You have likely heard the statistics before. But they bear repeating; one out of every five children in America lives in poverty. In the largest economic superpower on earth, the percentage of children living in poverty is almost three times higher than Norway. The United States has more children, by percentage, living in poverty than Russia. We rank somewhere around 30th in the number of children in poverty (that’s out of 35 industrialized nations in the Organization for Economic Cooperation and Development).
Why? How? We spend an enormous amount of money at the local, state, and federal levels. We have many charitable organizations that focus on the issue. Why does this situation exist and how can we address it?
Last week, Eduardo Porter, an economic writer for the New York Times, wrote a story about one idea – actually an old idea that has been around for a while – to help address the poverty faced by families with children.
Porter contends, and the numbers certainly appear to bear him out, that the “most generous federal programs for families with children barely help the nation’s unluckiest children. Rather, they push money to their counterparts higher up the ladder of well-being.” He cites a study by the nonpartisan Tax Policy Center that shows that only one percent of the $40 billion dollars of the federal per child tax deduction goes to the lowest, or poorest, fifth of the families in the country. The child tax credit, a second opportunity for low-income families to reduce taxes by $1000 per child, does somewhat better; providing ten percent of the benefit to the lower fifth. But that is still too low. In both cases these deductions and credits help; of that, there is no doubt. According to the Census Bureau, the child poverty rates have been cut by almost a third as a direct and indirect result of these federal programs.
Unless they are working, families and children do not benefit, and they are left to rely on other programs like SNAP; many of which are being drastically curtailed by states and the federal government.
But, according to the Porter’s column, there is a new/old proposal that might see new interest after the elections. That proposal would eliminate the child tax credit and the child deduction and replace them with a monthly check of $250 for every child in the country.
Quoting from Porter’s column:
“This is an old idea whose time has come,” said Timothy Smeeding, a professor at the University of Wisconsin, Madison, who directed the Institute for Research on Poverty there from 2008 to 2014. Daniel P. Moynihan, who advised former President Richard Nixon and was a Democratic senator from New York, actively supported this idea. So did Milton Friedman, the guru of conservative economic thinking from the 1960s through the 1980s.”
This proposal would certainly seem to be in opposition to the trend we see today to eliminate, reduce, or reform entitlement programs and incentivize work as a condition of receiving benefits. The benefit, as proposed, would apply to all – not unlike Social Security – and wouldn’t just go to low-income families.
Once again quoting from Porter’s column:
“Austria, Britain, Canada, Denmark, Finland, France, Germany, Ireland, Luxembourg, the Netherlands, Norway and Sweden all already have some child allowance. In Germany, the benefit for a family with two children adds up to $5,600 a year. In Canada, it is worth $4,935 per child under 6, and $4,164 for children ages 6 to 17.”
This program could be funded in part by eliminating the current tax exemptions and credit. Proponents estimate that a $250 a month per child benefit would cost somewhere around $190 billion a year. More than half of that cost would come from the elimination of the child tax credit and the tax deduction. The balance of $90 billion, is equal to about 0.5% percent of the United States GDP.
There is no doubt that this is a longshot proposal in a time where additional spending is the great taboo of American politics. And there is also no doubt that there would have to be refinements and fine-tuning in the idea to make it work. One wonders, no matter the result in November, whether there would be enough courage in the White House or Capitol Hill to propose such a dramatic change in tax and entitlement policy.
But we can at least hope – after two years of campaigning that was more noise and vitriol than it was ideas – that maybe we can start talking about new ways of looking at old problems.