Biden is Giving Parents an Allowance

When Congress was considering the latest covid relief bill, much of the debate centered around two provisions: relief checks and the minimum wage — was $1,400, if combined with the $600 dispatched in January, sufficient to satisfy Joe Biden’s promise of $2000? Should Democrats disregard the parliamentarian’s ruling to push the wage hike through? Comparatively little attention, though, was paid to the piece of the $1.9 trillion American Relief Plan that researchers believe will have the most massive impact: the expanded child income tax credit.

“Expanded child income tax credit” doesn’t sound revolutionary. It could be the fact that the words “tax credit” are political white noise at this point, or the fact that it’s being described as “expanded” – i.e., just more of what parents are already getting. But according to experts who study the effects of poverty, the provisions laid out in the bill Joe Biden will sign into law Friday represent nothing less than a fundamental re-imagining of the American social contract.

“It’s historic because this is not something that the United States would typically even think about,” Chris Wimer, co-director of Columbia University’s Center on Poverty and Social Policy says. “The idea that children shouldn’t suffer, essentially, regardless of their parents’ circumstances? …That’s new.”

Today, the U.S. offers a tax credit of up to $2,000 per child for almost two-thirds of American children, but the credit is tied to parents’ earnings. Roughly a third of American children live in families whose incomes are too low to qualify to receive all of the money, and about 10 percent too poor to receive anything at all. Biden’s bill not only increases the amount of money that families will receive — from $2,000 to $3,000 for children ages five to 17 and $3,600 for younger kids — but expands the criteria for parents who qualify, and will send the money out in direct, monthly installments, rather than forcing parents to wait to get a refund when they file their taxes every year.

Essentially, the changes will bring the United States a lot closer to the kind of child allowance that most other rich countries in the world provide. “It’s a big expansion both in the size of the benefit, but also making sure that the kids who are currently left out of the benefit structure receive the full benefits,” Wimer says.

Six years ago, when Wimer and his colleagues at Columbia University’s Center on Poverty and Social Policy began studying the impact that this kind of child allowance could have in the United States, it almost seemed like a futile research project. “When we started, I think all of us here at Columbia were like: why are we doing this? This is never going to happen. Because the United States is just traditionally a laggard on providing income support and help for our poorest families with children.”

Now, the concept is on the verge of becoming law. “I think we’ve seen a real transformation in thinking around this,” Wimmer says. The potential impact the researchers project is stunning: under the American Rescue Plan, the team at Columbia found the rate Americans living in poverty would fall from 12.3 percent to 8 percent, and the number of children living in poverty will be cut by more than half — dropping from 13.5 percent to 5.8 percent.

For every dollar that went to the expanded tax credit, researchers found that eight dollars were returned to society. The positive impacts included everything from impacts on everything from birth weight, to educational attainment, future earnings, and life expectancy for kids. For parents, there was evidence of significant improvements to health, mental health, and longevity. All of those outcomes would offer a big boost to society at large — increases in future income generated higher tax payments, savings in healthcare costs spread across society, and savings for taxpayers in reduced child protective service use and criminal justice costs.

But to feel the full weight of those benefits would require a longer term commitment to the principles articulated in the policy. As it stands, the American Relief Plan only extends the benefits for one year. Democrats are hopeful about the prospect to making it permanent, and some critics are already fretting about the a kind of child poverty “fiscal cliff” effect  that could plunge millions of children into poverty when the program expires. Wimer thinks those concerns undermine the impact the program’s will have this year.

“If it’s a one-time thing, it’ll still be important. But, if it were made permanent,” Wimmer says, “that would be a truly transformative moment.”