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Press pause on the rush to extend the child tax credit

One of the most popular — and most expensive — elements of Democrats’ proposed spending plan is making permanent the recently expanded child tax credit. Protecting children in the nation’s lowest-income families is important, and the credit has succeeded in helping families hit hardest by the pandemic. But our research suggests that making the tax credit permanent in its current form will end up unintentionally hurting many of the children it is supposed to help.

The child tax credit in its original form required taxpayers to have income in order to receive it. The American Rescue Plan changed the tax credit into a flat, universal child allowance for all but the highest-income families. Every family is now entitled to the allowance — at least $3,000 per child, up from $2,000 — even if they do not have income. (Another way of saying this is that the child tax credit became “fully refundable.”) The idea behind this change was to funnel money to families in the midst of a pandemic during which millions of workers lost their jobs.

Now, however, lawmakers seek to make the fully refundable credit permanent, based on claims that it will not meaningfully reduce employment and that it will cut child poverty by more than one third. We believe these claims are incorrect. First, replacing a tax credit available only to working families with a flat allowance will serve as a disincentive to work. Our calculations show that 1.5 million parents would leave the workforce, and as a result, child poverty would be reduced by at most 22%.

In addition, even without accounting for the reduction in work, the fact that benefits were increased and made fully available to families making up to $150,000 would make the child tax credit the least cost-effective anti-poverty program in the United States. The country would spend just shy of $30,000 per child lifted out of poverty by the expansion, compared with the less than $16,000 spent per child lifted out of poverty by food stamps or $21,000 for the earned-income tax credit (EITC), based on our calculations.

On the issue of the effect on employment, our key concern is with widely touted calculations that were part of a 2019 National Academies of Sciences, Engineering and Medicine report analyzing the economic impact of a number of anti-poverty programs, including the child tax credit and the EITC. The National Academies report estimated that replacing the child tax credit with a child allowance would have little negative effect on employment.

This is simply not accurate. The conclusions drawn by the National Academies report were based on calculations that did not account for eliminating existing child tax credit work incentives. That was surprising because the study did account for similar incentives when studying an expansion of the EITC — and the two programs serve similar populations.

The old child tax credit incentivized work; the expanded one would effectively discourage it. For example, a typical working parent with two children would no longer get a $4,000 boost from the tax credit as a result from working. The parent would receive at least $6,000 under the expanded credit whether or not they were employed. As a consequence, we estimate, 1.5 million workers (constituting 2.6% of all working parents) would ultimately exit the labor force, mostly at the lower end of the income scale.

This decline in employment with its resulting lost earnings would mean that child poverty would fall by 22% or less and deep child poverty would not fall at all.

That is a far cry from the 34% reduction in child poverty and 39% reduction in deep child poverty we estimate in a comparison analysis that ignores work incentives.

Another factor being overlooked is cost relative to overall program impact. The expansion of the child tax credit would cost an additional $100 billion per year, more than we spend on any existing nonmedical means-tested program, including food stamps and the EITC.

As a form of government-guaranteed income available to families regardless of need, a large share of additional funds would be spent on families far from the poverty line. It would provide a flat $6,000 to $7,200 benefit to American families with two children, and annual incomes as high as $150,000. That’s a big increase from the $4,000 these families received from the old tax credit. By increasing benefits for high-income families, the child tax credit will end up being less targeted to lower-income families than current means-tested programs.

Expanding the child tax credit would not be a cost-effective way to address poverty. It would lead a substantial number of parents to stop working. Until these basic facts are acknowledged, the policy will overpromise and underdeliver on its bold claims.

Bruce D. Meyer is the McCormick Foundation professor at the University of Chicago Harris School of Public Policy. Kevin Corinth is the executive director of Comprehensive Income Dataset Project at the University of Chicago.


Media's doomsday talk about Biden exaggerated

Many in the media are drumming up the narrative that President Joe Biden is in deep political trouble. The Afghanistan withdrawal was a failure! Biden’s polling numbers have experienced an “epic collapse”! Some in the White House press corps are asking questions along the lines of “Isn’t the president worried he’s failing?”

Biden’s poll numbers are down, thanks in part to the delta variant (primarily raging in red states with grossly irresponsible governors), a bump in consumer prices, and frustration over the prolonged legislative sausage-making on the reconciliation plan. But don’t lose perspective.

For starters, Biden’s approval rating is in the mid-40s (roughly where President Barack Obama was for much of his two-term presidency and higher than the average approval rating of his predecessor, who never broke 50%). Frankly, in such a polarized era, with one side intent on disapproving of the president and the other just as intent as approving, it is extremely difficult for any president to keep approval ratings above 50% after any initial “honeymoon.”

Moreover, Biden’s policies remain extremely popular. A CBS/YouGov poll released this week shows large majorities support the component parts of the Build Back Better plan.

Meanwhile, a CNN poll shows 50% approve of his performance while 49% do not. A nearly identical margin say he has done more to unify than divide the country. And contrary to the favored narrative — “Democrats in disarray!” — the CNN poll shows that with regard to Democrats and Democratic-leaners, “26% of that group say they see the party as mostly divided rather than mostly united,” lower than the 30% of Republicans who say the same of their party. The poll also found that a plurality of Americans (41%) favor a legislative package that covers all the proposed social and climate policies over one that does fewer things but costs less.

