Expanded Child Tax Policy Slashed Child Poverty
npr.org
npr.org
I agree that funding for children is among the best return on investment [1] (to the point that I think we should rank initiatives and spend on kids first before anyone else gets their turn in line for the same ROI), but I can see that purely dumping money into people's bank accounts is a rough tool to do it.
In fact, our recent history has shown that any kind of allocation of money to some goal mostly leads to the thing being targeted simply getting more expensive (higher education I'm looking at you), given how practiced private equity is at exploiting these things. And the other poster above is correct, of course you're going to see some number of people previously on the edge move into positive territory as soon as you roll out any measure like this.
The question is how efficient and effective can you make the expenditure of tax dollars? And how free market vs. controlling you have to be to do it?
So if some service (child care, health, education) is so important and we want to be efficient about it, doesn't that call for some public entity to provide some basic level of service that people can opt out of and pay more for privately if they want? So that we don't get private enterprise just sucking at the teat of free government money, inflating prices, and at last some guarantee of us getting what we allocated tax money for?
[1] https://www.impact.upenn.edu/early-childhood-toolkit/why-inv... and some other articles I've seen on the topic, will try to find and edit comment
Why? We do it with social security and that seems like a well liked program. Individuals are generally pretty good at deciding what they need
When you give money to people to spend on say, childcare, and there is not the built up social / labor infrastructure to do it, private enterprise often will just exploit the infusion of money to jack up prices and not actually provide more of the service desired.
Come to think of it, if you go back to the Social Security example, giving people more money because they can't afford housing is not going to magically create housing on its own. It will just produce more expensive housing as people try to outbid each other. We've all seen how that plays out.
When this happens, it's because there are unrelated supply constraints, usually resulting from misguided government intervention. The healthcare sector is a good example in the U.S.
Using Australia as an example, I went to a good University and had a government loan for the courses. I am 2 months away from paying it off (humble brag for me). But it was a government loan with no interest. So this is a good example of government offering a service to a point, that the private sector wouldn't ever touch.
If the US government offered a 0% loan for education up to 50K and required payment only after reaching a certain income threshold, that policy would put top down pressure on expensive courses. They'd still exists but the bulk of everyone would be doing a course they could pay off and the competition would change the market.
Likewise, I've recently been thinking about labor productivity with women returning to the workplace. Having kids is bad for families budgets (child care is a killer). Caring for kids keeps women out of the workforce.
I think if public schools offered pre K care from about 18 months to kinder then you'd have parents being able to get back to work and you'd permanently reduce childcare costs. I suspect it'd pay itself off a few times over. Similar to building quality infrastructure.
The problem with that second idea is that it would cost a ton upfront and the payback would be over the medium to longer term, like infrastructure.
People are bad at long term choices and there's the trend of populism in politics at the moment. Which doesn't help anything.
Child nutrition is probably the single best ROI you can get anyway. Why everyone doesn’t have such a card is beyond me.
There's nuance to this, like the effects of immigration and outsourcing, but with a high dollar, you need highly skilled labor to create export goods and for national security, and talent doesn't emerge in a vacuum.
From "The Rules for Rulers" by CGP Grey, an adaptation of "The Dictator's Handbook" https://www.youtube.com/watch?v=rStL7niR7gs
However, you’re right that we live in capitalism. And it creates child poverty.
Edit: Communist countries did have extensive well-functioning public health care systems (Cuba is an extant example) but that has to be balanced with the central planning in some larger communist states (namely China/Russia) that caused unprecedented famine and misery. Perhaps in an alternate timeline, if communist states weren't living in a world that was economically hostile (sanctions etc.) they might have thrived and focused on quality of life as a technology driver
You don’t have to create child poverty, as child poverty is the natural state of nature.
I don’t get what you mean, quality of life can be really low in China (eg no indoor heat in southern China in the winter mean the girls selling snacks at the train station are wearing jackets and gloves while still freezing), but people put up with it.
