Manchin’s worries killed child credits
The expanded child tax credit (CTC) has been one of the United States’ most successful anti-poverty programs in decades, and it’s shameful that Congress has not extended it for 2022. About 3 million children were kept out of poverty when the program started last July. The premise was simple: Raise the amount of the credit a little, and give it out monthly instead of waiting for families to claim it once a year on their tax returns. For every child under 6 years old, low- and middle-income families received $300 a month and for each child between 6 and 17 years old, families received $250 a month.
Wild claims were made about how families were using the money. Sen. Joe Manchin, D-W.Va., was reportedly worried parents would use the funds to buy drugs. There’s no evidence to back this up. In fact, there’s more and more data showing that households with kids, especially lower- and moderate-income ones, spent the bulk of the money on the basics: Food, housing, clothing and items for school. Still, Manchin’s bogus objections killed any hopes of renewing the program after it ended in December.
The Federal Reserve recently released one of the most definitive reports on how families spent their CTC payments. It shows, yet again, that the money largely went toward meeting basic needs. This was especially true of families earning between $25,000 and $49,999 a year. A third of these families used the money mainly on housing costs (rent, mortgage and utilities), and 22% used it mainly on expenses for kids such as clothing, school supplies, medicines and maybe a toy. The next most common uses for the money for these families were food, savings and paying off debt. In contrast, families earning above $100,000 were more than three times as likely to save the money.
The Fed’s findings underscore what a lifeline the CTC payments were to poorer families. Americans reported their highest-ever “financial well-being” in 2021, with nearly 80% saying they are at least doing OK financially. The Fed explicitly noted that “parents experienced particularly large gains” in their financial well-being thanks largely to the CTC payments.
All these benefits came at a relatively small cost. Extending last year’s program entirely would cost about $190 billion a year. That means families earning up to $150,000 a year would get the full benefits. The cost would be far less to keep the full program going for families that earn up to $50,000 or $75,000.
While lawmakers are rightly concerned about high inflation, this program added little to it. The payments were largely spent on basics or saved. If anything, high inflation is another reason lawmakers should be renewing this policy. Low-income families are the hardest hit by high gas, food and rent costs. In the past five months, there has been a 20% increase in households with children that lack sufficient food. We know how to help struggling families with kids. Why isn’t Congress acting?