Originally posted on: National Public Radio (NPR)
By: Cory Turner
Blink and you could have missed it.
For six months, the United States experimented with an idea that’s new here but is already a backstitch in the social fabric of many wealthy nations: a monthly cash payment to help families cover the costs of raising children. Less than a year in, though, this U.S. experiment, known as the expanded child tax credit, has already been unwound by a deadlocked Congress.
Still, it’s worth asking: What did it accomplish? Here’s what the data tells us.
The benefit reached more than 61 million children in December
In March 2021, Congress blew the doors off a preexisting child benefit known as the child tax credit. As part of the American Rescue Plan, lawmakers made three key changes:
- Congress chose to disburse half of the benefit in monthly payments, from July to December, instead of forcing families to wait for all of it to arrive as a lump sum at tax time.
- Lawmakers increased the benefit from $2,000 per child per year to a maximum of $3,600 per child 5 or younger and $3,000 for kids 6-17. For many families, that meant six monthly payments of $300 or $250, respectively, and the rest at tax time.
- Finally, Congress closed a hole that prevented roughly one-third of the nation’s children and half of all Black and Hispanic children from fully benefiting — because their families earned too little income.
This expansion reached 61.2 million children across more than 36 million households in December.
The Tax Policy Center estimates that by the end of tax season, families will have received an average of $4,380 from the 2021 version of the child tax credit, compared with the $2,310 they got under the previous version.
The payments cut monthly child poverty by roughly 30%
“The first payment, in July, kept 3 million children out of poverty,” says Megan Curran, policy director at the Columbia University Center on Poverty and Social Policy. By December, Curran says, the benefit was keeping 3.7 million children out of poverty.
Curran and her colleagues, Zachary Parolin and Sophie Collyer, looked at the benefit’s effect on child poverty rates from month to month.
In July 2021, for example, with the first monthly payment, Parolin and Curran write that “the monthly child poverty rate fell from 15.8 percent to 11.9 percent. The first Child Tax Credit payment in July 2021, on its own, reduced the monthly child poverty rate by… 26 percent.”
Overall, Curran tells NPR, the “monthly child tax credit payments have, in effect, by the end of their six months, reduced child poverty in the U.S. by about 30%.”
“That extra money helps out a lot,” says Lavern Riddick of Philadelphia, who lost her job on a hotel housekeeping team when the pandemic hit and, as a single parent, had trouble working outside her home while her kids were learning remotely. “We struggle day to day. I’m not going to lie, ever since I stopped working [at the hotel] it’s been a struggle.”
The expansion gave more help to millions of kids who needed it most
One of the reasons these monthly payments had such a significant impact on child poverty, Curran says, is because the expansion closed a large hole in the child tax credit.
Under the old rules, at least 23 million children didn’t qualify to receive the full benefit because their families didn’t earn enough money. As an example, Curran points out that a two-parent, two-child household needed to earn at least $36,000 a year to qualify for the full benefit. As a result, many of the kids who needed help the most got the least.
While 2021’s short-lived expansion closed that hole, now that the monthly payments have stopped, Curran and her Columbia colleagues project that the monthly child poverty rate could quickly jump back up by one-third or more — just between December and January.
Families spent the extra cash on basic needs
What happened when families earning less than $35,000 a year suddenly had extra money in their bank accounts each month? They used it to buy food, clothing and school supplies, pay their utility bills, and cover the rent.
That’s according to one analysis of U.S. Census Bureau data by the Center on Budget and Policy Priorities, which found that 91% of low-income families used their monthly benefit on these basic needs.
Less often, families spent the benefit on vehicle payments (19% of families), child care (16%) or to pay down old debts (17%).
“Me and my son could go get some fast food without, you know, making sure I didn’t hit a negative balance,” says Odessa Davis, who lives with her 12-year-old son in suburban Washington, D.C., and works as a public school paraeducator. “I was able to pay for gas and anything my son needed for school.”
Davis says she earns too much money to qualify for public assistance, but not enough to feel economically secure. As such, her monthly $250 benefit offered peace of mind, especially over the summer when she wasn’t earning a steady school paycheck. “Any unexpected expense that came, I was able to pay it without any worry of, like, ‘I don’t have any money to cover this.’ “
For Riddick, in Philadelphia, the monthly child benefit helped her keep the gas on in her home after she’d fallen behind on her payments and was threatened with a shut-off. She says it also helped pay for underwear, socks, school supplies and medicine for her family.
What happens if you broaden the lens and look at spending trends for families earning up to $150,000 a year? A one-month analysis of spending data from the Social Policy Institute at Washington University in St. Louis found that basic needs spending — on food, essential bills, clothing, rent/mortgage and school expenses — still topped the list, though a large share of families (43%) reported mostly using the money to pay down debts.
The monthly payments slashed food insufficiency by a quarter
Food insufficiency happens when, over the course of a week, a family doesn’t have enough to eat sometimes or often. Throughout the pandemic, insufficiency rates have fluctuated, spiking in late 2020. The six monthly child tax credit payments of 2021, though, appeared to cut food insufficiency among families by 26%.
There’s no evidence the money drove caregivers to quit working
One common refrain among critics of a monthly child benefit is that putting extra money in the pockets of working parents might compel some to work less or quit altogether.
“We see no evidence that there has been any sort of disruption to parental employment,” says Curran.
In fact, in interviews parents and caregivers commonly say this benefit helped cover costs that made working easier by paying for child care or transportation.
“Five-hundred dollars a month isn’t enough reason to quit looking for a job,” says Jess Hudson, a single mother of two in the San Francisco Bay Area. “I can’t live on that. It was enough to give me child care help so that I could finish school, so I could get a job, so I can participate in the economy in the ways that I want to do.”
Hudson recently earned her undergraduate degree from San Francisco State University and says the $500 monthly payments she received allowed her to pay for after-school care for her 10-year-old son while she attended a few required evening classes.
“I don’t think I would have been able to graduate on time without it.”
The expanded credit also cost a lot more taxpayer money
The expansion of the child tax credit and the social benefits that come with it obviously comes with a cost, too.
According to the Tax Policy Center, the price of reverting to the old child tax credit for 2022 would be about $125.5 billion, whereas the more generous benefit of 2021, which doesn’t exclude or limit families for earning too little income, would cost about $100 billion more.
Unless Congress can find a way to agree on an extension of the expanded child tax credit — and cost is a big concern for many of its critics — the policy now reverts back to its previous iteration.
This also means much of the progress achieved with the monthly benefit, including dramatic reductions in child poverty and food insufficiency, could be just as short-lived as the policy itself.