The payments, which started in July and amounted to
hundreds of dollars a month for most families, have helped millions of American
families pay for food, rent and child care; kept millions of children out of
poverty; and injected billions of dollars into the US economy, according to
government data and independent research. Now, the benefit — an expansion of the existing child
tax credit — is ending, just as the latest wave of coronavirus cases is keeping
people home from work and threatening to set off a new round of furloughs.
Economists warn that the one-two punch of expiring aid and rising cases could
put a chill on the once red-hot economic recovery and cause severe hardship for
millions of families already living close to the poverty line. “It’s going to be hard next month, and just thinking
about it, it really makes me want to bite my nails to the quick,” said Anna
Lara, a mother of two young children in Huntington, West Virginia. “Honestly,
it’s going to be scary. It’s going to be hard going back to not having it.” Lara, 32, lost her job in the pandemic, and with the
cost of child care rising, she has not been able to return to work. Her partner
kept his job, but the child benefit helped the couple make ends meet at a time
of reduced income and rising prices. “Your children watch you, and if you worry, they catch
on to that,” she said. “With that extra cushion, we didn’t have to worry all
the time.” The end of the extra assistance for parents is the
latest in a long line of benefits “cliffs” that Americans have encountered as
pandemic aid programs have expired. The Paycheck Protection Program, which
supported hundreds of thousands of small businesses, ended in March. Expanded
unemployment benefits ended in September and earlier in some states. The
federal eviction moratorium expired over the summer. The last round of stimulus
payments landed in Americans’ bank accounts in the spring. Relative to those programs, the rollback in the child
tax credit is small. The Treasury Department paid out about $80 billion over
six months in the form of checks and direct deposits of up to $300 per child
each month. That is far less than the more than $240 billion in stimulus
payments issued on a single day last March. Unlike most other programs created in response to the
pandemic, the child benefit was never intended to be temporary, at least
according to many of its backers. Congress approved it for a single year as
part of the $1.9 trillion American Rescue Plan, but many progressives hoped
that the payments, once started, would prove too popular to stop. That didn’t happen. Polls found the public roughly divided
over whether the program should be extended, with opinions splitting along
partisan and generational lines. And the expanded tax credit failed to win over
the individual whose opinion mattered most: Sen Joe Manchin, who cited concerns
over the cost and structure of the program in his decision to oppose President
Joe Biden’s climate, tax and social policy bill. The bill, known as the Build
Back Better Act, cannot proceed in the evenly divided Senate without Manchin’s
support. To supporters of the child benefit, the failure to
extend it is especially frustrating because, according to most analyses, the
program itself has been a remarkable success. Researchers at Columbia
University estimate that the payments kept 3.8 million children out of poverty
in November, a nearly 30% reduction in the child poverty rate. Other studies
have found that the benefit reduced hunger, lowered financial stress among
recipients and increased overall consumer spending, especially in rural states
that received the most money per capita. Congress in the spring expanded the existing child tax
credit in three ways. First, it made the benefit more generous, providing as
much as $3,600 per child, up from $2,000. Second, it began paying the credit in
monthly installments, usually deposited directly into recipients’ bank
accounts, turning the once-yearly windfall into something closer to the
children’s allowances common in Europe. Finally, the bill made the full benefit available to
millions who had previously been unable to take full advantage of the credit
because they earned too little to qualify. Poverty experts say that change,
known in tax jargon as “full refundability,” was particularly significant
because without it, one-third of children — including half of all Black and
Hispanic children, and 70% of children being raised by single mothers — did not
receive the full credit. Biden’s plan would have made that provision permanent. “What we’ve seen with the child tax credit is a policy
success story that was unfolding, but it’s a success story that we risk
stopping in its tracks just as it was getting started,” said Megan Curran,
director of policy at Columbia’s Center on Poverty and Social Policy. “The
