Will Dems Choose the Market or the Evidence?

As negotiations over the details of the Build Back Better legislation are heating up, one element that has become particularly contentious is the child tax credit that promises to lift millions of children out of poverty. The New York Times’ Jamelle Bouie has observed that the resolution of the ultimate argument — whether families should have to rely on the market to survive — will reveal much about the current direction of the Democratic party.

Senator Manchin has spoken plainly about his criticism of the expanded child tax credit. Because he is against “turning our society into an entitlement society,” he wants to see financial support for families with young children constrained with both earnings or work requirements and income ceilings. This line of thinking has a long and broad history.

In 1965, at the outset of the Great Society’s War on Poverty, President Lyndon Johnson declared himself adamantly opposed to making payments to poor people. He told Bill Moyers, his closest aide, to make his position clear to Sargent Shriver, director of the Office of Economic Opportunity. “You tell Shriver, no doles.” And according to journalist Nicholas Lemann, the president instructed economist Lester Thurow to remove from the Economic Report of the President “anything that could be construed as putting cash in the hands of poor people.” It was programs, the president insisted, not cash, that would end poverty.

The predominant theory of the time was that the problems of the poor would be solved by programs aimed at changing individual behavior. Ron Haskins, among the engineers of the Clinton-era “welfare reform,” contended that the keys to better outcomes were “changes in the personal decisions of more young Americans to get more education, work more, and stop having babies outside marriage.”

Firmly held beliefs along these lines only slowly gave way to the powerful research evidence that was accumulating over two decades that it was poverty that was the culprit.

Economists and other researchers were able to document that a quantum jump in improved American lives could be achieved by adopting a relatively simple remedy: radically cutting childhood poverty. As long as eighteen years ago, Congresswoman Rosa DeLauro of Connecticut became convinced by the research; she became relentless in acting on what she learned. She campaigned far and wide to expand and modernize existing legislation that had, for many years, reached far too few of the families that most needed help. She spread the word about the research that documented the clear connection between growing up in poverty and the results that manifested in ill health, inadequate education, and harshly circumscribed life prospects. The evidence on which she relied was soon strengthened by a report from the National Academy of Sciences, reflecting an emerging scientific consensus that reducing child poverty by half would be far less expensive than the billions that the country loses annually as a result of the negative outcomes of child poverty.

In the last two years, the arguments supporting strong and streamlined government action to reduce poverty became even more salient as awareness grew of the outsize damage that the COVID-19 pandemic imposed on poor and Black and Latino families. Megan Curran, director of policy for the Columbia University Center on Poverty and Social Policy, says that the pandemic “exposed the barriers that we were placing on families, and finally gave us a real push to reevaluate how we have approached things.” The maze of eligibility requirements that accompanied earlier legislation excluded too many children, including a high proportion of children in Black and Hispanic families.

That was the context in which President Biden’s top advisers, just days after his inauguration, were drafting his economic reform plans. Congresswoman DeLauro, now Chair of the House Appropriations Committee, quickly mobilized her circle of colleagues and friends to action. They would assure that whatever else would be in the economic reform package, its centerpiece would be an expansion of the child tax credit with high enough sums going monthly to enough families to cut American child poverty in half.

When DeLauro called Jared Bernstein, long-time adviser to the president, using language that Bernstein characterized as “somewhat juicy,” she made it clear that the plan must include an expansion of the child tax credit that would send direct monthly payments to benefit the nation’s families without imposing onerous eligibility requirements. While the idea wasn’t new, Cecilia Munoz of New America explained that the scale of the crisis was such that people took a fresh look and said, “Wow, this is really something we could do now.” Irwin Garfinkel, co-director of the Columbia University Center on Poverty and Social Policy, points to the critical role in re-awakening the moral conscience of the nation played by the murder of George Floyd and the Black Lives Matter movement. Community advocates, grassroots and research organizations came together to provide a massive push for the expanded child tax credit. Unlike the child tax credit of earlier times, the expanded form would not be limited only to families that paid taxes — which were then refunded. This proposed legislation would include the families that were too stretched to owe any federal income tax. Like other families with young children, these families would be among those who would receive the credit as a direct monthly payment.

The expanded tax credit rapidly came to be seen as an obvious remedy to a critical set of problems and was enacted as part of the American Rescue Plan on March 11, 2021. Just four months later, most American families with incomes under $150,000 for a couple, and $112,500 for a single parent family, received a monthly sum of $300 for each child under 6, and $250 for each child 7 to 17. Janet Yellen, Secretary of the Treasury, pronounced it a remarkable economic victory for America — and also a moral one. The results were almost immediate: the number of households that reported not having enough to eat dropped by 3.3 million, or one third, in the weeks after the first payments were issued.

We will probably know within a matter of days or weeks whether the US body politic will enact a series of connected policies that build on that singular accomplishment toward a future in which all of us will live significantly better lives. As negotiations proceed, the promise of the expanded child tax credit will be realized when it lasts long enough to become an integral part of the social fabric, and when monthly benefits are not contingent on whether the family is or is not in a position to pay taxes. (The experts speak of it as “making full refundability permanent.”)

We know now that the stakes are high. We know that incorporating a permanent expanded child tax credit — on terms that have already been proven — will

• help children do better at school, have better health outcomes, and earn more in adulthood,
• provide financial stability that will reduce the stress that cripples families living under the threat of unpredictable financial disasters, and
• bring societal benefits outweighing its fiscal costs by a ratio of 8 to 1.

The enactment of a permanent expanded child tax credit will be cause for widespread celebration as we bear witness to the children and families that have been left out in the past becoming an intrinsic part of a prosperous and generous nation.