Imagine if the federal government could lift millions of American children out of poverty with a single program. This program will help parents prepare nutritious meals, pay school fees, and even save their children’s college tuition—all without negatively impacting the economy.
You don’t need to introduce. We only had it last year… and not now.
Almost all empirical indicators, the Expanded Child Tax Credit (CTC) — a policy adopted in 2021 that gave parents a few hundred dollars a month for each child in their family — has been a wild success, drastically reducing child poverty and making it easier for families to buy food and pay for housing and utilities. Combined with other COVID-19 relief measures, especially the stimulus payments that have been made to Americans in April 2020, January 2021 as well as March 2021CTC has helped protect families from the economic disruption caused by the pandemic.
Researchers can rarely say with certainty that a program like CTC actually worked. Politicians usually view politics in the abstract, hypothetically, knowing that a given piece of legislation may not achieve their goals. But by the time Congress thought about expanding the CTC, a trove of cold, hard data had accumulated showing that the program had done a lot to help children and families.
But this was not enough to save him. The Extended Tax Credit ended in December 2021 and the chances of it being extended are slim. This tells you everything you need to know about what is stronger in Washington – politicians’ biases or factual evidence.
By the time the pandemic hit, reformers had been pushing for years for the US to establish a universal benefit for families with children. Many other rich countries provide some financial support to parents, and not coincidentally in these countries also lower child poverty.
But it took the ultimate shock – a global pandemic – to spur American lawmakers into action. Spring 2021 Democrats in Congress have changed CTC, an anti-poverty measure that was part of the Tax Code since 1997, in a kind of emergency child benefit. Unlike the original version, which parents received as a lump sum when they filed their tax returns, the extended CTC was distributed in monthly installments. July to December last year, most parents of children under 6 received $300 per month per child, and most parents of children aged 6 to 17 received $250 per month per child. The new payment was more generous, with families receiving up to $3,600 per child per year under the expanded CTC, up from $2,000 in the original version. And while the original CTC was mostly available to middle-class families, many more parents were eligible for the expanded program.
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Government programs often falter at launch, but the fact that most families are eligible means they are fairly easy to manage. The IRS already had all the information they needed for those who claimed children for the previous year’s taxes – no additional applications or forms to fill out. Payments went straight to recipients’ bank accounts or they got a check in the mail, with minimal fuss.
And the money helped – a lot. Since July 15, the vast majority (88 percent) of families with children received payment or either $300 or $250 per child. Researchers at Columbia University’s Center for Poverty and Social Policy found that the July payout lifted 3 million children out of poverty. At the end of 2021 researchers evaluated that the program keeps 3.7 million children out of poverty.
“Families lived in very difficult economic conditions,” said Megan Curran, one of the researchers on the Columbia University team. “That $300 or $600 a month might not sound like much, but when you’re making very little, it might be enough to give you a financial cushion.”
Reducing child poverty was an important finding that made headlines. But the payments helped in other ways as well. Several polls found that most parents spend money on the most important things like food, rent, and bills.
Low-income parents are especially likely to spend money on basic needs. Several research found that once the money started coming in, fewer families reported that they didn’t have enough food. “The most common expense item is food,” Curran said. “After that, there were the essentials bills — the most basic things that households need.” But the money was used for other things as well. When the school year began, about a third of parents who received the CTC payment spent at least part of it on school supplies. Another study found that most parents planned save some money for a rainy day. Some said they would spend money on tutors for their children – perhaps this will help offset some of the learning loss due to more than a year of interruptions in the work of the school. The payments helped some families dig yourself out of debt or avoid eviction.
The findings were especially striking because there were no strings attached to the money. Parents could spend the payments as they saw fit. And despite the statements of politicians old suspicion that if we just gave people money, they would run to buy drugs or cigarettesfamilies overwhelmingly spent it in ways that directly benefited their children.
Of course, it is possible that advanced payments also had disadvantages. For years, some economists have been concerned that child support for all families, whether parents work or not, will give some people a reason not to work. Research published months after the CTC expansion estimated that the move would encourage 1.5 million workers to quit their jobs and leave the workforce, which would void some benefits. In an October opinion column, the two co-authors of the study argued that, based on their findings, extending the extended CTC will do more harm than good.
It doesn’t seem to be what happened. When other economists looked on real data about when monthly payments were made, they found that only a small proportion of parents said they had quit their jobs. And these people were balanced by another group of parents who started working after the expanded CPC went into effect – perhaps because they suddenly had enough money to pay for childcare.
The researchers sliced and shredded the data looking for any negative impact on the economy. It wasn’t. “However we cut it down, we just don’t see the impact on whether parents work,” said Elizabeth Ananat, professor of economics at Barnard College and co-author of one of the studies. “And that contrasts with all the work on poverty and material hardship, where we’re seeing huge, huge effects.”
But the evidence didn’t seem convincing to the one person who controlled the fate of the expanded CTC: the Democratic senator. Joe Manchin. By fall 2021, when the Democrats Thinking about resuming payments it was clear that he would not win bipartisan support as part of a vast social policy bill. This meant that if one moderate Democrat defected, the extended payments would expire at the end of the year. Manchin thought the payouts were too high. He didn’t think parents should have the right if they didn’t have a joband he wanted parents to have a much lower income limit.
There is a certain logic in his reasoning – payments should not discourage people from working, but should go only to the most needy families. But experts have told me that these changes will not actually lead to more efficient spending of money. complex formula to determine eligibility can prevent the people who need the money most from getting it. And aside from the fact that the parents didn’t quit their jobs because of the payouts, the job demands can be counterproductive. “It is tantamount to kicking a person who is lying down,” Ananat said. “You can have a sick child and have to stay home for the day and lose your job. Then you can’t pay for childcare to go out and interview for a bunch of new jobs.”
Manchin disagreed. By the end of 2021 he reportedly told other senators that without strict restrictions, parents will spend money on drugs – despite a lot of evidence to the contrary. Democrat Social Policy Bill died in the Senate in Decemberand the last round of expanded payments was paid to families in the same month, with no signs of an extension in sight.
The consequences of losing money were as dramatic as getting them. In January and February, families with children more often said they struggled to cover household expenses. Child poverty has increased. Parents reported on the fight pay for diapers and baby care. Politico/Morning Consult Poll conducted in February found that 75 percent of people who used extended CTC said that losing money would affect their financial security.
In the meantime, researchers like Ananat have stood by in desperation, wondering how such a successful program went to waste. “It breaks my heart that we were able to figure out what this policy did,” Ananat said. “And now we have an answer. It just helps the kids. That’s all he does. And then they just let go.”