Taxes

Bipartisan Support of Child Tax Credits Is Too Hasty

The jury is still out about whether broad parental subsidies improve outcomes for children

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The ink had barely dried on the American Rescue Plan Act signed into law by President Joe Biden before calls began to make permanent the expanded child tax credit that the law provides as a one-year emergency measure for 2021.

"Democratic leaders are banking on some of the aid provisions being so popular that letting them expire would be a political nightmare, painful enough for Americans that even Republicans couldn't stand in the way. At the top of the list is making permanent the expanded child tax credit," Politico reported.

It cited a press release from Rep. Rosa DeLauro (D–Conn.) who even before the COVID-19 stimulus passed was insisting, "Children and families must be able to count on this benefit long after the end of this pandemic."

Michael Gerson, who was a White House aide to President George W. Bush, wrote a Washington Post column headlined, "The child tax credit is a conservative dream fulfilled. Let's help make it permanent."

Gerson reasons that the refundable tax credit of $3,600 or $3,000 "will be the functional equivalent of a school voucher—money they can use at any private or religious school. This is the fulfillment by liberals of a conservative policy dream."

The politics of this are indeed perilous for potential opponents. Allowing the expanded refundable tax credit to expire as scheduled after a year will be described as "plunging 4.1 million children into poverty" or "cutting $1 trillion in funding for poor children."

But the politics of a $1 trillion (over 10 years) increase in no-strings-attached welfare spending aren't exactly so easy for advocates, either.

Two comparison cases can provide some useful context. Jonathan Tepperman's 2016 book The Fix describes the "Bolsa Família," or family grant, that was a signature initiative of Brazilian president Luiz Inácio Lula da Silva. When the program launched in 2003, Tepperman writes, "most experts and international organizations still considered the idea of simply handing money straight to the poor to be dangerously wrongheaded. It just felt wrong, on an intuitive level." Tepperman writes that people assumed the poor would "just blow the money on booze, cigarettes" or jewelry.

Lula told Tepperman that a key to winning political support for the program was requiring beneficiaries to commit to positive behaviors. "The idea was to show that we are not giving away money for free," Lula said.

Participants had to get regular medical checkups for themselves and their families, and make sure their children between ages 6 and 15 attended school at least 85 percent of the time. Pregnant women had to get prenatal care. And the rules were enforced; in 2006, by Tepperman's account, the Brazilian ministry of social development cut off payments to half a million recipients who had failed to hold up their ends of the bargain.

In New York City, a randomized controlled trial tested the effect of paying 600 families cash rewards for behavior such as getting medical checkups, attending school, getting good grades in school, or working full time. A study of the "Family Rewards 2.0" program found it "met its short-term goals of increasing income and reducing poverty, for all families and across a range of family types. The program also increased dental visits and adults' self-reported health status, particularly for those in poorer health at study entry. However, the program led to reductions in work and earnings for some participants. Moreover, the model did not affect students' progress in school." In addition, the program was costly to administer—for every dollar in rewards to families, a dollar and seven cents were spent on consultants, staff salaries, and partner organizations.

Whether poverty can be cured by government handouts or whether it is a problem of bad habits is a long-running controversy. Will the recipients of the $3,600 "Joe Dole," as welfare reform advocate Mickey Kaus dubs it after Biden, spend it on Catholic school tuition, or on cigarettes and lottery tickets?

test of a no-strings-attached $500 a month payment to 125 adults in Stockton, California during 12 months in 2019 and 2020 found "less than 1 percent of the tracked purchases were for tobacco and alcohol." Education spending also tracked at about that same level—a monthly average of 0.83 percent.

The record of the old Aid to Families With Dependent Children program is contested but eventually was clear enough to the voting public that a Democrat, Bill Clinton, got elected president in a significant measure on the basis of a promise to end welfare as we know it.

The prudent move now would be to test the refundable expanded child tax credit in a state or a city, or empirically evaluate the nationwide results after one year, before making a trillion-dollar 10-year or "permanent" commitment. Maybe one place could try it no-strings, and another place could try it with conditions attached, and the results can be compared. No one wants to be excessively paternalistic. If "free money" makes the poor children better off, great. But if it just subsidizes bad parental habits and doesn't improve outcomes for children, skip it. These aren't deep philosophical questions. They are empirical ones.