China doesn’t technically have homeless people since many of the grifters in their cities have land back home (again, because of the hukou system, your home is hard to change). However, they migrate to cities to try and not starve to death, and might wind up sleeping under an underpass (or somewhere the police can’t find them, to avoid getting beaten). A lot of people who are poor but still have money live in basement rooms (no window, would be illegal in the USA, it’s actually illegal in China as well but rule of law is not a Chinese thing), see https://en.m.wikipedia.org/wiki/Ant_tribe.
Middle class Chinese do well, but they are just a small part of a country with 1.4 billion people. Not everyone lives like they were from Shanghai.
Anyway agreed on China. They've pulled 800 million people out of poverty.
Nope. But going back to my OP, I think this is a sound rationale for someone of a capitalist mindset to support welfare. It's fair to say that a capitalist society with perfectly rational actors does not exist. Its also quite possible that there are rational counterpoints within the capitalist frame that completely invalidate my argument - but I haven't seen that yet in this thread.
> Today I handed out survival kits at a homeless encampment. People are cold, tired and hungry. Child poverty, homelessness....this system is not working.
I agree.
Disclaimer: I think that unchecked capitalism is wrong, not just because humans are irrational actors, but that it's immoral for humans to serve an economy instead of the economy serving humans. The latter requires broad geopolitical intervention and the global will of people to hold their governments to account. But we always must remember that economies are human constructs, and one that can be changed with enough motivation.
The idea that government is particularly ineffective is not an absolute. We'd do well with dropping it as an assumption and instead question why certain governments fault to produce good outcomes.
Why? And are you sure? Are there any statistics on the matter regarding this particular program?
Whether there's a net increase in GDP or government revenue, I'm not qualified to even guess, but if I'm running a business and I can benefit from human resources on-site, or need them to have deep cultural knowledge to fulfil my business needs, a local talent pool increases competition, reduces my expenses, and ensures timely and potentially revenue-generating improvements to my enterprise.
I know the answer, no need to reply to me. Regardless. Give everyone equally.
One is having to prove you are under threshold (documentation, paperwork etc) - the other, everyone gets it, so much less overhead for the poor (the overhead is on the side of the people who can afford it - the VAT tax or whatever is on the other side)
It’s about who has to deal with the paperwork
I don't think I will ever wrap my head around the fact that there are politicians who seem to sincerely believe that the best way to decrease poverty is to give tax cuts to the rich and huge corporations, instead of actions like what's described in the article.
But it's reasonable to question whether that's a good solution, a band-aid, or perhaps a short-term hack with future blowback, etc.
Direct cash transfers are not exactly some foolproof, no-brainer solution to poverty. We've made a real mess in some third world countries with the cash spigot.
Has there been a comparable scenario of direct cash transfers to poor people?
[1]. https://www.povertyactionlab.org/case-study/giving-directly-...
To use Taleb’s terminology, the rentier class have made themselves antifragile. Look how they’ve benefited from political chaos be it financial crises or pandemics.
1 dollar spent on increasing food stamps increases GDP by something like $1.75. For something like an expanded child tax credit, it's more like $1.25. And for tax cuts for top earners, it's around $0.30. Even just looking at it from a purely economic standpoint, one policy is drastically better than the other. But more importantly, the first two policies also have enormous positive and direct benefits - they drastically decrease things like child poverty.
These are some of the most obvious public policy choices for any wealthy country, and for whatever reason we just refuse to take action until there's a massive recession or a global pandemic, and even then it's for like 6 months or a year.
Can you cite the 'actual data' -- has it held up to broad peer review? Can you provide examples of critique of these policies, and explain why detractors have concerns, and how we could address them?
This isn't global warming (science is clear) -- social policy is inherently messy, with lots of tradeoffs, and is hard to prove empirically. There are lots of reasons why expanding the welfare state might be beneficial for society, but please stop with the moral grandstanding -- it does nothing to further real dialogue.
