You are here

Project Teams » Where Does the Money Go? Federal Spending on American Children (2016-2017)

Where Does the Money Go? Federal Spending on American Children (2016-2017)

A consensus is growing in the United States that the government underinvests in children’s early years. Early childhood is a time of tremendous brain development and skill formation that sets kids on a successful path to adulthood. As researchers evaluate and assess the needs of the United States’ most vulnerable children, they have increased their focus on and support for federal spending on American children.

Research has shown that social spending on early childhood pays for itself in better long-run outcomes. This Bass Connections project team investigated how much money the federal government spends on young children in America ages 0-8, by family income level, considering both direct program expenditures and tax expenditures.

The team focused on four main categories of spending—cash, childcare, housing, nutrition—whether they come to families through programs such as cash welfare and public housing, or through tax subsidies such as the Earned Income Tax Credit. Most of the program spending data required for this project did not exist, so team members had to calculate multipliers to divide total program spending by income level and age. Starting numbers came from sources including the Survey for Income and Program Participation, the Tax Policy Center, IPUMS and the U.S. Federal Budget.

The team found that tax system spending exceeds direct social spending on young children, at $73 billion versus $54 billion. The poorest 20% are the only group to receive most of their social benefits through direct programs. The richest 20% receive 94% of their social benefits through the tax system. Tax system spending has significantly less strings attached—the majority of spending is through cash programs that give recipients more flexibility in use. Because the majority of government expenditures on the rich come through the tax system, the rich have much more freedom to spend their government dollars however they choose. Additionally, the federal government spends almost $3 billion more on housing for young children in the richest 20% than it does on the poorest 20%.

Even though the richest 20% of children receive the least amount of money, the government still spends almost $2,000 annually on each child in that income range. Meanwhile, only 25% of children eligible for federal housing assistance receive it, and there are waiting lists for Head Start and childcare subsidies. The team concluded that reallocating the money spent on the richest 20% of children to programs that benefit the poorest, the government could provide Head Start, childcare subsidies and housing subsidies to every young child who needs them.

The team’s final report documents the money the federal government spends on children from birth through age 8, what it is spent on and where it goes. It is intended to be useful to policymakers, advocates for children and families, news media and ordinary citizens.