In the spring of 2020, the COVID-19 pandemic and accompanying recession crashed down on American life, creating many new problems as well as exposing and exacerbating long-ignored ones. The alarmingly high child poverty rate in the United States is among those problems. Before COVID-19, close to one in three children in the United States lived in or near poverty, and the pandemic has undoubtedly made those figures worse. The U.S. child poverty rate is already higher than almost any other wealthy country, typically by a large margin, and it is beyond time to consider how the country may combat child poverty amid the pandemic and beyond.
The United States may want to look to its northern neighbor, Canada, for a robust solution to dramatically reduce its child poverty rate. Canada has a child allowance program, called the Canada Child Benefit, that gives families an allowance equivalent to $3,834 USD per child, per year, and up to $4,544 USD for younger children. A recent report of the Bernard L. Schwartz Rediscovering Government Initiative at The Century Foundation and Center on Poverty and Social Policy (CPSP) at Columbia University found that if the United States adopted a child allowance modeled on the Canada Child Benefit, it could cut the country’s child poverty rate by more than half, and move 5.3 million children—1.6 million of them young children—out of poverty. Such a child allowance was the topic of a webinar featuring an all-star panel of researchers and three members of Congress who co-authored the American Family Act of 2019 (AFA), which proposed expanding the U.S. Child Tax Credit (CTC) to more closely resemble a child allowance.
The webinar, “How Would a Child Allowance Impact Child Poverty in America?,” was held on July 21, 2020 and co-hosted by the report’s sponsors. Jeff Madrick, director of the Rediscovering Government Initiative, began the event by giving context as to how the United States has found itself with such comparatively high child poverty rates. Children in the United States, he said, are deprived in many ways, including inadequate access to food, education, health care, and housing. Madrick cited research that illustrates the devastating effects of child poverty: children who live in poverty for even just a couple of years are seriously disadvantaged cognitively, emotionally, and in other ways compared to their peers, and the negative effects get worse for children as the years in poverty grow. Furthermore, the United States is behind most of its peer nations when it comes to poverty prevention policies, such as adopting cash allowances to directly target child poverty, Madrick said.
The CARES Act, the federal relief bill passed last March, implemented forms of cash allowances, with $1,200 checks to adults, $500 payments per child up to 17 years old, and an extra $600 a week to supplement unemployment insurance (this latter better expired on July 31). Those key income transfer provisions have helped stave off the worst of the economic impact from the pandemic. Not only should these provisions be extended, but others are likely needed. In addition, the new report finds that a fully refundable and regularly delivered child allowance, similar to the Canada Child Benefit and the AFA’s Child Tax Credit expansions, can be a prescription for the United States’ serious child poverty problem.
Evidence from Canada: How and Why a Child Allowance?
Sophie Collyer, research director at CPSP, kicked off the technical portion of the webinar by presenting the findings in the new report, “What a Child Allowance Like Canada’s Would Do for Child Poverty in America.” Collyer explained that the $2,000 Child Tax Credit is the closest thing the United States has to a child allowance, yet the CTC leaves out one third of children from receiving the full credit, and it is these children who need the support most. The credit is only partially refundable and requires families to earn at least $2,500 in earned income to claim the credit.
The Canada Child Benefit, on the other hand, is focused toward families with incomes below $21,300, as the benefit phases out when incomes rise above this point. This targeted design means that low-income families receive the greatest benefit, roughly $4,000 USD per child per year, and $4,800 USD for the youngest of children, and the generosity of the benefit decreases as income climbs. Thus, under the Canada Child Benefit, low-income families are provided critical support, while higher-income households may qualify for partial benefits or be deemed ineligible based on income.
If the United States were to replace the Child Tax Credit with a child allowance similar to the Canada Child Benefit, the U.S. child poverty rate could be cut fully in half, reducing it from 13.7 percent to 6.4 percent.
A child allowance in the United States based on the Canada Child Benefit could make critical inroads in addressing U.S. child poverty, Collyer said. The CPSP analysis found that if the United States were to replace the Child Tax Credit with a child allowance similar to the Canada Child Benefit, the U.S. child poverty rate could be cut fully in half, reducing it from 13.7 percent to 6.4 percent (according to the Supplemental Poverty Measure), thus moving 5.3 million children—1.6 million of them under the age of six—out of poverty. By comparison, the American Family Act of 2019, which also expands the Child Tax Credit, would reduce the child poverty rate from 13.7 percent to 7.9 percent, a reduction of just over 40 percent.
When broken down by race and ethnicity, an American child allowance policy based on the Canada Child Benefit would cut child poverty by more than half for Black and Hispanic children. The American Family Acts’s child allowance proposal would reduce child poverty for Black children by just half, from 23.7 percent to 11.4 percent. During the COVID-19 pandemic, expanded child allowance policies, Collyer pointed out, have the potential to provide stability and security for American children.
Why Money Matters, and the Policy Mechanics of a Child Allowance
After Collyer presented CPSP’s findings, an expert panel of researchers and thinkers were asked why the direct cash transfer element of child allowances could have constructive impact in the United States. Not only does being in poverty restrict parents’ ability to purchase and invest resources in their child’s development, said developmental psychologist Vonnie McLoyd of the University of Michigan, but it also exposes families and children to serious environmental and psychological stressors that stem from poverty. McLoyd pointed to the recently published National Academy of Science’s report, “A Roadmap to Reducing Child Poverty,” which found income transfer programs such as the Earned Income Tax Credit (EITC) improve children’s outcomes. This is an example of how income has a causal effect on children’s outcome, she said.
