The Right Way to Battle Child Poverty
SACRAMENTO — Since COVID-19 emerged as a public-health threat in 2019, the federal and state governments have embraced a wide range of policies that were designed to “protect” us but instead have unleashed a fury of unintended — but easily predictable — consequences that have disrupted our lives and made us poorer. Government policies shuttered businesses, obliterated jobs, and resulted in a level of inflation not seen since the Jimmy Carter era. Obviously, lower-income people are suffering most.
Before the pandemic, gasoline prices in California averaged around $3.75 a gallon, and they’re now pushing $6. Mortgage rates went from below 4 percent to 7 percent now. Median home prices went from $659,000 statewide in 2019 to $758,000 as of this writing. New car prices have surged 30 percent, with used-car prices going up 47 percent over the same period. Grocery prices rose 11 percent last year alone. You can delay that new car, but not your trip to Safeway.
I could write an entire column about recent local and state proposals that increase our utility costs as well as our tax bite. I rehash these widely discussed statistics as a backdrop to the latest discussions about fighting child poverty — because whatever the states and feds do to ameliorate some of the pain, it pales in comparison to the pain they caused with their profligate spending and lockdown policies that disrupted the supply chains.
Recent news reports have highlighted a recent increase in childhood poverty. The U.S. Census Bureau noted this month that the official poverty rate of 11.5 percent was steady from last year, although median household income fell by 2.3 percent. However, the Supplemental Poverty Measure — the rate adjusted to account for government-assistance programs — increased across the board. Shockingly, child-poverty rates more than doubled from 5.2 percent to 12.4 percent.
As the New Yorker summarizes, “[T]he most important driver of the 2022 jump was the expiration of the expanded child tax credit, which the Biden administration and congressional Democrats were unable to renew last year, thanks to the opposition of Senate Republicans and (West Virginia Democratic Senator) Joe Manchin.” Originally enacted as part of the Contract with America in 1997, Congress boosted the credit from $2,000 to $3,000 following COVID — and made it available (“refundable”) even to those who didn’t pay enough federal taxes to otherwise qualify.
As federal anti-poverty programs go, I have no real problem with it. Most beneficiaries are middle-class parents who get a break on their tax bill. I’m all for allowing people to keep more of their hard-earned money. For the 19 percent of its beneficiaries who are poor, it serves more as a transfer program. But, still, given all the economic harm the government caused people over the past four years, this was far from the worst way to help people feed their kids.
The tax credit’s expansion got caught up last year in debates about whether it would discourage work, which is a legitimate point of contention. Opponents had argued that child tax credit should only be offered to working parents who earned above a certain threshold. With no work requirement, they feared that the CTC would discourage work — which, not surprisingly, remains the most-effective anti-poverty measure.
Congress is considering the measure again. As the Washington Post explains, some Republicans — as part of their latest pro-family agenda — are proposing increases: “Sen. Mitt Romney (Utah) proposed increasing the credit and making up to $1,400 refundable for the poorest families. Sens. Marco Rubio (Fla.) and Mike Lee (Utah) would also bump up the credit, but their plan would not make it refundable.” Democrats mostly want it refundable for the poorest residents.
The solution here isn’t that hard. Research from my R Street Institute colleague, competition fellow Jacob Bastian, reported that poor residents mostly used the extra cash to buy necessities (rather than drugs and whatnot, as critics feared). Specifically, he proposes a bipartisan hybrid solution that would, say, “provide $2,000 in CTC benefits for everyone and another $2,000 that phase in for workers.” That would reduce poverty rates and even encourage employment. This can be done without increasing spending by limiting its availability to the wealthiest tier.
But focusing on a particular program — even one that seems relatively beneficial — ultimately focuses on raising people’s incomes above some arbitrary poverty line, as Max Gulker explains for the Reason Foundation. In his view, we need to zero in on “more immediate and feasible ways to enable and empower poor Americans,” including removal of “unnecessary regulations that disproportionately impact the poor and need reform — health insurance flexibility, occupational licensing reform, childcare and zoning regulations.”
Policymakers also need to look at the broader economic policies that are eroding every Americans’ buying power — including a free-spending Congress and administration that continue to increase the likelihood of a poverty-creating recession. And while we’re at it, how about rethinking a public-school system that failed so miserably during COVID that it has obliterated educational progress for poor students and has led to enduring — and deeply troubling — absentee rates?
There’s nothing wrong with adjusting the child tax credit to provide some immediate help, but let’s not think that providing poor Americans with an extra $250 a month will do very much if they lose their jobs or are forced to pay hundreds of dollars a month more in gasoline and utility bills. The answer remains less regulation, a booming economy, and less government spending.