Consider This from NPR - The New Child Tax Credit Is Here. Will Millions Get Cash Permanently?

Episode Date: July 20, 2021

Tens of millions of American families are beginning to receive direct cash payments as part of the expanded child tax credit, which was part of the COVID relief bill passed back in March. Those payments top out at $3,600 a year per child — an amount experts say could lift tens of millions of children out of poverty. But the expanded credit is only scheduled to last one year. The question now is: will Democrats succeed in making it permanent? Here's a breakdown of what you need to know from NPR's Andrea Hsu.This episode contains excerpts from NPR's daily economics podcast The Indicator. Listen and subscribe via Apple, Spotify, Google, or Pocket Casts. Additional reporting this episode from NPR's Cory Turner and Mara Liasson.In participating regions, you'll also hear a local news segment that will help you make sense of what's going on in your community.Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

The expanded child tax credit is here. This tax cut will be issued in monthly payments. This has never happened before. And America, yes, it is a big deal. The baby you hear crying in that crowd when Vice President Kamala Harris spoke last week could make its parents eligible for an expanded child tax credit worth up to $3,600, half of it in monthly cash payments. Because I know if the struggle to make ends meet is monthly, the solution has to be also.

People who make more get less, and eventually the benefit phases out. Tens of millions of families are expected to get cash. Some already have. The payments are going out around the 15th of each month from now until December. You get the second half of the credit when you file your taxes. The net result of all that is we're going to cut childhood poverty in America by almost 50 percent this year. That is Senator Michael Bennett of Colorado. Notice he said this year. The tax credit is for one year only, a part of the COVID relief bill President Biden signed back in March. Bennett is part of a group of Democrats pushing to make it permanent. It would be, he says,

A little bit like Social Security for kids. Social Security for kids. And while it would cost the U.S. $100 billion each year, Bennett says that's far less than the annual cost of child poverty, a trillion dollars by some estimates. So I think this is money very well spent. Consider this. Millions of American children may get a new social safety net if enough lawmakers agree that a new government benefit is worth the cost. From NPR, I'm Mary Louise Kelly. It's Tuesday, July 20th. Support for this podcast and the following message come from Sejo. A mindful, sustainable home brand,

Sejo creates bedding from performance materials to contribute to healthier and more restful sleep. Whether you prefer the soft texture of French flax linen or the breathability and heat dispersion of eucalyptus bedding, Sejo has something for every type of sleeper. Sejo is offering a 30-night risk-free trial so you can try out their bedding. Visit S-I-J-O home.com slash consider for 20% off of your first order. There is no denying that there is a lot going on in the economy right now. of your first order. It is kind of our thing here at The Indicator. It's how we like to spend our free time. Every day we explain something that is going on in the economy. Listen and follow The Indicator from Planet Money on NPR. It's Consider This from NPR. Nearly 20% of children in the U.S. live in poverty.

That makes America one of the worst countries in the Western world for child poverty rates. But experts who've long studied the issue tell NPRPR when countries take steps to lift kids out of poverty, the benefits are clear. Kids are healthier, more likely to finish school, more likely to attend college, less likely to go to prison, less likely to be recipients of public assistance when they're older, they're more likely to work, more likely to get married. They're less likely to be engaged in criminal activity. And all of those things are great for the child, but they're also great for society. That was Hilary Hoynes at the University of California, Berkeley, Pamela Hurd at Georgetown University, and Tim Smeeding at the University of Wisconsin-Madison. In short, says Bradley Hardy at American University,

My view is that it's the right thing to do, but also it is sound economic policy. Now, to be clear, the poverty line is just a number, a measure of annual income. Raising families a few thousand dollars above the poverty line doesn't automatically solve all their problems. But the new credit would be a start, supporters say, and mark a shift in the way Washington approaches the issue. Back in the 90s, for instance, there was a big bipartisan push to reform welfare. That effort was supposed to be about fighting child poverty. Instead, Pamela Hurd says, it ended up being about parents. Nearly all of the emphasis was just basically on getting poor single mothers back into the workplace.

