America Is Choosing to Keep Children in Poverty : Business


The 117th Congress accomplished something that none of its 116 predecessors managed to do so effectively or quickly: It halved child poverty. Specifically, for six months in 2021, it lifted 2.9 million children out of poverty by temporarily expanding the Child Tax Credit.

With less than two weeks left in their term, legislators appear ready to abandon that progress permanently.

The credit’s success was simple: It was generous and it was fully refundable — meaning that every family could receive it, whether or not they worked or owed income tax. The effects will be far-reaching. Poverty undermines children’s education, health and lifetime earnings, a deadweight loss that clips as much as 4% to 5% from US economic output — which is why the math on any reduction nets positive, even under conservative assumptions.

Unfortunately, the credit’s features also precipitated its downfall: Critics saw it as too expensive, and worried that it would encourage people to work less. Actually, economists are split on whether parents would reduce or stop work, with some saying the effect would be trivial. Yet even the theoretical possibility of enabling laziness was enough to make a permanent extension a complete non-starter.

For many parents, especially mothers, politicians’ purported concern about work rings hollow. Congress has provided none of the supports for work — such as paid family leave, subsidized child care, sick days, the right to work part-time — that other developed nations do. Such policies could increase the number of women employed by several million. Instead, the US has one of the lowest female labor force participation rates among its peer countries, plateauing while others progress.

 The very idea that the child tax credit could discourage work is more an indictment of the US labor market — with its low wages and lack of workplace accommodations — than evidence of laziness. If an extra $400 a month is enough to make someone quit, it’s the job that’s bad, not the benefit. 

Let’s face it: the US is completely capable of reducing child poverty. It chooses not to. Americans like to think that they live in a society of endless potential, where anyone with enough grit and determination can pull themselves up. Yet their elected representatives are unwilling to remove one of the greatest obstacles to prosperity — one that affects people at an extremely vulnerable stage in life, when they have no say in the matter.

An expanded Child Tax Credit wouldn’t solve everything, but killing it off is a false economy. Congress is walking away from giving nearly three million children a better shot at the American Dream. That dream hasn’t failed: Policymakers simply lack the will to make it succeed.

More From Bloomberg Opinion:

• Lame-Duck Fiscal Policy Is No Way to Make a Budget: Editorial

• Bolster the Child Tax Credit Before Expanding It: Ramesh Ponnuru

• Ugly Politics Create Poverty-Inflation Trade-Off: Eduardo Porter

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Kathryn Anne Edwards is a labor economist and independent policy consultant.

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