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Last year, Congress expanded the federal child tax credit and made the money available in installments, rather than all at once after federal income taxes are filed. Millions of parents received checks of up to $300 a month starting in July. The expansion is credited with lifting more than three million children out of poverty.
But, the expansion was temporary and lawmakers failed to agree on a plan to extend the larger tax credit. The last checks were sent out in December. Predictably, millions of children were back in poverty by January.
Unfortunately, a Democratic plan to reinstate the credit, part of the Biden administration’s larger social safety net plan, is stalled as West Virginia Democratic Sen. Joe Manchin — and Senate Republicans — have opposed it.
The expanded credit offered $3,000 per child ages 6-17 years old and $3,600 per child under 6. And, beginning in July of last year, it could be paid out monthly in $300 allotments, making the money available throughout the year. The older credit, which remains in effect, is $2,000 per child, and only available after a parent or guardian files their federal income taxes.
In Maine, the expanded child tax credit was estimated to benefit 142,000 families with 229,000 children, according to the White House.
A March study from the National Bureau of Economic Research suggests that the benefits of returning to an expanded child tax credit would greatly outweigh its price. It estimates that the expanded program would provide benefits worth about $980 billion per year.
So, why is investing in children seem to be such a low priority for lawmakers? In its online newsletter, Planet Money, NPR took a closer look at the situation.
“The failure of Washington to renew the enhanced Child Tax Credit continues a long tradition in America: Our welfare system has long spent generously on the old, but it has consistently skimped on the young,” it reported.
The expanded child tax credit did carry a significant price tag, around $100 billion per year more than the existing credit, for a total cost of $225 billion per year, according to the Tax Policy Center. That’s a lot of money, but less than a quarter of the annual cost of Social Security, about a third of the cost of Medicare, and about the same as the budget for the Department of Agriculture, NPR reported. Even with the enhanced child tax credit, America spent only about 7 percent of its federal budget on kids in 2021, according to the Urban Institute.
As a result, the U.S. has a higher rate of child poverty than many other affluent countries.
One reason for the lack of investment, identified in a recent National Bureau of Economic Research report, is that economists and policy makers tend to overemphasize the costs of social programs rather than their benefits. According to the researchers who did the report, less than a third of articles in research journals about such programs documented their benefits.
A recent study by Harvard economists found that spending on programs, especially those for health and education, for low-income children had far greater returns over the long term than spending on adults.
The problem often is that these benefits accrue over a long period of time, and the Congressional Budget Office, which assesses the costs and benefits of government programs, only looks out 10 years.
Another problem is that kids don’t vote (and, often their parents don’t either), while older Americans are reliable voters. Groups like AARP are better funded and have more members than the Children’s Defense Fund.
Race may also be a factor. Older Americans are also more likely to be white, like the majority of members of Congress and state legislatures. “The elderly population in the US is 77 percent white non-Hispanic in contrast to children who are slightly less than half white non-Hispanic,” the authors of the March NBER report found. Beyond the child tax credit issues, this is a disturbing statistic.
The expanded child tax credit was a good investment and it improved the lives of low-income children and their families. Members of Congress — notably Republicans who have not supported a permanent expansion — should work to reinstate it.