Tangle - The child tax credit ends.

Episode Date: January 5, 2022

At the end of the year, the child tax credit legislation that provided monthly checks that were going out to millions of parents — which Democrats passed last year — lapsed. Party leaders had expected to pass a temporary or permanent expansion of the CTC in the Build Back Better legislation, but that bill was effectively killed last month when Sen. Joe Manchin (D-WV), who Democrats needed to pass the legislation, announced he was not going to vote for the nearly $2 trillion bill.You can read today's podcast here.You can subscribe to Tangle by clicking here or drop something in our tip jar by clicking here.Our newsletter is written by Isaac Saul, edited by Bailey Saul, Sean Brady, Ari Weitzman, and produced in conjunction with Tangle’s social media manager Magdalena Bokowa, who also created our logo.The podcast is edited by Trevor Eichhorn, and music for the podcast was produced by Diet 75.--- Send in a voice message: https://podcasters.spotify.com/pod/show/tanglenews/message Hosted on Acast. See acast.com/privacy for more information.

From executive producer Isaac Saul, this is Tangle. Good morning, good afternoon, and good evening, and welcome to the Tangle podcast, a place where you get views from across the political spectrum, some independent thinking without all that hysterical nonsense you find everywhere else. I am your host, Isaac Saul, and on today's episode, we are going to be talking about the child tax credit, what it is, what just happened, and what some people on the right and left think should happen going forward. As always, before we jump in, we'll start with some quick hits you need to know. First up, Chicago Public Schools, the third largest school district in the United States,

canceled all classes today after rejecting a vote by the Chicago Teachers Union to return to remote learning. Number two, 4.5 million workers quit their jobs in November, a 9% increase from October. Number three, California investigators told prosecutors they believe a PG&E power line was responsible for last year's nearly million-acre Dixie Fire after it was hit by a truck. Number four, North Korea test-fired a ballistic missile today, the first weapons test in nearly two months. Number five, Representative Brenda Lawrence, the Democrat from Michigan, became the 25th House Democrat to announce that she would retire in November. Lawrence's district is heavily Democratic and considered a safe seat for the party. All right, before we jump into our main story, I want to issue a correction from yesterday.

I wrote that Bobby Bush was retiring from Congress. In fact, the representative's name is Bobby Rush. You'll forgive my brain for not immediately noticing Bush as an incorrect name in political reporting. This is the 49th Tangle correction in its 127-week history and the first correction since December 6th. I track corrections and place them at the top of the podcast in an effort to maximize transparency with readers. We also got a bit of reader feedback from yesterday's edition that I wanted to share. This one is from Joe in Buenos Aires, who wrote in about our podcast to say, I am very sorry to have to inform you that you missed a gigantic, and I mean gigantic, point on congressional action and defense budgets. A lot of those representatives and senators, when they vote

for all those no longer needed weapons systems systems are actually voting for the continuation of jobs in their districts that those weapons programs bring. Indeed, a lot of the major contractors deliberately spread out their manufacturing sites for said weapons systems into as many states and districts as they can in order to provide more incentive for representatives and senators to vote for that system need or redundancy be damned. And the president, I do not give a damn from which party she or he is in, is not about to alienate representatives and centers by telling them, no, you can no longer have those jobs. Joe, I think that's a good point and probably something we did overlook in yesterday's edition. So thanks for writing in. I appreciate it.

All right. Today's topic is the child tax credit. Now to a story that affects tens of millions of American families. An expanded version of the child tax credit is set to expire next month after Congress failed to reach a deal to extend it. A new financial pinch for families in the new year. The expanded child tax credit put in place this summer has just expired. Millions of parents who relied on the child tax credit extension this year are bracing for a possible stop in payments next month. At the end of the year, the legislation that provided monthly checks that were going out to millions of parents, which Democrats passed last year, lapsed. Party leaders had expected to pass a temporary or permanent expansion of the child

tax credit in the Build Back Better legislation, but that bill was effectively killed last month when Senator Joe Manchin, who Democrats needed to pass the legislation, announced he was not going to vote for the nearly $2 trillion bill. A quick reminder, before 2021, the CTC existed in a different form. Families used to be able to get up to $2,000 per child on their tax returns, and many low-income families did not receive the benefit because they did not pay taxes. In 2021, Democrats passed legislation to boost the annual value to $3,000 per child for most households and created a $600 additional credit for children under the age of six. Instead of distributing the money on end-of-the-year tax returns,

they added monthly payments and made the lowest-income families eligible. In July, more than 30 million homes housing approximately 61 million children began receiving as much as $300 per child under six and $250 per child between six and 17 every month. The full tax credit goes to families with incomes up to $75,000 for individuals, $112,500 for single parents, and $150,000 for married couples. For every $1,000 above those income thresholds, the credit is reduced by $50 until it completely phases out for individuals earning $95,000 and those married couples making $170,000 a year and filing jointly. Research has shown that the CTC sharply cut child