weight of the evidence is clear here in terms of what the policy is doing. It’s
reducing child poverty and food insufficiency.” But the expanded tax credit doesn’t just go to the
poor. Couples earning as much as $150,000 a year could receive the full $3,600
benefit — $3,000 for children 6 and older — and even wealthier families qualify
for the original $2,000 credit. Critics of the policy, including Manchin, have
argued that it makes little sense to provide aid to relatively well-off
families. Many supporters of the credit say they’d happily limit its
availability to wealthier households in return for maintaining it for poorer
ones. Manchin has also publicly questioned the wisdom of
unconditional cash payments and has privately voiced concerns that recipients
could spend the money on opioids, comments that were first reported by The Wall
Street Journal and confirmed by a person familiar with the discussion. But a
survey conducted by the Census Bureau found that most recipients used the money
to buy food, clothing or other necessities, and many saved some of the money or
paid down debt. Other surveys have found similar results. For one of Manchin’s constituents, Lara, the first
monthly check last year arrived at an opportune moment. Her dishwasher had
broken days earlier, and the $550 a month that she and her family received from
the federal government meant they could replace it. Lara, who has a 6-year-old daughter and a 3-year-old
son and whose partner earns about $40,000 a year, said the family had long
lived “right on the edge of need” — not poor but never able to save enough to
withstand more than a modest setback. The monthly child benefit, she said, let them step a
bit further back from the edge. It allowed her to get new shoes and a new car
seat for her daughter, stock up on laundry detergent when she found it on sale
and fix the brakes on her car. “None of the dash lights are on, which is amazing,”
she said. Some researchers have questioned the policy’s
effectiveness, particularly over the long term. Bruce D Meyer, an economist at
the University of Chicago who studies poverty, said that whatever the merits of
direct cash payments at the height of the pandemic-induced disruptions, a
permanent policy of providing unconditional cash to parents could have
unintended consequences. He and several co-authors recently published a working
paper finding that the child benefit could discourage people from working, in
part because it eliminated the work incentives built into the previous version
of the tax credit. “Early on, we just wanted to get cash in people’s
hands — we were worried about a recession; we were worried about people being
able to pay for their groceries,” Meyer said. Now, he said, “we certainly
should be more focused on the longer-term effects, which include likely larger
effects on labour supply.” Analyses of the data since the new child benefit took
effect, however, have found no evidence that it has done much to discourage
people from working, and some researchers say it could actually lead more
people to work by making it easier for parents of young children to afford
child care. “There’s every reason to believe that in the current
labour market, the child tax credit is work-enabling, and no evidence to the
contrary has been presented,” said Samuel Hammond, director of poverty and
welfare policy at the Niskanen Center, a research organisation in Washington. Hammond said the child benefit should also have
broader economic benefits. In a report last summer, he estimated that the
expansion would increase consumer spending by $27 billion nationally and create
the equivalent of 500,000 full-time jobs. The biggest effect, on a percentage
basis, would come in rural, mostly Republican-voting states where families are
larger and incomes are lower, on average. Some Republican critics of the expanded child tax
credit, including Sen. Roy Blunt of Missouri, have argued that it has
essentially done too much to increase spending — that by giving people more
money to spend when the supply chain is already strained, the government is
contributing to faster inflation. But many economists are sceptical that the tax credit
has played much of a role in causing high inflation, in part because it is
small compared with both the economy and the earlier rounds of aid distributed
during the pandemic. “That’s a noninflationary programme,” said Joe
Brusuelas, chief economist at accounting firm RSM. “That’s dedicated toward
necessities, not luxuries.” For those receiving the benefit, inflation is an
argument for maintaining it. Lara said she had noticed prices going up for
groceries, utilities and especially gas, stretching her budget even thinner. “Right now, both of my vehicles need gas, and I can’t
put gas in the car,” she said. “But it’s OK, because I’ve got groceries in the
house, and the kids can play outside.” © 2022 The New York Times Company