Three cheers for child benefits!

Let’s discuss something worth getting really excited about, the Biden/Romney child tax credit/child allowance proposals.  These proposals would make life much better for poor children and their parents.  A lot better.  Neither proposal goes as far as I would like, but they would be a real improvement and could be made more generous over time.

I will briefly describe the proposals and then discuss the political changes that may have paved the way for a major shift in social policy.

What the proposals do

To see just how exciting these proposals are, it helps to remember what is wrong with our current system of support for families with children, which is centered on a partly refundable Child Tax Credit (actually, two credits) and the Earned Income Tax Credit.  Matt Bruenig emphasizes these difficulties with the current system:

  • Our Child Tax Credit is not fully refundable, which means that children in the poorest households do not benefit from it.  
  • The Earned Income Tax Credit is only available to families with significant labor market income.  This again excludes the poorest households.
  • The current child tax credit and the Earned Income Tax Credit are paid to families once a year, when they file their taxes.  This makes it hard for families to budget.
  • With the EITC, many eligible families (around 22%) do not apply, presumably because of the complex eligibility rules.  It is likely that the same is true for the child tax credit.

The Biden and Romney proposals make full payments available to families without any labor market income.  They would reduce the number of children living in poverty by a third, and reduce deep child poverty by 50%.  They also pay families every month.  For further discussion of the proposals see this from Hammond and Orr or this by Bruenig.

The politics of child payments

Part of the reason these proposals are so exciting is that they reflect a sea change in how we think about poverty, work, government.  The poorest families were excluded from the CTC and EITC intentionally.  The purpose was (depending on your point of view) to create incentives for poor people to work, to punish the non-working poor, to avoid giving the undeserving poor an incentive to have children, and, of course, to do all these things to poor Black people, especially women.  A secondary factor in the structure of the current system was the tendency to run cash benefits through the tax code, to disguise them as tax cuts rather than just admitting they are benefits.  These ideas and impulses have shaped our thinking and limited our options for decades, yet today we may be ready to send monthly checks to poor parents – often single mothers – who do not work. 

Why might we be ready to give modest amounts of unconditional cash to poor families today, assuming we are?  What changed?  I can only guess, but here are some ideas.

Part of what changed is simply that conservatives succeeded in eliminating cash payments to the poorest families.  This means that conservatives have had less to complain about, and the media has had fewer occasions to write stories about poor Black people on welfare.  (As Martin Gilens has shown in his work on welfare, these stories were clickbait before there was clickbait.)  In other words, the politician- and media-induced panic about poor Black women having babies has subsided simply because so few unconditional cash benefits are now available. 

If this was the only thing that has changed, we would expect conservatives to re-run all the old Reagan/Clinton-era arguments against these new child assistance proposals, and we would expect these arguments to be just as effective now as they were 25 years ago.  Marco Rubio and Mike Lee have already rejected Romney’s proposal on the ground that it undermines work. 

But I suspect there have been real changes in our lifestyles and attitudes and that the old scripts will be less effective today. 

Teen pregnancy rates are down.  Single motherhood (and fatherhood) has become much more common.  Although most people think solo parenting is not ideal, my guess is that punitive attitudes towards single parents have diminished.  Most people know and love a young single mother just like they know and love a person who is gay.  Crime is way down, which makes vague warnings about social decay less persuasive.  Economic changes have arguably made raising kids more of a financial challenge for low- and middle-income parents.  The cost of childcare and the price of college have risen much faster than incomes.  Matt Yglesias makes this argument here

A more general point is that after decades of rapid social and economic change we may have a less moralized and conventional view of prudent behavior and individual responsibility, and a more realistic view of the challenges of raising children.  If this is what is going on, John Stuart Mill would approve. 

Another more technical factor is that we now are willing to give financial assistance to families that are not desperately poor (the EITC and CTC do this; AFDC did not).  This means that benefits can decline gradually with income if they are means-tested, and the work disincentive effect of cash assistance is lessened.  (There is still an income effect that discourages work; the slow phase-out of benefits reduces the substitution effect.)

Support for child benefits could reflect the influence of the (progressive) policy elite.  There really are serious problems with the existing system, and analysts have been patiently explaining these problems for years.  In addition, there is a new body of empirical research that documents the long run benefits of providing material support to poor children.  (There are even a few papers showing multi-generational effects.)

Finally, there is a growing desire on the part of Democrats to use government to help people.  Democrats believe they need to provide people with tangible benefits that are generous enough to make a difference in their lives.  Due to the work of Suzanne Mettler and others, Democrats also believe that these benefits should be visible, not hidden in the tax code or in subsidies in insurance exchanges. 

It is far from clear that many Republicans will join Romney and endorse a child benefit that is not tied to work.  But it is worth noting how far our attitudes have changed to make something close to universal child payments a live possibility.