The COVID-19 relief bill working its way through Congress is full of big ideas to help people. But there’s one idea that’s so big, it was politically unthinkable not that long ago.
President Biden and Democratic lawmakers want to fight child poverty by giving U.S. families a few hundred dollars every month for every child in their household — no strings attached. A kind of child allowance.
If this proposal survives the wrangling in Congress and makes it to Biden’s desk, experts say it could cut child poverty nearly in half.
The idea even has some bipartisan support. Republican Sen. Mitt Romney, of Utah, has pitched his own, smaller version of a child allowance.
More than 10 million of the nation’s children lived below the federal poverty line in 2019, according to the U.S. Census Bureau. And the pandemic has made life even harder for those already vulnerable families.
Over the past year, job losses have been especially concentrated among single mothers. And with so many school cafeterias still closed and unable to feed kids experiencing food insecurity, researchers are seeing alarming levels of child hunger.
Compared to other wealthy nations, the United States does little to reduce child poverty. According to the Organisation for Economic Co-operation and Development, the U.S. ranks 37th among OECD nations — barely ahead of last-place Turkey — for how little it spends on family benefits: just 0.6% of gross domestic product in 2019.
“Right now, less than 3% of families [in the U.S.] receive any kind of cash assistance,” says C. Nicole Mason, who heads the Institute for Women’s Policy Research. “The social safety net has all but eroded and dissipated over the last two decades or so.”
To begin to repair that safety net, Democrats would give caregivers $300 a month for each child under 6, and $250 a month for older kids — for at least the next year. Romney’s benefit would last beyond the one-year window and be more generous for younger kids, $350 a month, while also reaching higher-income families. Because his proposal also cuts other programs, though, economists estimate it could have less overall impact on poverty.
The monthly benefit is designed to help families manage unpredictable incomes and unpredictable expenses, like a child’s illness or a car repair.
“If you have a child allowance like this, all of a sudden you have more of a buffer, more of a cushion that can address those concerns,” says Bradley Hardy, a professor of economics at American University. “My view is that it’s the right thing to do, but also that it’s sound economic policy.”
“Children become disadvantaged for life”
Poverty can act like an invisible weight that children carry well into adulthood.
“There is fascinating research out there that shows children in poverty, their brains are actually not developing at the same pace or in the same ways as children in well-resourced households, so that children become disadvantaged for life,” says Elaine Maag, who studies tax policy at the Urban Institute.
Research suggests that investing money to lift kids out of poverty, especially young children, has enormous long-term benefits.
“They’re not only better today, but it turns out they do better in school, they’re more likely to graduate high school, more likely to attend college, less likely to be recipients of public assistance,” says Hilary Hoynes, a professor of public policy and economics at the University of California, Berkeley. “When they’re older, their health is better. They’re less likely to be engaged in criminal activity, and they live longer. And all of those things are great for the child, but they’re also great for society.”
It turns out they do better in school … When they’re older, their health is better. They’re less likely to be engaged in criminal activity, and they live longer. And all of those things are great for the child, but they’re also great for society.”
Hilary Hoynes
In 2015, Congress convened a committee to study how to cut child poverty in half within a decade. Hoynes served on that committee, as did Tim Smeeding, a professor of public affairs and economics at the University of Wisconsin-Madison. They say the group issued a clear warning to policymakers: Alleviating child poverty would cost billions, yes, but not doing so would be even more expensive.
“We argued that the cost of not doing anything was $800 billion” in lost productivity, as well as increased costs associated with crime and health care, Smeeding says. “On the other hand, the cost of doing one of our [recommendations] was about $100 to $110 billion — an 8-to-1 return.”
In its report, the committee proposed the kind of monthly benefit that Democrats and Romney are now embracing. Both plans are estimated to cost between $110 and $120 billion, though Romney has proposed offsetting much of that cost by cutting other safety net programs.
How we got here
The politics of family benefits have come a long way. Among the first government-sponsored welfare programs in the U.S., the “mothers’ pension” gave a stipend to qualifying widows and other single mothers, starting in 1911. One study found the sons of those accepted to the program went on to get more schooling, earn more money and even live longer compared to the sons of women whose applications were rejected.
We argued that the cost of not doing anything was $800 billion. … On the other hand, the cost of doing one of our [recommendations] was about $100 to $110 billion — an 8-to-1 return.”