I am very skeptical of this - not that we have data, but that the data suggests such a clear and simple relationship that is open to exploitation via policy. There is a long history of people trying to exploit correlations and realizing that the correlation breaks down whenever they try to turn this into a policy lever.
There is also the issue that foodstamps might be beneficial up to a point, but when you flood the system with foodstamps they are no longer beneficial and can be harmful -- there are regimes of effectiveness.
There's a huge difference between giving poor people some money with no strings attached, versus giving governments and ruling classes money with or without expectations, or IMF and World Bank-style economic imperialism.
There is really interesting history around the food rationing program from the Red Cross that actually just increased human trafficking.
It may turn out that direct cash payments are the most efficient means because then you parallelize the distribution of decisions.
Surely this makes a difference in the lives of these people but on large scales, how much of a difference have you actually made?
Effectively what you've erected is a subsidy for high rent and low wages which target the poor, there must be better solutions than solidifying the systematic problems which capture this segment of the population.
Judging by the article, quite a large difference.
>there must be better solutions than solidifying the systematic problems which capture this segment of the population.
We're talking about poor children here. The systemic problem of this segment of the population is that they are poor. It's easy to talk about poor adults and prescribe behavioral adjustments, it's a way of assigning desert. It's much harder to talk about poor children because it's obvious that no child deserves to be poor.
Giving cash to liquidity- and asset-constrained folks with high-value spending needs (like raising a kid) makes a huge difference if you can even roughly target the intervention to them. It's almost impossible to theoretically bound the benefit, it could be very large indeed. Even if some money were wasted on "bad" spending, and even though redistributing it is inherently costly, it's the kind of thing that's absolutely worth trying. It has all the well-known benefits of UBI, except on an even larger scale.
Capitalism is a religion, they believe because they grew up told to believe it. We have found out that the theory is almost entirely made up and rarely reflects reality.
1) 25% reduction is a relative number.
> There was a 3.7–percentage point reduction (95% CI, –0.055 to –0.019 percentage points; P < .001) in household food insufficiency for households with children present in the survey wave after the first advance payment of the Child Tax Credit, corresponding to a 25.9% reduction, using an event study specification. Difference-in-differences (−16.4%) and modified Poisson (−20.8%) models also yielded large estimates for reductions in household food insufficiency associated with the first advance payment of the expanded Child Tax Credit.
For ~3 percent to be a 25% relative reduction, the starting value is about 12% households with food insufficiency.
2) What are the patterns of insufficiency rates historically?
> Households with children were most affected—food insufficiency in households with children peaked at 18% in December 2020 and remained at 14% through June 2021, compared with approximately 3% among all households during 2019.
I'd guess the pandemic (esp. lockdowns) did the most harm here. Note that the payments started in July 2021 (per the paper), so the fluctuations in rates of insufficiency in the period before are higher than the estimated CTC-caused reduction.
3) Disparities are because of racism?
> Structural racism has shaped disparities in food insufficiency, with children in Black non-Hispanic (19.2%) and Hispanic (22.0%) households experiencing food insufficiency at almost triple the rate of children in White non-Hispanic households (7.0%) as of June 2021.
Asians? What Asians? We're talking about structural racism here! They don't count because they usually screw up the narrative.
4) What is child food insufficiency?
> The outcome was household food insufficiency, based on the survey item “Getting enough food can also be a problem for some people. In the last 7 days, which of these statements best describes the food eaten in your household?” We coded our outcome as 1 if respondents reported sometimes or often “not [having] enough food to eat” in the last 7 days, and 0 otherwise (“enough of the kinds of food [I/we] wanted to eat,” and “enough, but not always the kinds of food [I/we] wanted to eat”). This coding is the same as others using the Household Pulse Survey data in recent studies during the COVID-19 pandemic.
Thankfully, it's more focused than the catch-all of "food insecurity."
Hypothesis: News and fear over the next pandemic wave causes people to stock up. This causes temporary shortages. Then, when asked if they had been unable to buy what they need, people say "yes."