NEXT: Pausing AstraZeneca COVID-19 Shots Is a Bad Risk/Benefit Call

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  1. Will parents spend it on education, or on cigarettes and lottery tickets?

    Does it matter?

    1. They should be buying condoms.

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  2. Gotta get those VOTES. This is naked pandering to a very large voting demo. Join the Party of Free Shit™ paid for by someone with deeper pockets than you! At least in theory. Why not shit out a couple if you were on the fence? You can’t lose with kids on rebate.

    1. Yep, these politicians are taking the Ceauşescu Challenge!

      Oh, and if I were on the fence, I couldn’t have kids even if I wanted to. *BA-BOOM-BOOM-Ssssss!*

  3. >>even Republicans couldn’t stand in the way

    lol there are four who might.

  4. Will parents spend it on education, or on cigarettes and lottery tickets?

    No, it’ll be on hookers, blow, and 80″ big-screen TVs, just like the past 3 stimulus checks. Please try to keep up, Ira Stoll.

  5. “Many on the Left and the Right Want To Permanently Expand the Child Tax Credit. They Still Don’t Know if it Works.”

    Oh Ira. For 4 years, anything coming out of Washington DC was blamed squarely on Trump. Trump is gone and you NOW want to share the blame across both parties?

    It’s bullshit like this that makes the commenters question your Libertarian credentials. The only person the “Right” you quoted was George Bush. Nobody with a thinking cap really believes he’s a conservative.

  6. Maybe one place could try it no-strings, and another place could try it with conditions attached, and the results can be compared.

    How DARE you suggest using people as guinea pigs!

  7. It will not work.

    (do I get a million dollar consulting contract?)

  8. If “free money” makes the poor children better off, great.

    Well, maybe not so great for the taxpayers?

    1. In other words, if “legal plunder” makes some poor children that we can hold up as examples better off, great. F everybody else.

    2. IT’S NOT THE GOVERNMENT’S MONEY, DUMFUCK.

      Anything, ANY THING that keeps resources out of the hands of these blood-soaked monsters is a good thing,

  9. I would think it’s clear that handouts and gifts aren’t about the economics but getting votes. The voters figured out they could vote themselves more money and the witheringly stupid politicians agreed. Logic, reason, sanity, even plain old common sense doesn’t matter when there is a multi trillion dollar grab bag. Libertarians constantly try to argue from rationality, and there is no such thing in politics.

  10. “Gerson reasons that the refundable tax credit of $3,600 or $3,000 “will be the functional equivalent of a school voucher—money they can use at any private or religious school.”

    What? Do these people have any idea how much it costs to send a child to a private school? Your average private High School is somewhere between $15,000 – $25,000 a year, for four years. Elementary schools I think are somewhere between $10,000 – $15,000 a year. The math on this does not even make sense. And — let’s be perfectly clear — the people that can afford private school tuition for their children are not going to qualify for the tax credit in the first place.

    That tax credit is going to help people purchase (1) the latest iPhone, (2) a new living room set, or (3) jewelry, clothing, and drugs.

    1. It will be enough to keep the peasants from revolting.

  11. So you’re telling me the Dems are doing the same thing Rs do with their bullshit tax cuts? Say it ain’t so…

  12. Democrats paying for votes. Are we surprised?

  13. “…for the children…” is the modern and at least as pernicious version of Marx’s “…to each according to his needs.”

  14. “Allowing the expanded refundable tax credit to expire as scheduled after a year will be described as “plunging 4.1 million children into poverty” or “cutting $1 trillion in funding for poor children.””

    Could anyone describe people earning 2 to 3 times the median wage as “poor”? Remember, it applies to an AGI of up to $150,000!

  15. Socialism is now enforced at the “point” of a dirty diaper, instead of at the point of a bayonet.

  16. The jury is still out about whether broad parental subsidies improve outcomes for children

    Does it matter? Is not the core concept here that people who are net taxpayers will be paying even more for *other people’s children*? So . . . if we’re going to accept that this is permissible ‘if the outcomes for those children are better’, even at the expense of the people who have had their money taken – then we’ve given up the war.