The 1935 Social Security Act included the Aid to Dependent Children program (later renamed Aid to Families with Dependent Children), which again primarily directed aid to single mothers. Benefits remained small, and government caseworkers sometimes intruded into families’ private lives.
Between the 1960s and 1990s, many states reduced benefits further while introducing work requirements and other limitations.
Then, in 1996, President Bill Clinton signed legislation aimed, he said, at “ending welfare as we know it.” Pamela Herd, a professor of public policy at Georgetown University, says the bipartisan welfare reform package — which combined benefit cuts, time limits and work requirements for caregivers — was focused on one key policy idea.
“Nearly all of the emphasis was basically on getting poor, single mothers back into the workplace.”
At the time, politicians argued that benefits should be tied to work, out of fear that a regular cash allowance might keep people out of the workforce, lowering overall economic growth.
Hilary Hoynes explains, “What was missing in that entire conversation was that we’re talking about assistance for children.”
The 1996 welfare reform law ended previous cash assistance programs in favor of a state block grant program called Temporary Assistance for Needy Families, which added more red tape and reached fewer people. By 2019, fewer than 1 in 4 families in poverty received TANF cash assistance — compared to about 7 in 10 helped by the previous programs.
Then, in 1998, two years after welfare reform passed, a broader form of family assistance was introduced: the Child Tax Credit, which is the basis of the current child benefit proposals.
Right now, the tax credit maxes out at $2,000 a year. But Elaine Maag says millions of children live in families that don’t make enough money to get the full benefit — or simply don’t get any benefit because they don’t file their taxes, maybe because of unstable housing or knowledge barriers.
“This results in this upside-down benefit, where the lowest-income children get the smallest benefit,” Maag says.
One constant across the decades: The money the U.S. government provides to families has never been enough to truly drive down child poverty the way Social Security payments, with their regular cost-of-living increases, worked to reduce poverty among senior citizens. Today, children in the U.S. are more likely to be living in poverty than adults, or, for that matter, children in other wealthy countries that provide child payments — countries like Germany, South Korea and Canada.
Research on the effects of Canada’s program shows that parents and caregivers use the money to cover rent, groceries, transportation, education and computer costs. Interestingly, one study found “large and significant decreases in both alcohol and tobacco spending among families,” perhaps because the benefit eased parents’ stress.
And, despite conservative arguments, Canada’s plan didn’t discourage people from working.
“Contrary to the stereotype of the ‘welfare queen,’ the employment and labor force participation rates of single mothers increased thanks to the child allowance, as did employment rates of educated married women,” reads one analysis from the Niskanen Center, a libertarian think tank. Partly that was because recipients used the money to pay for childcare, thus allowing them time to work.
“It is not pro-family to provide cash payments”
Romney isn’t the only Republican embracing the idea of a child benefit.
Sen. Marco Rubio of Florida and Sen. Mike Lee, Romney’s Utah colleague, have proposed expanding the current Child Tax Credit to $3,500 per child, and $4,500 per child under 6.
Hilary Hoynes says this expansion would continue the status quo, leaving behind families with the lowest incomes.
Rubio and Lee argue that a cash allowance with no strings attached could discourage recipients from working — exactly the same argument made during the welfare reform debate in the ’90s.
“It is not pro-family to provide cash payments without ensuring that at least one parent has a stable job or a path to getting one, because it makes the family reliant on those cash benefits,” Rubio wrote in National Review.
Multiple economists tell NPR that, today, other threads in the social safety net, especially the Earned Income Tax Credit, offer parents and caregivers powerful incentives to work.
If Democrats were only proposing a child allowance, Tim Smeeding says, it could lead to fewer workers. But because they’re also proposing other work incentives, including more child care subsidies, “the net effect will be to increase work amongst the lower income recipients.”
The Romney plan’s potential impact on labor force participation is less clear, as he has recommended cuts to the EITC and other programs to pay for his proposal.
House Democrats plan to vote Friday on the COVID-19 relief bill, including their child benefit proposal. They do not need to win over reluctant Republicans in the Senate to pass the bill, with Vice President Kamala Harris available to cast the tie-breaking vote.
Still, while the Democrats’ plan has the fast track at the moment, it’s possible that some ideas from the other side of the aisle — not to mention decades of welfare debate in the U.S. — could influence what ultimately passes.