*Important*: this pertains to the food insufficiency paper --- I didn't look into the child poverty reduction paper.
Regarding the child poverty reduction, I also would be interested in comparisons of child poverty rates and fluctuations re. the CTC. My cynical self views it like this: 1. There is a distribution of income. 2. One threshold in that distribution is called the poverty line. 3. Give people money, and it shifts the mean of the distribution. The integral between the threshold and (threshold - stimulus) on the curve is the people 'lifted out of poverty.'
Seems like a shell game to me. Less so than the EITC, though. It's not that people through the CTC are now able to climb the ladder to job and economic security and achieve the American dream (TM). My sense is that they are still treading water, albeit at a different level, all while the credentialed class congratulates itself over its magnanimity.
If anyone has papers (peer-reviewed papers, not journalists' hot takes), I'd like to read them. Thanks.
> Publicly, his biggest gripes are about the cost of the bill. But privately, Manchin has told his colleagues that he essentially doesn’t trust low-income people to spend government money wisely.
> In recent months, Manchin has told several of his fellow Democrats that he thought parents would waste monthly child tax credit payments on drugs instead of providing for their children, according to two sources familiar with the senator’s comments.
https://www.huffpost.com/entry/joe-manchin-build-back-better...
See how easy it is to make things up about your enemies?
Not shocked the HuffPost publishes it though.
> The West Virginia Democrat has raised concerns that the no-strings attached benefit fuels opioid use, according to people familiar with his views. Some other Democrats and outside advocates have argued that the payments help prevent opioid use in hopes of changing his mind on work requirements. West Virginia has the highest rate of opioid-related overdoses in the country, according to government data.
> “Don’t you think, if we’re going to help the children, that the people should make some effort?” he said on CNN earlier this month.
https://archive.is/2021.09.28-163016/https://www.wsj.com/art...
The Republicans aren’t necessarily against spending for these sorts of things but only when they’re in control. Their first principle is to prevent Democratic “wins”, even if it means screwing over children.
Democrats also went on to further increase the size of the CTC, as well as the refundability of the CTC, and also made it available as a monthly payment.
Notice that child poverty didn't substantially drop after the Republican change, but did after the Democrats plan.
Revenue neutral versions of CTC policies have been proposed (like Mitt Romney's)
Seems when the question is war the answer is always yes but when the question is can we help our citizens the answer is how can we pay for it?
The long term compounding benefits of children not being in poverty is a huge win on a society.
1) Are they committing genocide?
2) Did they attack you?
[1] https://en.wikipedia.org/wiki/Xinjiang_internment_camps
[2] https://en.wikipedia.org/wiki/Genocide_of_Yazidis_by_the_Isl...
[3] https://en.wikipedia.org/wiki/Isaaq_genocide
Arguably it did in WW2 as well. The Nazis originally planned to dump the Jews in Africa, not kill them. The plans for the Nazis industrial slaughter were approved shortly after the US entered the war and the Nazis were slowly being boxed in.
The fact that Germany reacted to the US entering the war with industrial slaughter doesnt mean that the US was wrong to go to war of course, but it underscores the fact that by default military intervention makes everything worse - especially for the most vulnerable.
Should Japan have sent troops over in the Mexican-American war of 1846 to stop America's imperial expansion into California and Texas?
> Did we do that "so our hegemony can be asserted all over the place"?
no.
> If so, then I think asserting our hegemony is a good thing.
well that's wrong.
> If not, then what definition/test of it are you using that the wars you don't like count, but that one doesn't?
I don't like any war; some are needed like stopping hitler and their ghoulish goals sure. name a "war" we have won since then. hell name the last time we actually were at war since congress hasn't gone to war many times.
Look for vertical - and you'll see it wasn't a small slice.
Seriously, how do weigh the consequences of actions like this? On the one hand you have a certainty: many children plunged into deprivation by an unavoidable pandemic. On the other hand you have an almost unknowable risk of influencing worldwide macroeconomic trends. Is the second worth more to you than the first?