poverty in its first few months. Families spent the cash primarily on the essentials the drafters behind the legislation had hoped they would. Food was the number one expense, followed by essential bills, clothing, rent, mortgage, school expenses, and paying down debt. About 16.5% said they put some of the money away in savings or investments. However, some economists have argued the legislation will discourage low-income people from seeking out work. When Democrats passed the CTC overhaul, they expected it would be so popular that Congress would not let it lapse. But now that it has lapsed, there is currently no clear path forward for reinstating it. If Democrats can revive the bill, it's possible they would issue a double payment in February to make up for the lost month. they would issue a double payment in February to make up for the lost month. Critics of the bill,

including Senator Manchin and many Republicans, have said it is too generous for higher-income households and that they will not support it without a work requirement. Democrats and President Biden have said such a requirement would leave out the neediest families. Manchin has also called for an income cap of around $60,000 per household to receive the benefit. Below, we'll take a look at some arguments from the right and the left on the child tax credit lapsing, and then my take. First up, we'll start with what the left is saying. The program is a long-term investment in our children and would sharply cut child poverty. $300 per child a month is not enough money to keep people from working.

And in the five months the CTC was in place, parents spent the money on exactly the kinds of things Democrats had hoped they would, food and essentials. In the Washington Post, Claudia Sam said Manchin's concerns are valid, but her strong view is that it would not cause parents to work less and more specific targeting would be a mistake. The credit is already a huge success, Sam said. It is by itself expected to lower the national poverty rate by nearly a percentage point. In regions where poverty is most common, the decline would be even more pronounced.

In West Virginia, experts anticipate a decline in child poverty rate from 13% to 7%. Some economists predict that without a minimum income requirement, parents will work less. Some go as far as to claim that parents in deep poverty will work less if the credit is extended, choosing to stay in deep poverty. But this analysis approaches the question backward. No child chooses their parents. No child decides if a parent works, she wrote. And this is a child tax credit, not a parental workforce credit. It is policymakers who face a choice. Do you stand by and let roughly one quarter of black and Hispanic children continue to live in poverty? In addition to fighting poverty, the credit supports parents who do work.

Currently, two parents with joint income under $150,000 or single parents with income under $112,500 receive the full amount of the monthly credit. The top fifth of all families are ineligible for the full credit. A tighter income means test would punish parents who are already working hard to get ahead. The Miami Herald editorial board said Congress failed our children. Some critics say the program became too broad because it included couples who can make up to $150,000. That's a fair concern, but lawmakers should fix it, not scrap the whole thing. Others have said the money from the tax credits would reduce parents' incentives to work. A study by the Columbia University Center for Poverty and Social Policy found no evidence of that. There are different economists who say the impact on the workforce isn't so clear-cut.

But there are some concrete indications that the money is being used for basic needs, the board added. The U.S. Census Bureau found that many families were spending the money on child care and school expenses to pay off debt or to pay off food. Not exactly frivolous stuff. The program isn't perfect, but it has helped millions of American children, including those right here in Miami. It has provided support to the poor and lower middle class. By failing to extend the child tax credit, Congress is failing our children. In The Hill, Jessica Tarlov and Antoine Seawright said the CTC is the gift that keeps on giving. By putting more cash in families' pockets, mom and

dad can afford to buy Christmas presents, take the family out to dinner, or travel to see extended family, they wrote. That means more money for businesses providing those goods and services, as well as new demand that not only protects existing jobs, but may create others. Couple that with expenses such as doctor's visits, groceries, and diapers that families likely can better afford since they started receiving payments in July, and the impact is easy to see. Want to know how the economy managed to create 531,000 jobs in October and roughly 5.6 million jobs in the first nine months of the Biden administration? That's a big reason. In fact, unemployment is down to 4.2% right now, its lowest point since the pandemic began.

That's not a coincidence. The expanded child tax credit is the gift that keeps on giving, injecting roughly $19.3 billion into local economies, supporting an estimated 500,000 new median wage jobs over the next 12 months and helping to pull some 4.1 million children out of poverty. All right, that brings us to what the right is saying. The right says the CTC Democrats passed is not a cost-effective way to reduce poverty. It will create incentives not to work and as many as 1.5 million people could leave the labor force. Democrats are trying to hide the real cost of the program, they say. Bruce D. Meyer and Kevin Corrance said their research indicates making the CTC permanent will unintentionally hurt many children it is supposed to help.