    Because why not a $15 minimum wage? Sure, a lot of people will lose their jobs – but a lot more people will be better off.

    This is policies that treat people as a collective rather than as a group of individuals always end up so horrific.

    Once we’re willing to screw over some individuals – no matter how slightly – in order to benefit another group of individuals, there’s no longer a *principle* that you can use to base drawing a line, a point where ‘this is too far’.

    Because you’ve already discarded the ‘we don’t rob Peter to pay Paul’ principle and after that its just merely ‘how much atrocity are we willing to tolerate?’

    And that line is always being pushed further and further.

    1. These aren’t deep philosophical questions. They are empirical ones.

      Mmmm. Maybe *we* should be asking that deep philosophical question since its one of the ones that separates libertarianism from conservatism.

    2. “Once we’re willing to screw over some individuals – no matter how slightly – in order to benefit another group of individuals,…”

      Maybe, I shouldn’t nitpick that with which I so much agree; but your “- no matter how slightly -” pokes a pet peeve. That “slightly” slightly pushes someone somewhere over the edge. The intersection of the concepts of concentrated benefits and dispersed costs and the seen and the unseen is on the margin where an individual being screwed over slightly is enough to mean what would have been his great innovation goes nowhere or, in the extreme, is the last straw that costs her everything.

      1. That “slightly” slightly pushes someone somewhere over the edge.

        Yes, yes it does. Someone, somewhere was on the edge of destruction and sliding in and that help saved them.

        Someone somewhere else was on the edge of destruction and barely hanging on and the loss – to help the other guy – pushed them into the abyss.

        Why was the one deserving to have someone sacrificed to save them?

        What makes the person who made that decision good enough to be trusted with that power?

        How come we’re not asking that ‘deep philosophical question’?

        1. Too honestly and fully answer that question is to end the state, thus the state must never allow it to be frankly asked and fully answered.

        2. I have a bigger problem with the focus being solely on the jury being out out on improved outcomes for children. Even if one wants to disadvantage some for “the greater good”, one needs to weigh the individual costs against the greater benefit. When do the proponents of these programs EVER discuss the costs to those who pay?

    3. What are you expecting here, an actual libertarian argument? This is Reason.

  17. A test of a no-strings-attached $500 a month payment to 125 adults in Stockton, California during 12 months in 2019 and 2020 found “less than 1 percent of the tracked purchases were for tobacco and alcohol.” Education spending also tracked at about that same level—a monthly average of 0.83 percent.

    *sigh*

    Money is fungible.

    If you sent them money in a debit card and they didn’t spend it on that shit you still don’t know what they spent *their cash on*.

    1. Yep. This is a classic example of confirmation bias. And what if they buy weed and crack in the alley with cash made available by that money? Maybe they did. How would we know?

    2. It should be no surprise (except to utterly innumerate journalists and academics) that little of the money was spent on education. If you cannot or choose not to spend $10,000 and up for tuition at a private school, $500 won’t change that.

      Part of it might be used for paper and pencils, but I think most families with kids in public schools would have been paying for that anyhow, and considerably more the the $4 or $5 that showed up in the tracking. This is one of the areas where you spend what you have to and no more. If you could afford this before, you’ll spend the same as before and use the $500 on other things, and if you couldn’t afford school supplies so your kids were getting them in other ways, you’ll continue relying on that.

      Anyhow, if you used $150 from the debit card at the Walmart checkout, it’s unlikely that the tracking software could distinguish a few dollars in school supplies from everything else in the bill.

  18. No one wants to be excessively paternalistic.

    Except you just quoted several programs – including the current US welfare programs (every single one of them) where *being paternalistic is the point*.

    Its not about the *money*. Its about sending a message – we own you.

  19. I think that children’s education cannot wait, they must start learning and progress from daily life.
    https://www.ku-168.net/

  20. Taxation is theft, so I don’t care how much good you think you could do by stealing my money. Don’t.

  21. Well the kids will get to watch bigger TVs and ride in nicer vehicles.

  22. “It cited a press release from Rep. Rosa DeLauro (D–Conn.)”

    guess they never figured out what most of her constituents figured out decades ago. the Rep is batshit crazy.

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