Biden is somewhat at the mercy of events he does not control. Democrats and indeed the entire country are waiting to find out what the two senators with shaky rationales for obstruction want to do concerning the president’s reconciliation package. And while Biden was able to announce extended hours for the severely backed-up port of Los Angeles, the supply chain problems go well beyond one port. As the New York Times reports: “The blockages stretch up and down supply chains, from foreign harbors to American rail yards and warehouses. . . . The pandemic has shut down factories and slowed production around the world.” That means delays in getting products to consumers, as well as potentially higher prices.

Several things are clear regarding Biden’s future: First, tackling the coronavirus pandemic so that the economy can return to something akin to normal is fundamental. The good news is that the seven-day average for covid-19 cases is down roughly 12% with fewer hot spots. Second, if Biden gets a sizable reconciliation package, the bumpy negotiations will fade in significance; if he does not, he and his party will be in deep trouble. Third, Biden is in a holding pattern when it comes to messaging his package. While he waits for two Democratic holdouts, it is difficult for Democrats to remind the public that, unlike Republicans, they are for the little guy, for making work easier and for making scofflaws pay taxes.

Completing Biden’s essential task — passing his domestic agenda — is taking longer than the president would like. If and when the deal is made, Biden will have the advantage in explaining what Democrats are doing for Americans (e.g., making child care and prescription drugs cheaper) and what Republicans unanimously oppose (e.g., making the super-rich pay their taxes, lending a hand to working families).

Think of it as though Biden is playing a tied baseball game delayed by rain. It may be frustrating, but it’s far from the hyperbolic predictions of doom from the media.

Jennifer Rubin writes reported opinion for The Washington Post. She is the author of “Resistance: How Women Saved Democracy from Donald Trump.”


McConnell must refute Trump's election fraud claim

Former president Donald Trump’s continued lies about 2020 create a huge headache for Republican leaders such as Senate Minority Leader Mitch McConnell, Ky. The more Trump prattles on, the harder it is to look the other way from his bizarre and false claims. The time will soon come when McConnell will have to do what he has long avoided: directly, publicly and forcefully rebut Trump’s lies about election fraud.

Trump’s all-over-the-place political messaging complicates matters. On one hand, Trump endorses numerous candidates and argues that his fans should put his friends in office. That helps the GOP when it is deployed on behalf of Republican nominees, as was the case on Wednesday in Virginia’s gubernatorial race. GOP leaders could live with Trump’s rants if this were primarily what he was up to.

But it’s not. He is also increasingly focusing on his false allegations that Democrats fraudulently stole the 2020 election. Trump upped the ante Wednesday by sending a message warning that Republican voters will not turn out in 2022 unless GOP leaders “solved” the purported fraud. That’s a shot across Republican leaders’ bow that Trump clearly hopes will lead to them to embark as willing sailors on his suicide cruise into the rocks of fact and public opinion.

Most Republicans will ignore Trump’s suggestion not to vote even as they hold him in high esteem. They fear the Democratic agenda too much to do otherwise. But Republicans could be torpedoed if even a small portion stays home. That arguably happened in Georgia’s two Senate runoff elections in January, when Democrats captured both seats by narrow margins as Republicans voted at lower rates than Democrats. If President Joe Biden recovers politically, that small voter boycott could be the difference between Republicans retaking the Senate and defeat.

McConnell has tried to turn a blind eye to Trump’s fulminations. He excoriated Trump on the Senate floor after the impeachment vote in February but has otherwise not actively attempted to contest or rebut Trump’s claims. He clearly hopes the issue will go away on its own, allowing Republican voters to concentrate on the Biden administration’s liberal policies.

Trump’s statement shows those hopes are naive. As long as Trump is politically active, he will push his election fraud narrative to anyone who listens. That will have an effect whether McConnell likes it or not. The only question remaining, then, is whether benign neglect continues to be the optimal strategy.

McConnell would be wise to start preparing to fight back. He knows that Trump’s allegations are figments of his fevered imagination. It takes time to demolish each of the specific allegations that too many Republicans believe to be true. But without that exertion, those Republicans will continue to believe the election was stolen. And if they believe that, some might not vote at all. McConnell should not take that risk.

He can start with the bully pulpit he commands, the Senate floor. He can give a speech — or better yet, a series of speeches — specifically demolishing each of Trump’s lies. He can explain why Dominion’s voting machines couldn’t have flipped votes as many Republicans believe they did, and why post-election hand checks of paper ballots would have caught them if they did. He can painstakingly show how election officials in large, Democratic-run cities may have been sloppy, but they did not stuff the ballot box after the fact to push Biden over the top. And he can conclusively prove that demographically similar communities behaved in the same way whether they were in swing states or safe states, and whether mail-in balloting was a feature or a bug of each state’s voting.

McConnell shouldn’t stop there. He should enlist the support of leading figures whom Trump backers trust, such as Fox News hosts Sean Hannity and Laura Ingraham or radio stars such as Mark Levin. They should be shown the facts in excruciating detail and told that their tacit support for Trump’s lies could give Biden and House Speaker Nancy Pelosi, D-Calif., more power after the midterms. Their endorsement, and those of others like them in other conservative spheres of influence, would force Republican voters to face the facts. And that would force Trump to face the music: His grift is up.

McConnell is one of the savviest political strategists of the past half-century. He probably already knows this is a Rubicon he must cross, even if that risks an open fight with Trump. But he also knows that the facts are on his side, and fear of Democratic victory in the midterms will incline even ardent Trumpians to hear him out. That should give him the courage to fuel his cunning and do what he does best: win.

Henry Olsen is a Washington Post columnist and a senior fellow at the Ethics and Public Policy Center.


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