> almost unknowable
We know quite a lot about economics, especially inflation and the money supply.
> many children plunged into deprivation
Many children were in deprivation already, and by investing in them we not only help them, we end up with more productive citizens later. Poverty can be devastating.
That isn't the case. There's an awful lot of beliefs and curve fitting to them. Hence why QE didn't cause the 2% inflation they believed it would.
It is absolutely the case; we just don't know everything. Using modern economics, we have managed inflation and other economic phenomena highly effectively. High inflation (well beyond what is happening now - look at history and at places that ignore economics), depressions, bank runs, etc. are a thing of the past. Look at economic history before the post-war era; look at places that ignore economics and embrace ideology or political priorities instead; there is no comparison.
It's trendy to attack them for their imperfections, but to suggest that economics is powerless is not only ignorant, it's yet another rejection of our human agency, of the power of knowledge, of our ability to determine our destiny, and another baby-and-bathwater attack on our institutions.
That is a consequence of bad decisions, not economics. In fact, economics does every well: It predicts the outcome of the bad decision. And you call it a bad decision because it prioritizes politics over reality, i.e., the economics.
If the doctor says, 'take this pill or you will have a heart attack', and you don't take the pill and have a heart attack, then the problem is you, not the doctor, who actually did very well (unfortunately).
> Inflation is a funnel that sucks money from the poor to the wealthy.
That's a separate question, but that's not really true either afaik:
Argentina's inflation level and the current US inflation level are on entirely different magnitudes; the US has never had hyperinflation (what you describe in Argentina), at least since the advent of modern economics around WWII. US inflation is well under 10% (last I checked), an order of magnitude less than the 50%+ you are discussing. It's like comparing a scraped knee to an severed femoral artery.
Also, the inflation is from entirely different causes. US inflation is due largely to supply chain issues caused by the pandemic.
For poorer people, inflation's effect depends on whether your wages and, if you have savings, whether the interest rate the bank pays on your deposit are inflating at a similar rate. Note that most Americans have no meaningful savings: One recent study said that something like 60% didn't have even $500 saved for an emergency.
Generally, inflation helps those in debt, including poor people, by inflating away the value of their debt. It hurts those who own and lend money - mostly the wealthy. If you have a billion saved and it's
That's why the American reactionaries are so up in arms about it - I agree about the irony, but reactionary policies almost always to favor the wealthy. 'Populists' are about manipulating the populace, not serving them. (They also are making a big deal about it because, 1) they function by creating crises - imagine them not being outraged; 2) it is a way to attack non-reactionaries. Both of those are the reasons for their existence.)
The child tax credit costs ~100 billion a year. The payments cut monthly child poverty by roughly 30%. We have direct evidence that growing up in poverty dramatically reduces your odds of graduating high school, going to college or getting a well paying job later in life. So I would posit that pulling kids out of poverty has a long term net positive effect on the economy. Also its just the right thing to do if we can.
As a comparison, ~$76 billion in PPP loans were fraudulent. ~250 billion of covid relief benefits went to the rich and corporations. https://www.propublica.org/article/the-cares-act-sent-you-a-...
But its the poorest of us that are causing inflation...
All government spending occurs by 'printing money' because that's how bank clearing works. Balance sheets expand during the day and then shrink back at settlement time - but often not quite as far as they expanded. That's how a growing economy is accommodated.
When money is created, it will always either instantly pay off other loans somewhere or end up entirely in tax, unless somebody along the way doesn't spend it the instant they get it. That's because income, less tax and net loan repayments -> spending -> somebody else's income, less tax and net loan repayments.
To notice "printing money", it has to have been saved not spent somewhere along the spending chain. Therefore the real question we need the answer to is why certain people believe saving causes inflation?
In reality it is the deflationary drag of excess saving that is offset by 'printing money'. They are two sides of the same accounting journal.