Child poverty is bad for the United States. And we're paying a terrible social and economic cost for allowing it to continue.
Children who grow up in poor families are more likely to struggle in school, suffer from stress and have poor health, compared with children in families living well above the poverty line. A growing body of research has found that adults who grew up very poor tend to have lower earnings, a heavier reliance on public assistance, have more health problems and are more likely to become entangled in the criminal justice system.
A landmark National Academy of Sciences report in 2019 estimated that childhood poverty costs the U.S. between $800 billion and $1.1 trillion a year through reduced adult productivity, increased costs of crime and health expenditures. The U.S. has one of the highest rates of child poverty among industrialized countries, and poverty here is disproportionately high among children of color, furthering systemic inequities.
So it's deeply frustrating that one of the nation's most potentially powerful tools to reduce childhood poverty — the expanded federal child tax credit — was allowed to expire this month without so much as a vote in the U.S. Senate.
From July through December, approximately 36 million households with more than 61 million children received monthly payments of up to $300 per child from the federal government. The longtime tax benefit that was increased and broadened for one year under President Joe Biden's $1.9 trillion American Rescue Plan passed last March.
The president and many Democratic lawmakers intended to extend the more generous child tax credit for several more years and make certain provisions permanent through the "Build Back Better" bill. That hope was dashed — perhaps temporarily — last month when Democratic Sen. Joe Manchin III of West Virginia, whose vote was crucial to passage, announced he would not support the bill. Manchin cited the cost and details of the child tax credit as one of his concerns.
Fine, debate the details. Even the outspoken supporters of the child tax credit have recommended changes to make the expanded version more sustainable. But abandoning this transformational expansion of the child tax credit would be a terrible mistake and set back efforts to lift the next generation out of poverty.
The child tax credit was adopted in 1997 as a middle-class tax cut. Over time and with bipartisan support, the value of the credit has increased along with who was eligible to receive it. As part of President Trump's 2017 tax bill, Congress doubled the value of the credit, but the poorest families got nothing or only a partial credit because they didn't earn enough to qualify for the full amount.
The American Rescue Plan increased the credit to a maximum of $3,000 for children 6-17 and $3,500 for children under 6, half paid in monthly installments and the other half at tax time.
And, most importantly, it made the maximum payment available to families who earned little or no income, transforming the child tax credit into a powerful anti-poverty program.
And it worked.
By November, the tax credit kept 3.8 million children from poverty, according to the Center on Poverty and Social Policy at Columbia University, reducing the monthly child poverty rate by 29.4%.
During the six months of payments, researchers found that low-income families had higher checking account balances. As soon as the payments went out, there was a marked reduction in food insufficiency rates among low-income families.
Three out of four families spent the initial payments mostly on food, bills, clothing, housing, school and child care rather than save the money. Among families receiving food stamps, three-quarters said they used the child tax credit to pay overdue utility bills or prevent eviction or foreclosure. These are families living in constant stress, month to month, to keep a roof over their heads and the power on.