At the time, Republicans and many Democrats thought help for parents in need should be tied to work. Here's Hillary Hoynes again. What was missing in that entire conversation is the fact that we're talking about assistance for children. Hoynes, along with Tim Smeeding, was also part of a committee charged by Congress in 2015 with studying how to reduce child poverty. In its report, the committee proposed precisely the kind of monthly cash benefit that is now a reality. Many other wealthy countries already give families a similar child benefit. And while the U.S. does have a child tax credit right now, it maxes out around $2,000 a year. And it's tied to income, meaning millions of American families don't earn enough to get the full benefit. This child allowance will put us

in line with other peer nations who understand if you invest in children, your entire country will flourish. Senator Cory Booker of New Jersey, another Democrat, pushing to make the expanded child tax credit permanent. We spoke last week. 90% of American families will benefit from this. Helps them with everything from diapers all the way, frankly, just to helping ends meet and relieving financial insecurity. Your point being child poverty is a chronic problem. It's not going to go away just because the pandemic is hopefully going away or at least easing. Exactly.

Do you have any concern, though, about the economics here, about pumping more money into the economy at a time that we're seeing record levels of inflation? Well, we know empirically that every dollar invested in raising a child above the poverty line gets $7 back for our overall economy and lower healthcare costs, lower involvement with the police, better overall lifetime earnings. So of all the things you can invest in in our country right now, the best thing to invest is in children. And that doesn't account for the immeasurable benefit

of when a child is more secure economically, they are more likely to be the next inventor, the next artist, the next entrepreneur. doesn't account for the immeasurable benefit of when a child is more secure economically, they are more likely to be the next inventor, the next artist, the next entrepreneur. We cannot let other countries around this globe out-invest in children. That's the argument for making the tax credit permanent. The argument against, from some Republicans, is that it's a handout that would discourage parents from working. That is a notion that experts at the nonpartisan Center for Budget and Policy Priorities dispute. The group put out a report this year that concluded the anti-poverty benefits of the new credit far outweigh any small reductions in employment. Whether those benefits become permanent, though, is still up in the air.

Democrats are working to include the credit in a massive $3.5 trillion budget resolution. It's a bill that would only need Democratic votes in the Senate because it's being passed under a budget maneuver called reconciliation. But to pass it, Democrats have to have all 50 of their votes in the Senate. There is no margin for error, and it'll be a couple of months until we know if that's going to happen. Even if the expanded tax credit is made permanent, it might not look exactly like it does now. Under the one-year version signed by President Biden, full benefits are paid to two-parent families, earning up to $150,000 a year. After that, the benefits start to peter out until you get to families making $400,000 a year. Even some Democrats think that's too high. Senator Michael Bennett's plan, for instance,

would cap the credit around $200,000. But this debate brings us back to something you heard at the top of this episode, that the expanded child tax credit is a little like Social Security for kids. This Social Security measure gives at least some protection to 30 millions of our citizens. When FDR signed the Social Security Act in the summer of 1935, he said the average citizen deserved some protection from poverty and old age. We have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-stricken old age. The notion that average people would benefit, not just extremely poor ones,

that was part of Social Security from the start. There's a lot of political science research that argues that the more universal the policy, the less likely it is to fall victim to a group of legislators who want to kind of cut it back. That's economist Hilary Hoynes again at UC Berkeley. She points out that Social Security is politically popular and has been for a long time precisely because it goes to almost everyone. And because it's popular, it's less likely to be targeted for cuts by politicians. The more universal the credit, the higher up the income distribution it goes,

the more likely there's going to be broad enough support so that it stays as a stable policy in our social safety net. In the case of Social Security, Hoyne says it's been worth it. Without Social Security, it's estimated around one-third of people over the age of 65 would live in poverty, as it is fewer than 10% of seniors live below the poverty line. And Social Security is almost never a political target like other government benefits are. Take Medicaid versus Medicare. So Medicare, like Social Security, is universal. When you're 65, you get it, everybody, from Warren Buffett down to someone who's worked a minimum wage job their whole life. But then there's Medicaid, which is the program for the poor. And Medicare is not very politicized. Medicaid is extremely politicized, as we saw through states to this day, turning down

the federal expansion of Medicaid under Obamacare. I, for one, am finding myself wondering whether even though it costs us more to have programs that are more universal, higher up the income distribution, could it allow us as a country to move forward a little bit? Hillary Hoynes, economist at UC Berkeley. She spoke to NPR's daily economics podcast, The Indicator. You can check them out in our episode notes. One more note about the new tax credit. Most people will get the money automatically via direct deposit, the same way you get your tax refund. For families who don't earn enough to file taxes, the IRS has a website where you can go and register to get the monthly payments. If you have

more questions about that, including how much your family might be getting, there's a piece at NPR.org with answers. You can find that in our episode notes as well. It's Consider This from NPR. I'm Mary Louise Kelly.