The idea behind this change was to funnel money to families in the midst of a pandemic during which millions of workers lost their jobs, they wrote. Now, however, lawmakers seek to make the fully refundable credit permanent, based on claims that it will not meaningfully reduce employment and that it will cut child poverty by more than one-third. We believe these claims are incorrect. First, replacing a tax credit available only to working families with a flat allowance will serve as a disincentive to work. Our calculations show that 1.5 million parents would leave the workforce, and as a result, child poverty would be reduced at most by 22%. In addition, even without accounting for the reduction in work,

the fact that benefits were increased and made fully available to families making up to $150,000 would make the child tax credit the least cost-effective anti-poverty program in the United States, they said. The country would spend just shy of $30,000 per child lifted out of poverty by the expansion, compared with the less than $16,000 spent per child lifted out of poverty by food stamps, or the $21,000 for the earned income tax credit based on our calculations. In USA Today, Nick Adelson said even though he is receiving the checks, he wants them to stop. The families of nearly 60 million children are getting these monthly checks, including families with good-paying jobs.

Families like mine will quickly come to demand taxpayer-funded checks, Adolfson said. Worse, we'll come to depend on the money. It doesn't matter who you are. You start out not needing the cash only to find out that you do need it. You start out not needing the cash only to find out that you do need it just as soon as you spend it. Maybe you bought a new minivan. Maybe you subscribe to a bunch of streaming services. Maybe you put that money into a bigger mortgage on a better house. Regardless of what they use it for, families are already spending the money as

if it were always going to be there and will always be there. The name of that is dependency. Normally, I have to work hard for $800, but this money came regardless of the effort I put in. While my wife and I recognize that raising kids is its own form of work, it's a labor of love, not a day at the office. I can't help but feel that my work is somehow diminished and even unnecessary, he added. For me, that's just a feeling, but for a lot of families, it will become a compulsion. The new child tax credit is paid regardless of whether parents work. One study shows that 1.5 million parents could leave the workforce

relying solely on the checks and other government programs. The Wall Street Journal editorial board said attacks on Senator Manchin about child poverty are among the most dishonest from pundits and Democrats. Traditionally, someone needed $2,500 in income to claim the child tax credit, which became more generous as a person earned more to encourage advancement. This is an extremely modest amount of income, and Democrats torpedoed this threshold for the sole purpose of sending large checks to people who don't work. Mr. Manchin also had the audacity to wonder whether parents who earn $400,000 need government child benefits. That's because zeroing out the credit at lower incomes would violate President Biden's pledge not to raise taxes on anyone earning less

than $400,000. Mr. Manchin also dared to point out that progressives buried the cost of their expanded credit by extending the benefit for only one year, the board said. This deception lets the Congressional Budget Office score the cost at $185 billion over 10 years, which lets Progressive use budget reconciliation and pass it with only 51 Senate votes. The Democrats say explicitly that their plan is to extend the allowance every year. CBO says the 10-year extension would cost about $1.6 trillion. All right, that's it for the left and the right's take, which brings us to my take. So any discussion about the issue of childhood poverty needs to acknowledge a few basic things.

First, there are lots of government programs in place to address poverty. Food stamps, Medicaid, school lunches, housing subsidies, the earned income tax credit, all of which exist right now to try and address poverty among children and adults. Second, and Democrats hate to talk about this, but before the pandemic, the share of American children in poverty hit a record low under President Trump. 14% of children under the age of 18 were in poverty in 2019, down from 22% in 2010. It fell by 40% among Hispanic children and by almost one-third among black children. Should we celebrate 10 million children living in poverty in the richest country on earth? Of course not. But that was in large part due to a near decade of Obama-Trump-era job growth and wage increases. That Trump inherited a growing and relatively strong economy from Obama

is something many conservatives also refuse to acknowledge. Still, there's no doubt that the pre-pandemic Trump economy was, historically speaking, very good for America's poorest citizens. Here's what I love about the new CTC. It's simple. If you have a kid and make a certain amount of money, the government writes a check and deposits it into your account. That's a lot more straightforward than the programs that require so much more paperwork, qualifications, and bureaucracy. A huge number of those things eligible people simply never even apply or get past. I love that it includes the lowest income Americans, and I like that the overall value of it has gone up. Life is simply a lot more expensive now, and $300 a month for a kid is still not a whole lot of cash.

I also like that the most popular criticisms of it seem to at least include kernels of positivity. For instance, nearly every article criticizing the child tax credit included a link to the University of Chicago economists Bruce D. Meyer and Kevin Corinth, who said that some 1.5 million parents could leave the workforce because of CTC. But in their own writing, they also say that child poverty would be reduced by at most 22%. If you read their actual argument, which was shared under what the right is saying above, one of their big gripes is that child poverty won't be reduced by third, as many Democrats claim, but instead might just be 22%, which is still a substantial achievement, not exactly a stake in the heart.

