the necessary expectations for the political pressure they were counting on.
“Public policy can become part of our vision of what a government should do,” Jamila Michener, a political scientist at Cornell University, told me. “Classic cases are Social Security and Medicare. But a lot needs to happen for these effects to take root. People need to know where the benefit comes from, who needs it, and then be motivated — organized to respond in a political way.”
This goes back to a broader problem for Democrats, which was simple confusion about what the policy was and where it was coming from. It was a downside to enacting the policy as part of a larger stimulus package.
The fight over Obamacare, which dominated American politics in 2009 and 2010, made it clear that whether you liked the law or hated it, the Democrats were responsible for it. But there wasn’t a huge discussion about child poverty that culminated in the policy they enacted.
Biden’s proposed Build Back Better plan would have extended the children’s tax credit, but it also proposed doing dozens of other things. It made sense as a legislative strategy, but it made it virtually impossible to get the message across.
Being for or against the BBB did not mean being for or against the children’s tax credit, climate and early childhood education policies, the expansion of Obamacare, changes to corporate taxes, or any of the other dozens of points in the package. If there was one thing that defined it in the public mind, it was its starting price: $3.5 trillion.
This did not represent an unexplained communication error. It is the consequence of a bankrupt Senate that now does most of its work through the bizarre process of budget reconciliation. Two of these problems reached the BBB. First, before writing such a project, it is necessary to define what its cost will be. “You start the discussion at the wrong point,” Sharon Parrott, president of the Center for Budget and Policy Priorities, told me.
Second, because you can only pass one or two such texts a year, you have to include everything you fear the other side will try to block. It is difficult enough to get voters to pay attention to the discussion of an issue and to hold their parliamentarians about it. Getting them to follow the discussion of 6 or 12, all stuffed into one legislative bag, is impossible. This is yet another way in which legislative obstruction has left the government more confused and less accountable.
There’s also the Joe Manchin and Kyrsten Sinema factor. If the Democrats had won the Senate elections in North Carolina and Maine, Build Back Better might have passed. But with the House split evenly, 50 to 50, Democrats need to be fully united to pass anything without a Republican vote — and they’re not. Manchin’s vote of West Virginia in particular was crucial, and the Democrats lost it.
Whether they could have enlisted his support is something I cannot answer convincingly.
But those who dealt with Manchin say he found the children’s tax credit especially problematic. In his view, the incentive would give too much money to poor people who weren’t working, encouraging them to remain unemployed or quit their job if they had one. Bennett said, frustrated, “I showed him the evidence that countries with higher child credit have higher labor force participation rates than the US, but I couldn’t persuade him.”
We must not lose sight of the moral core. There are ways to make it easier for poor parents or, if need be, to make it harder for them to remain unemployed. Condemning children to poverty should not be one of them. “There’s this fundamental question of when, as a country, are we going to see the humanity in each child,” says Parrott. “It is unacceptable that we leave children living in deep poverty because we don’t trust their parents or want to punish them.”
And inflation is no reason to leave children living in poverty. Extending the expanded tax credit would cost about $100 billion a year — less than 0.5% of US GDP. And this could easily be implemented in conjunction with policies that raise taxes or reduce spending in other sectors, nullifying the ultimate impact on spending.
The story isn’t over yet. There is still hope that some of the BBB’s investments could be revived, including a smaller child tax credit — large companies are lobbying for an extension of a research tax break that could be bundled with such a credit.
Republican Senator Mitt Romney has a great plan, and while he hasn’t found many allies in the party so far, hope is the last to die. And maybe Manchin will wake up one fine day and decide to accept a deal. Reversing Trump’s tax cuts, which he says he favors, would raise more than $1.5 trillion.
Manchin wants to set aside half of that amount for deficit reduction — great. The rest could be split between climate investments and a permanent children’s tax credit, something that would cost less than the American Rescue Plan, which wouldn’t run out completely until a person reaches $150,000 in family income. .
Here is my optimistic interpretation, although I am not very optimistic. A tax credit of this size would have been unthinkable in American politics a decade ago. But by 2021 it was being proposed by moderates like Bennett and Republicans like Romney, and Democrats passed it the first chance they got.
Since then, the arguments in favor of it have only strengthened: we saw that it worked very well, how many people it helped. It may or may not be reactivated, but for now it remains firm in the area of what is politically possible. The expanded children’s tax credit made clear something we’ve always known: that so much child poverty in a country as rich as ours is a political choice — an abomination.
“I think this will become permanent fiscal policy someday,” says Bennett. I say the same. And I hope that day comes very soon.