The other panelists—Mark Stabile, Stone Chaired Professor of Wealth Inequality at the European Institute of Business Administration, and Samuel Hammond, director of poverty and welfare policy at the Niskanen Center—both pointed to various studies that show that cash given to parents is spent on necessities, such as housing, education, food, and child care. When parents have access to more cash, they spend it on children and family needs, and inversely, when parents do not have surplus cash, children are the ones who suffer the most.
A key element of a successful child allowance is ensuring that the benefit is delivered on a regular basis instead of one lump sum, several panelists said. If the benefit is delivered on a monthly basis rather than once a year, people can factor the payment into monthly bills, make plans around the cash, and be able to mitigate shortfalls more effectively, said McLoyd. The benefit’s delivery on a regular basis, such as monthly payment, makes it a more flexible support for families to use effectively instead of a once-a-year payment.
Not only should the benefit be delivered regularly instead of annually, but the benefit should not be counted as income to be accounted for in means-tested program formulas. The CPSP report did not count the benefits as income used to determine Medicaid or SNAP eligibility, Collyer said, and nor does the Columbia team think it should be. The purpose of the child allowance is to build on the existing system and give families more cash, rather than eliminating eligibility from other resources that help families in other ways. Further, the Canada Child Benefit does not count the benefits as income so that it will not hinder a claimant’s qualifications for other benefits, Stabile said.
Notably, Canada was able to use its child benefit program to deliver quick and effective COVID-19 relief to families who likely needed it most, Stabile said. Because the Canada Child Benefit was already in effect and its claimants’ information was already in the system, the Canadian government was able to add an extra $300 CAD to all enrolled claimants to top up their benefits during the pandemic. Stabile notes that while the system served as an easy tool to deliver direct support to the targeted group, it likely left out those who did not file taxes or apply for the benefit.
The Politics of Child Allowances: An Emerging Arena for Bipartisan Work?
Child allowance policies have gained serious momentum since 2003, when Representative Rosa DeLauro (D-CT) first offered an amendment in the House Budget Committee to make the Child Tax Credit fully refundable. The political and ideological coalition of supporters for a child allowance is growing, Collyer said, but that there are opportunities to implement such policies at the state and local level. In Canada, the child benefit was originally designed as a program that would appeal politically to the middle class, which indicates how a program may appeal to a wider swath of the population, said Stabile.
The support for a child allowance must be expanded in a bipartisan manner in order for it to succeed, and that shift has been occurring over the past few years, said several panelists. Hammond posited that the politics and perceptions of child allowance programs in some conservative circles is shifting toward thinking of such programs as a way to promote family stability and invest in children. In July 2020, over fifteen top conservative thinkers sent a letter to Congress demanding a fully refundable $2,000 Child Tax Credit be made available to families this fall. Child allowance policies, Hammond says, are an emerging area for bipartisan work to unite both pro-family and anti-poverty messages.
Congressional Action: Featuring Sen. Bennet, Rep. DeLauro, and Rep. DelBene
The webinar was joined by Senator Michael Bennet (D-CO), Representative Suzan DelBene (D-WA), and Representative Rosa DeLauro (D-CT) to discuss the current status of the child allowance in Congress. They are three of the four members of Congress that introduced the American Family Act of 2019.
In a panel discussion moderated by Jeff Madrick, Senator Bennet, Representative DelBene, and Representative DeLauro talked about the urgent need to enact such legislation to provide support to families now and in the future. Senator Bennet pointed to his December 2019 bipartisan Bennet–Romney proposal, which would have created a new Young Child Tax Credit and reformed the existing Child Tax Credit to be partially refundable, as a way to move forward and grow coalitions. All three members of Congress suggested that reforming the current Child Tax Credit to become fully refundable and delivered regularly are likely to be high on the priority list in a new administration. A child allowance is a smart investment in children that makes sense from both sides of the aisle, Rep. DelBene said, and it is smart fiscal policy that lives up to the American value of giving everyone an opportunity.
The original design of the Child Tax Credit was rigged against people who need it most, including women and families of color, DeLauro said. She said the United States must seize this moment of COVID-19-related loss of jobs, child care, and socialization to do something about economic security for families, and that there is genuine bipartisan support for expanding the CTC. “Let us take this moment to deal with the crisis now, but put in place the architecture for lifting people out of poverty in this country,” said DeLauro.
In order to grow support for expanding the Child Tax Credit into a broader child allowance, it is important to speak in terms of what a child allowance would actually do for most people, said DelBene. “We need to talk about what refundability means to people and the real world impact of these tax credits. . . . It takes it from being a wonky legislative idea to what its impact would be on the ground, and it will make all the difference in helping us pass legislation.”
In a seemingly far-off future in which COVID-19 is contained in the United States, child poverty will still be a persistent issue if the country does not take steps now to address it. The legacy of this moment will be that the country decided that one-in-three of its children living in or near poverty is unacceptable. A child allowance, as discussed in the July webinar, is a tool that the United States can use to dramatically reduce its child poverty rate, and such a measure can be enacted and implemented rather easily through reforming the Child Tax Credit. In this unstable time, it is a relatively efficient action that the United States can take now to lift children out of poverty and provide security.