Still, Manchin isn't alone in suggesting the income cap on the CTC should be lower. Even progressive stalwarts like Senator Sherrod Brown of Ohio have made that argument to some degree. Brown has strong disagreements about scaling back as much as Manchin wants, but I'd be fine to see phase-outs for couples jointly filing over $100,000 or $115,000 a year rather than $150,000, even though in many places that is still a challenging income to raise a child on. What Manchin has suggested, though, a $60,000 household income cap is far too low. $60,000 goes a lot further in a place like West Virginia, where Manchin serves, than it does in many other cities. That income in Arizona, Florida,

and Virginia buys about 10 to 15 percent less than it does in West other cities. That income in Arizona, Florida, and Virginia buys about 10 to 15 percent less than it does in West Virginia. In California and New York, it buys about one-third less. I also don't see a great deal of logic in a work requirement, at least in an absolute form. Families will rely most on the CTC when they are out of work or have just lost a job. The number of parents who are going to quit jobs because of, say, $600 a month seems pretty low to me. And those parents would be giving up other benefits like the earned income tax credit, which gives them up to $6,000 a year by not working. That's a substantial net loss. If they were in a position to quit working because of the credit, they'd almost certainly be

spending more time raising their children, which seems like a net plus. Compared to other countries, we'd still have some of the strongest work incentives in the world. Perhaps the best way to structure this would be similar to unemployment, where someone has to be recently employed or seeking out work in order to receive the CTC. But the working poor are also the most likely to be in unstable jobs. Further punishing them with a strict work requirement and removing the safety net when they lose work seems backward, though it's still unclear exactly what Manchin would want a work requirement to look like. All told, I've consistently said the CTC should be Democrats' primary focus in Build Back Better. It's true that the best way to reduce poverty is strong economic growth, rising wages, and reducing income inequality.

But the CTC, done properly, could be a much more effective policy than other poverty-fighting legislation we've passed, and it could be brought to fruition without adding to inflationary pressures. If we view the last five months as an experiment, it went pretty well. If the bad outcome is a 22% reduction in child poverty and 1.5 million people leaving the workforce, it's worth talking about that trade-off and how to mitigate the downsides. The focus could absolutely be narrowed to the neediest Americans, and if it takes some kind of loose work requirement

and a lower income cap to win support in Congress, I think that is a trade-off worth making. All right, that's it for our main topic today, which brings us to our story that matters, also kind of related to what we're talking about. Democrats and Republicans are discussing another round of coronavirus stimulus spending for an array of businesses like restaurants, performance venues, gyms, and even minor league sports teams at risk of going under due to the latest COVID-19 surge. The discussions are in early stages but are being led by Senators Ben Cardin, the Democrat from Maryland, and Roger Wicker, the Republican from Mississippi.

In December, they put together a rough outline of a $68 billion proposal that includes a mix of new spending and a repurposing of old cash. Senators Maria Cantwell and Mark Warner and Susan Collins have also joined the talks, which reflect a growing fear among lawmakers that the COVID-19 will continue to hamper the economic recovery. The Washington Post has the story linked to in today's newsletter. All right, here are some numbers for you today from our main story. 15% is the percentage of CTC recipients who said the payments helped their families a lot in an NPR Marist poll last month. 64% said the payments helped their families a

little. 14% is the percentage of voters who said renewing the CTC was among the most important elements of the Build Back Better plan. 57% is the percentage of respondents in a YouGov poll who supported the CTC. 21% opposed it. 59% of respondents said the recipients should sometimes be required to work. 31% said that the recipients should always be required to work. And just 10% said the recipients should never be required to work. All right, that is it for our numbers section. We are skipping today's reader question because this podcast was already pretty long with just our main topic. So we're going to wrap things up with our have a nice day story. You may have heard about the drivers on I-95 in Virginia who ended up getting stuck on the highway for more than 20 hours after a series of big rigs were

involved in an accident that shut the highway down. What you may not have heard about was how some motorists managed to make it through the 20-plus hours long being stuck in their cars. One long-haul trucker with a two-day supply of food popped out of his truck to offer his neighbor a hot meal, a drink, and a Jimmy Dean bacon egg and cheese breakfast bowl. Trucker Jean Carlo Gachet told CNN the story. There's a link to it in today's newsletter that you can check out. All right, everybody, that is it for our podcast today. As always, if you'd like to support us, you can go to readtangle.com backslash membership or click

on some of the links in the episode description and become a monthly supporter. As always, just hitting that five-star rating and sharing the podcast with your friends is one of the best things you can do. We'll see you guys tomorrow. Have a good one. Our newsletter is written by Isaac Saul, edited by Bailey Saul, Sean Brady, Ari Weitzman, is written by Isaac Saul, edited by Bailey Saul, Sean Brady, Ari Weitzman, and produced in conjunction with Tangle's social media manager, Magdalena Bokova, who also helped create our logo. The podcast is edited by Trevor Eichhorn, and music for the podcast was produced by Diet75. For more from Tangle, subscribe to our newsletter or check out our content archives at www.readtangle.com.